Make Kitco Your Homepage

Sentiment in gold market caught between rising market volatility and Fed rate hikes

Kitco News

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) - Wall Street analysts are hesitant about gold in the near term. Still, retail investors remain bullish as the precious metal appears to be on the precipice of another breakout, with prices holding near a two-week high.

The results from the latest Kitco News Weekly Gold Survey show sentiment is extremely mixed on Wall Street, but the bullish sentiment is clear on Main Street as consumers continue to fear the rising threat of inflation and the loss of their purchasing power.

Friday, the University of Michigan said its consumer sentiment survey dropped to a 10-year low to 61.7. At the same time, the report noted that consumers expect inflation to remain around 5% through 2022.

The report said rising inflation has become the biggest drag on consumer sentiment.

Some market analysts do not believe that gold remains an attractive asset for consumers as they look to preserve their wealth and protect against growing market and economic risks.


Hold something real like gold and silver as risks, volatility rise - abrdn

This week 15 Wall Street analysts participated in Kitco News' gold survey. Among the participants, 6, or 40%, called for gold prices to rise. At the same time, four analysts, or 27%, called for lower gold prices next week. Five analysts, or 33%, were neutral on gold in the near term.

Meanwhile, 597 votes were cast in online Main Street polls. Of these, 373 respondents, or 62%, looked for gold to rise next week. Another 128, or 21%, said lower, while 96 voters, or 16%, were neutral in the near term.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

Not only is gold an attractive wealth preserver for consumers, but some analysts noted that rising bond yields and interest rate expectations are increasing market volatility and gold is also a good risk hedge.

David Madden, market analyst at Equiti Capital, said that he is slightly bullish on gold as equity market volatility supports gold prices in a "flight to quality" move. However, he added that he doesn't see a material break above $1,850 an ounce anytime soon the Federal Reserve's looming rate hikes are also supporting the U.S. dollar.

Sean Lusk, co-director of commercial hedging with Walsh Trading, said that he is also watching equity markets to determine gold's next move.

"Stock market volatility will be key for gold and any further weakness will support gold prices," he said. "For now, any drop in gold should be seen as a buying opportunity."

Some analysts also remain bullish on gold as the price has managed to hold its ground above $1,800 an ounce and is retesting initial resistance around $1,835 an ounce.

However, other analysts still see gold trapped in its wide trading range between $1,750 and $1,850 an ounce.

Nicholas Frappell, global general manager at ABC, said that technically gold is stuck in neutral.

"The recent price action where the price was resisted at the Weekly Cloud top, combined with the high CPI print, implies a move back towards the lower part of the recent range, with support at US$1817 and on to US$1800," he said.

Frappell added that gold has a chance to break out if geopolitical tensions heat up between Russia and the U.S. over Ukraine.

Although there is still some bullish support for gold, other analysts note that it will be difficult for the precious metal to rally as the Federal Reserve looks to aggressively tighten monetary policies to combat the growing inflation threat.

Markets are becoming more and more comfortable with the idea of the Federal Reserve raising interest rates by 50 basis points in March. Markets are also pricing in a potential for five rate hikes.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.