Make Kitco Your Homepage

Sentiment shows gold’s fair value is around $1,800… for now

Kitco News

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) - Gold prices could fall below $1,800 an ounce as sentiment in the marketplace continues to have a slightly bearish tilt; however, market analysts are not expecting any major route in gold as the precious metal continues to stand its ground, faced with rising interest rates worldwide.

The latest Kitco News Weekly Gold Survey shows that sentiment is relatively neutral among Wall Street analysts and Main Street investors.

David Madden, Market Analyst at Equiti Capital, capital said that $1,800 an ounce could represent fair value for gold in the near-term as the market continue to be caught as rising interest rates boost the U.S. dollar but also creates more volatility for equity markets.

“I think the U.S. dollar has a slight advantage over gold as a safe-haven asset,” he said. “Although gold looks comfortable trading around $1,800, the technical picture shows price could move lower in the near-term.”

The comments come as the gold market ends its third week in negative territory. August gold futures last traded at $1,800.80 an ounce, down more than 1.5% from last Friday. Adding to the dismal technical outlook, the gold market ended June with its third-straight loss.

Despite the dismal start to the second half of 2022 gold continues to outperform equity markets. The S&P 500 ended the first half of the year down 20%, it’s worst half-year performance since the 1970s.

“Gold is still doing what it’s supposed to,” said. Daniel Pavilonis, Senior Commodities broker at RJO Futures. “With all the rate hike issues, gold is holding its ground. The price is lower but it hasn’t broken down.”

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

 

This week 16 Wall Street analysts participated in Kitco News' gold survey. Among the participants, five analysts, or 31%, were on gold bullish in the near term. At the same time, seven analysts, or 44%, were bearish on gold and four analysts, or 25%, were neutral on the precious metal next week.

Meanwhile, 612 votes were cast in online Main Street polls. Of these, 253 respondents, or 41%, looked for gold to rise next week. Another 233, or 38%, said lower, while 126 voters, or 21%, were neutral in the near term.

Although sentiment among retail investors remains at a multi-year low so is the participation rate. Analysts have noted that investor interest in gold has cooled recently as prices consolidate.

According to some analysts gold prices will continue to struggle as the Federal Reserve leads the global push to raise interest rates. The U.S. central bank is expected to raise interest rates by 75 basis points later this month.

But the Federal Reserve is not the only central bank looking to tighten its monetary policy. Expectations are growing that the European Central Bank will raise interest rates in July as inflation continues to rise. Friday, preliminary data showed that inflation in Europe rose 8.6% for the year in June, up from May’s increase of 8.1%.

However, other analysts note that central banks all face the same dilemma as they look to raise interest rates in the face of slowing growth.

Adrian Day, President of Adrian Day Asset Management said that in the current environment, gold is oversold and due for a bounce.

“[Central banks] will face the choice of continuing to tighten in order to bring down inflation, or pushing economies into recession; the U.S. may already be in one.  At that point, most will slow their tightening or, if economic conditions get sufficiently bad, reverse course,” Day said. “If the Fed and other banks abandon their efforts to control inflation, this would be wildly positive for gold.”

Marc Chandler, Managing Director Bannockburn Global Forex, said that he is also looking for a bounce in gold; however, he is not as optimistic on the precious metal.

“I am reluctant to chase it lower after this week’s big break down, below $1800,” he said. “That said, it is a bounce to sell as recession fears are eclipsing inflation a chief angst.”

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.