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Sentiment in gold remains strong despite nearly 3% drop this week

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(Kitco News) - Gold futures are seeing their worst week since November, but sentiment in the marketplace remains strong as the price continues to hold clear support above $1,900 in an environment of growing uncertainty and volatility.

The latest results of the Kitco News Weekly Gold Survey show broad-based bullish sentiment among Wall Street analysts and Main Street investors.

Sean Lusk, co-director of commercial hedging with Walsh Trading, said that while gold will remain volatile along with all financial markets, it still shines bright as an alternative asset. He added that he sees gold prices push back above $2,000 in the near term.

"There is uncertainty everywhere and the question remains where do funds put their money," he said. "Investors should be buying the dips."

Although Lusk is bullish on gold in the near term, he added that he likes playing gold through the options market because risks are defined.

This week 16 Wall Street analysts participated in Kitco News' gold survey. Among the participants, nine analysts, or 56%, called for gold prices to rise next week. At the same time, four analysts, or 25%, were bearish on gold in the near term, and three analysts, or 19%, were neutral on prices.

Meanwhile, 822 votes were cast in online Main Street polls. Of these, 560 respondents, or 68%, looked for gold to rise next week. Another 147, or 18%, said lower, while 115 voters, or 14%, were neutral in the near term.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

The bullish sentiment comes as gold prices trade at $1,928.90 an ounce, down 2.8% from last Friday.

Phillip Streible, chief market strategist at Blue Line Futures, said that he likes the idea of buying gold on dips. He added that he remains doubtful that the Federal Reserve will be able to follow its plan to raise interest rates seven times this year.

"The Federal Reserve has said that it will remain data-dependent and if the data doesn't improve then the Fed will have to adjust,"

Sentiment in gold came after the Federal Reserve raised interest rates by 25 basis points and laid out its plan for the rest of the year. The Federal Reserve lowered its growth forecast and raised its inflation expectations for 2022. At the same time, it sees the potential for seven rate hikes.

While the Federal Reserve has embarked on a new tightening cycle, many analysts have said that with inflation pressure steadily rising, real interest rates will remain in negative territory.


Gold price has a path to $2,200 after Fed revealed its strategy - SSGA's Milling-Stanley

However, looking beyond monetary policy, some analysts have said that gold will be at the mercy of the ebb and flow of safe-haven demand in the near term.

Adrian Day, president of Adrian Day Asset Management, said that in the current environment, he sees lower prices in the near term, but the long-term uptrend remains in place.

"What happens to gold in the next week is largely dependent on movement in the Ukraine war," he said. "Gold's war premium will continue to slip away, but the longer-term trend from September remains up on monetary factors."

Some analysts note that gold could still consolidate further as investors adjust to higher prices. Colin Cieszynski, chief market strategist at SIA Wealth Management, said that he sees gold in a holding pattern in the near term.

"Gold has had a big rally and a big correction over the last couple of months, and it is settling into a range where it could pause to digest its recent moves between say perhaps $1,920 to $1,980," he said. "With the Fed now done, unless there is a big change in the Ukraine war, both USD and Gold could be due for a pause."

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.