Sentiment suggests gold is ready to retest $2,000 as three-week selloff ends
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(Kitco News) - Although off its highs, the gold market is eking out a modest gain to end a three-week losing streak; solid bullish sentiment in the marketplace could push prices back to $2,000 an ounce by next week.
The latest Kitco News Weekly Gold Survey shows that both Wall Street analysts and Main Street investors are solidly bullish on gold in the near term.
The broad-based bullish sentiment comes as the precious metal is seeing some selling pressure Friday after the U.S. Labor Department released robust employment data, saying that 339,000 jobs were created last month. However, some analysts said that despite the hawkish employment numbers, gold's new momentum has room to run further.
While gold has been unable to hold $2,000 ahead of the weekend, analysts said the bounce off a two-month low should provide some bullish momentum in the near term.
"There's a bullish trendline connecting last Friday's and this Tuesday's lows – I think this is in bulls' courts and it's theirs to lose, for now,” said James Stanley, senior market strategist at Forex.com.
At the same time, while prices are expected to rise next week, analysts aren't expecting to see a major break to new all-time highs. Colin Cieszynski, chief market strategist at SIA Wealth Management Inc, said a weaker U.S. dollar next week should support gold, but he doesn't see prices breaking above $2,000 an ounce.
"Easing political and banking systems tensions suggest that if we do get a bounce for gold, it may be moderate and $2,000 remains a significant psychological barrier,” he said.
This week, 19 Wall Street analysts participated in the Kitco News Gold Survey. Among the participants, ten analysts, or 53%, were bullish on gold in the near term. At the same time, five analysts, or 26%, were bearish for next week, and four analysts, or 21%, saw prices trading sideways.
Meanwhile, 509 votes were cast in online polls. Of these, 307 respondents, or 60%, looked for gold to rise next week. Another 124, or 24%, said it would be lower, while 78 voters, or 15%, were neutral in the near term.
Along with Wall Street analysts, retail investors are not expecting gold prices to hit record highs soon, even as they remain bullish on gold. The survey shows that Main Street sees gold prices ending around $1,997 an ounce next week.
Heading into the weekend, August gold futures last traded at $1,971.80 an ounce, up 0.40% from last Friday.
For many analysts, the main driver for gold remains the Federal Reserve's monetary policy stance. There are going expectations that the Federal Reserve is looking to pause its aggressive hiking stance when it meets in two weeks; at the same time, economists have noted that a pause would not signal an end to the tightening cycle.
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Some analysts have noted that the significantly better-than-expected employment gains last month support the Federal Reserve's aggressive stance; however, other analysts have pointed out that looking beyond the headline number, cracks in the labor market are starting to appear. The U.S. unemployment rate jumped to a seven-month high of 3.7%.
"I believe it will come increasingly clear that the Fed funds rate has peaked and that will be a tailwind for gold. Still the $2070 level looms as major resistance and it's tough to be overly bullish until it breaks,” said Adam Button, chief currency strategist at Forexlive.com.