Market sentiment signals gold price needs to consolidate after pushing above $2,000
The latest results of the Kitco News Weekly Gold survey, show no clear majority on near-term price direction among market analysts. At the same time, bullish sentiment among retail investors has also dropped from last week's elevated levels.
Many analysts have said that while gold is destined to move higher, the precious metal's push to a new all-time intraday high above $2,000 an ounce could be a sign that it is a little overextended and due for a consolidation.
"There is no question gold prices are in a bullish uptrend and prices are going higher, but there needs to be some consolidation," said Philip Streible, chief market strategist at Blue Line Futures. "You don't want to chase the market. I am looking to scale in and buy around $1,962 an ounce."
This week 18 Wall Street analysts participated in Kitco News' gold survey. Among the participants, eight analysts, or 44%, called for gold prices to rise next week. At the same time, three analysts, or 17%, were bearish on gold in the near term, and seven analysts or 39% were neutral on prices.
Meanwhile, 1,013 votes were cast in online Main Street polls. Of these, 634 respondents, or 63%, looked for gold to rise next week. Another 223, or 22%, said lower, while 156 voters, or 15%, were neutral in the near term.
David Madden, market analyst at Equiti Capital, said that although he is neutral on gold next week, he does see growing upside risks ahead of the Federal Reserve's monetary policy meeting decision on Wednesday.
Madden said markets continue to expect the Federal Reserve to raise interest rates six times this year; however, Russia's war with Ukraine is creating a lot of economic uncertainty as rising commodity prices raise inflation risks. Madden added that any hint that the U.S. central bank will be less aggressive with its monetary policy could be good for gold.
"The Fed is going to raise interest rates; that is a given," he said. "But maybe they signal four rate hikes this year instead of six markets are pricing in. The Fed is not going to accelerate rate hikes with the ongoing conflict in Ukraine."
The U.S. may be volatile around the Fed meeting, but overall, inflation remains high, and the global political/financial situation remains volatile, which historically have been tailwinds for gold.
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Colin Cieszynski, chief market strategist at SIA Wealth Management, said that he is also watching the U.S. central bank's monetary policy meeting, and he expects it to create some volatility for the U.S. dollar and, in turn, gold prices.
Looking past the potential volatility, Cieszynski, said that he is bullish on gold next week. "Overall, inflation remains high, and the global political/financial situation remains volatile, which historically have been tailwinds for gold," he said.
Adrian Day, president of Adrian Day Asset Management, said that he expects the ongoing conflict in Eastern Europe to continue to support gold at higher prices.
"The war in Ukraine is not over, and the situation could deteriorate before it gets better," he said.
However, some analysts expect to see lower prices in gold's new consolidation phase. Darin Newsom, president of Darin Newsom Analysis, said that initial downside targets for gold in the near term are between $1,964.90 and $1,929.70.
Marc Chandler, managing director at Bannockburn Global Forex, said that he also sees lower gold prices next week as momentum indicators turn bearish.