The Federal Reserve's slight shift in monetary policy will drive bullish momentum in gold price next week
(Kitco News) - According to the latest Kitco News Weekly Gold Survey, Wall Street analysts and Main Street investors see the potential for higher prices next week. The new bullish sentiment comes as gold prices end the week with a 2% gain testing a critical resistance point. December gold futures last traded at $1,783.30 an ounce.
Daniel Pavilonis, senior commodities broker with RJO Futures, said that he sees a perfect setup for gold in the near term that will lead to higher prices. He noted that the bounce in gold comes as sentiment has been significantly bearish.
Pavilonis said higher prices would create a short-squeeze as bears leave the market. However, fundamentally, a less hawkish U.S. central bank through the rest of the year will support higher prices.
Although Federal Reserve Chair Jerome Powell said that further aggressive tightening remains possible, he added that the central bank would remain data-dependent. At the same time, he also said that at some point, the Federal Reserve would have to slow the pace of tightening as the economy feels the impact of rising interest rates.
"The Fed is signaling that it is not going to be as hawkish on rates as they have been," Pavilonis said. "Gold is off to the races now."
This week 16 Wall Street analysts participated in Kitco News' gold survey. Among the participants, 11 analysts, or 69%, were bullish on gold in the near term. At the same time, three analysts, or 19%, were bearish on gold. Two analysts, or 13%, cast neutral votes this week.
Meanwhile, 1,543 votes were cast in online Main Street polls. Of these, 961 respondents, or 62%, looked for gold to rise next week. Another 334, or 22%, said lower, while 248 voters, or 16%, were neutral in the near term.
Adam Button, chief currency strategist at Forexlive.com, said he is also bullish on gold in the near term.
"The subtle shift from the Fed was all the market needed and support at $1680 held," he said. "There's plenty of room for upside from here."
However, not all analysts are bullish on gold or see a sustainable rally next week. Friday, analysts at TD Securities said in a note that they had entered a tactical short in gold as the market looks overbought.
Phillip Streible, chief market strategist at Blue Line Futures, said that he sees room for gold to hit $1,800 an ounce; however, he added that he would be looking to take profits at that level.
He added that markets could be a little early on expectations that the Fed will pivot. Friday, the U.S. Department of Commerce's core Personal Consumption Expenditures Price Index shows inflation holding near a 40-year high at 4.8%.
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"If inflation remains hot, then the Federal Reserve will continue to raise interest rates aggressively that would cap gold's rally," he said.
Marc Chandler said he is neutral on gold for next week after two weeks of positive price action. He added that investors would have to pay attention to Friday's nonfarm payrolls report.
"A number of around 250,000 is expected, which would be fairly solid pre-pandemic," he said. "The 10-year yield got down to about 2.65%, after peaking near 3.50%. I suspect ahead of the jobs report, might not get much lower. That may see gold consolidate after stringing together back-to-back weekly gains for the first time since May."