Fear has peaked and sentiment in gold price has turned slightly bearish
(Kitco News) - Russia's invasion of Ukraine will continue to provide some support for gold. However, according to some analysts, the fear and uncertainty propelling gold prices have peaked, and sentiment in the precious metal in the near term has turned slightly bearish.
The latest results of the Kitco News Weekly Gold Survey show no definitive picture of the precious metal. Still, bearish sentiment has a slight advantage in the near term. Meanwhile, Main Street remains extremely bullish on gold.
Adam Button, chief currency strategist at Forexlive.com, described gold's price action as scrappy investors digest Thursday's nearly $100 price swing. As Russia's invasion of Ukraine started, the gold price pushed to an intraday high of $1,976 an ounce, its highest level since September 2020. However, the market could not hold its nearly 3% gains and fell to a low of $1,878 an ounce by the end of the day.
"At the height of the crisis, gold showed that it was the only safe-haven asset investors wanted to own. It shows just how important gold's intrinsic value is as an asset," said Button. "However, we have likely seen the peak fear and concern regarding Ukraine, and that could be a headwind for gold," he said.
Button noted that he was neutral on gold in the near term.
This week 15 Wall Street analysts participated in Kitco News' gold survey. Among the participants, six, or 40%, called for gold prices to rise. At the same time, seven analysts, or 47%, called for lower gold prices next week. Two analysts, or 13%, were neutral on gold in the near term.
Meanwhile, 1,001 votes were cast in online Main Street polls. Of these, 710 respondents, or 71%, looked for gold to rise next week. Another 187, or 19%, said lower, while 104 voters, or 10%, were neutral in the near term.
The bullish outlook from retail investors comes as gold prices end the week with a loss. April gold futures last traded at $1,889.30 an ounce, down 0.5% on the week. Last week, both Main Street and Wall Street were significantly bullish on the precious metal.
Looking ahead, some analysts noted that despite gold's failed breakout Thursday, the market remains in a strong uptrend, making higher highers and higher lows.
David Madden, market analyst at Equiti Capital, noted that gold was finding strong support even before it started to ride the wave of safe-haven demand. He added that any new market uncertainty or a rise in geopolitical tensions would continue to support prices.
Some analysts also remain bullish on gold as inflation remains a more significant economic threat than the conflict in Eastern Europe.
"The monetary situation is why gold moved over last few months, and that certainly is not going to be resolved in a way that would be fundamentally negative to gold in the near term," said Adrian Day, president of Adrian Day Asset Management.
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Although the Fed is expected to tighten interest rates next month to cool down rising consumer prices, markets are pricing in less aggressive action, which some analysts have said remains bullish for gold.
While there is still some bullish sentiment in the marketplace, some analysts have said that gold's reversal Thursday will frustrate some investors and traders, which could weigh on prices in the near term.
"Gold was seriously overpriced and was due for a pullback, but technically the price action created a massive shooting star with volume, and that does not bode well," said Colin Cieszynski, chief market strategist at SIA Wealth Management.
Marc Chandler, managing director at Bannockburn Global Forex, said that he is bearish on gold next week, and a drop below $1,877 could lead to a test of $1,850 an ounce.
Chandler added that positive U.S. economic data, particularly a strong February nonfarm payrolls report Friday, could weigh on gold prices.