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Analysts aren't giving up on gold

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(Kitco News) - Gold has been resilient these past few weeks. Although the market remains caught in a consolidation pattern, investors don't appear to be ready to give up on the precious metal.

The week started with a lot of potential as prices tested resistance at $2,000 an ounce; however, it quickly became clear that the precious metal didn't have enough momentum to break out as it faced a stronger U.S. dollar and rising bond yields.

Gold prices are ending the week down 1.7% after hitting a brick wall late Monday. While the price action is disappointing, it's difficult to be too discouraged when looking at financial market conditions. Gold is holding critical support as the U.S. dollar hit a new two-year high, with the index pushing above 101. At the same time, U.S. 10-year bond yields are on the cusp of hitting 3%, their highest level since early 2018.

Bond yields and the U.S. dollar are surging higher after Federal Reserve Chairman Jerome Powell confirmed that the U.S. central bank is ready to raise interest rates by 50 basis points next month and potentially at the June meeting.

Powell said that it is essential the Federal Reserve uses its tools to get inflation and price stability under control.

"Economies don't work without financial stability," he said.

These are some pretty difficult headwinds for the gold market. The fact that the precious metal is holding at an elevated level means that investors and analysts still see some value in the market.

In a recent report, technical analysts at Bank of America said that gold appears to be forming a "cup and handle" pattern. They see any drop to $1,940 as a buying opportunity.

"We like longs/buying dips near $1,940/50 for tactical trades and if above $1,888/oz for medium-term trades. Our measured move targets suggest $2,175/oz can still be seen," the analysts said.

Bank of America still sees gold price hitting record highs and silver price pushing to $30

BofA isn't the firm that remains bullish on gold. Analysts at S&P Global remain bullish on precious metals.

"Our price outlook for gold appears healthy for the short to medium term, remaining about the $1,900 an ounce mark on the back of the geopolitical and macroeconomic uncertainties," said S&P Global Market Intelligence senior analyst Bjorn Goosen in a webinar last week.

Finally, Wells Fargo is also not giving up on the precious metal as the bank sees gold prices moving above $2,000 this year.

"The bottom line is that we still like gold and are maintaining our 2022 year-end target price range of $2,000-$2,100 per ounce," said John LaForge, head of real asset strategy at the bank.

Despite all the headwinds, there is plenty of bullish sentiment in the marketplace, which will continue to support gold.

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.