Gold prices have room to run as sentiment turns solidly bullish after best week in two years
(Kitco News) -A potential peak in the U.S. dollar because of shifting interest rate expectations is creating broad-based positive sentiment for gold in the marketplace, according to the latest Kitco News Weekly Gold Survey.
The gold market is ending the week with a more than 5% gain as prices hold solid support above $1,750 an ounce. Heading into the weekend, December gold futures last traded at $1,768 an ounce.
In the futures market, the precious metal is seeing its best weekly gains since early April 2020, and both Wall Street analysts and Main Street retail investors look for higher prices next week.
Recession fears and worries that chaos in cryptocurrencies would spread to the broader economy sparked the initial rally in gold last week. Since then, weak inflation data has added to the momentum as markets look for the Federal Reserve to slow the pace of its aggressive monetary policy hikes.
"Right now, everything is coming together for gold," said Adam Button, chief currency strategist at Forexlive.com. "If inflation has truly peaked, then so has the U.S. dollar and that will continue to support gold prices."
This week, a total of 19 market professionals took part in Kitco News' Wall Street survey. Twelve analysts, or 63%, said they were bullish on gold next week. Two analysts, or 11%, said they were bearish. Five analysts, or 26%, said they were neutral on the precious metal.
On the retail side, 905 respondents took part in online polls. A total of 588 voters, or 65%, called for gold to rise. Another 199, or 22%, predicted gold would fall, while the remaining 118 voters, or 13%, called for a sideways market.
Main Street is not only significantly bullish on gold, with sentiment at its highest level since June, but interest in the precious metal appears to be rising, as participation in this week's survey rose to its highest level since late September.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said he is also bullish on gold as he sees further weakness in the U.S. dollar.
"The headwind of the previously rising U.S. dollar has broken. Having established a nice floor of technical support, gold has finally broken out to the upside, rallying up toward $1,750," he said.
Jim Wyckoff, senior technical analyst at Kitco.com, said he is bullish on gold in the near-term as the rally has improved the precious metal's technical outlook.
However, not all market analysts expect this gold momentum to last. Adrian Day, president of Adrian Day Asset Management, said that while he is a long-term bull, he expects gold prices to lose some ground next week.
"After the exuberance in the markets the last week, I feel Powell or other Fed spokesmen will have to come out and dampen the enthusiasm. This will be bad for gold," he said.
Darin Newsom, president of Darin Newsom Analysis Inc, was the second bear in this week's survey. He said he is breaking his cardinal rule of never going against the trend.
"From a short-term point of view, the contract is sharply overbought with daily stochastics approaching 100%. This sets the stage for a possible selloff within the uptrend, a standard retracement wave," he said.
On the neutral side, some analysts have said they want to see if gold prices can consolidate at these higher levels to confirm that the market is in a new uptrend.
Others have said that they want to see if this is more than just a short squeeze and that hedge funds are actually buying gold again.
Phillip Streible, chief market strategist at Blue Line Futures, said he is neutral on gold next week because the market has moved up too fast.
He added that although markets expect the Fed to slow the pace of interest rate hikes, expectations are for the Fed Fund rate to peak around 5%, and that this elevated terminal rate could still create some headwinds for gold.