Bullish sentiment highlights growing value in gold market; prices to hold within striking distance of $2,000
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(Kitco News) - The $2,000 level remains a tough nut to crack for the gold market; however, retail investors are not expecting to see any significant selloff as bullish sentiment will continue to support prices near record highs next week.
While Main Street investors remain solidly bullish on gold in the near term, the latest Kitco News Weekly Gold Survey shows Wall Street Analysts are slightly more hesitant, with bullish sentiment holding a small majority.
However, looking beyond initial headlines, even analysts who are neutral on gold in the near-term note that there are several factors in the market and the precious metal remains an attractive buy on the dips.
Although the market continues to see solid safe-haven demand as recession fears grow, some analysts note that the U.S. dollar's waning influence as the world's reserve currency was a major driving force behind this week's late-rally push back to $2,000 an ounce.
This past week, news broke that China settled its first Liquid National Gas trade in yuan through the Shanghai Petroleum and Natural Gas Exchange. Also, this past week China and Brazil announced that they will conduct trade and financial transactions in the real and yuan, cutting out the U.S. dollar.
"There are very clear underpinnings for gold as nations move away from the U.S. dollar," said Kevin Grady, president of Phoenix Futures and Options.
Grady added that central banks buying gold to diversify their foreign reserve holdings and support their currencies are providing extremely strong long-term support for gold prices and a solid floor in the market.
"Central banks aren't fickle investors who will sell their gold if the price drops. They are buying gold for the long term," he said. "This is creating significant strength in the marketplace. Investors are starting to realize that there is value in the market and are quickly jumping in to buy the dips."
This week, 22 Wall Street analysts participated in the Kitco News Gold Survey. Among the participants, 11 analysts, or 50%, were bullish on gold in the near term. At the same time, three analysts, or 14%, were bearish for next week, and eight analysts, or 36%, saw prices trading sideways.
Meanwhile, 782 votes were cast in online polls. Of these, 507 respondents, or 65%, looked for gold to rise next week. Another 158, or 20%, said it would be lower, while 117 voters, or 15%, were neutral in the near term.
Although sentiment among retail investors has dropped from last week's more than one-year high, it remains elevated. The survey shows that retail investors expect gold prices to stay near current levels with an average week-end target at $1984 an ounce.
In the previous survey, both Wall Street and Main Street were extremely bullish on gold and are being proven correct. June gold futures last traded at $1,993.10 an ounce, up nearly 0.5% from last Friday.
Not only is gold ending the week in positive territory, but for the second week in a row, it managed to hold solid support at around $1,950.
Jim Wyckoff, noted that gold has solid technical momentum. He explained that along with gold's bullish weekly performance, the market is seeing an all-time-high closing price for the month and the quarter.
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"The near-term and longer-term technical postures for gold were already bullish, and a record monthly high close today would just add fuel to that technically bullish fire," he said in a special report.
However, some analysts recommend investors exercise caution at current levels as gold is ending the month up 8%. Adrian Day, president of Adrian Day Asset Management, said that he is neutral on gold in the near term.
"But only because gold needs a rest after the strong gain in March," he said. "Fundamentally, gold has turned and the "risk" is to the upside from here."