Retail investors see no urgency to buy gold as prices remain stuck in neutral
However, looking through the short-term ambiguity, many analysts see lower prices as a buying opportunity because uncertainty and market volatility will remain dominant features within the financial landscape.
"Gold has failed to generate any excitement that would lead to higher prices, but it does continue to hold its ground in a tough market with a strong U.S. dollar and higher bond yields," said Adam Button, Chief Currency Strategist at Forexlive.com. "The gold prices are suffering because investors don't have any sense of urgency to buy."
Phillip Streible, Chief Market Strategist at Blue Line Futures, said that the Federal Reserve's stance to aggressively tighten its monetary policy is weighing on sentiment among retail investors. However, he added that if the U.S. economy does fall into a recession, the U.S. central bank would be forced to reverse some of its rate hikes, which would spark the next gold rally.
"For now, you want to look at strategist buying opportunities," he said. "You want to buy either side of $1,800 and maybe take some profits at $1,875 because we are still stuck in a range. What you don't want to do is buy your entire position at $1,875," he said.
This week 15 Wall Street analysts participated in Kitco News' gold survey. Among the participants, six analysts, or 26%, were on gold bullish in the near term. At the same time, six analysts, or 32%, were bearish on gold and nine analysts, or 42%, were neutral on gold next week.
Meanwhile, 681 votes were cast in online Main Street polls. Of these, 301 respondents, or 44%, looked for gold to rise next week. Another 185, or 27%, said lower, while 195 voters, or 29%, were neutral in the near term.
Bullish sentiment among retail investors is at its lowest point in nearly three years. However, participation in the online survey has fallen to a one-month low.
Because of lackluster investor interest in gold, many analysts expect gold prices to fall lower but remain within their current consolidation pattern with support at $1,800 and resistance around $1,850 an ounce.
"While the rest of the commodity complex is exploding and imploding, all at the same time, the August edition of King Gold is comfortable hiding in its bunker between support at $1,806.10 and resistance at $1,861.50. My guess is it will lie low until the shrapnel from other commodities stops flying," said Darin Newsom, president of Darin Newsom Analysis," he said.
Marc Chandler, Managing Director at Bannockburn Global Forex, said he also sees gold consolidating next week.
"I think continued consolidation is the most likely scenario and note that the 20-day moving average has converged with the 200-day moving average (1842 and 1845 respectively)," he said. "Lower interest rates and a softer dollar may help it recover from the week's low recorded today. Still, the yellow metal remains mired in the range."
The relatively neutral outlook comes as gold prices end the week down 0.5%. Gold prices struggled to attract new bullish momentum after Federal Reserve Chair Jerome Powell wouldn't rule out the possibility of a 100-basis point hike next month.
"Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy," Powell said in his semi-annual testimony before the U.S. Senate Banking Committee.
Frank McGee, Precious Metals Dealer at Alliance Financial, said that he expects gold prices to continue to fall as the reality of rising real interest rates impacts investor sentiment.