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Mixed sentiment highlights difficult environment for gold as bond yields remain elevated

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(Kitco News) - Rising bond yields as the Federal Reserve looks likely to maintain its aggressive rate hikes are creating a challenging environment for gold Gold prices, and the mixed sentiment in the marketplace does not point to significantly higher prices anytime soon.

The latest Kitco News Weekly Gold Survey shows that Wall Street analysts are significantly bearish on gold in the near term, while sentiment is roughly balanced among retail investors.

According to analysts, rising U.S. bond yields, which hit a new 15-year high Thursday, remain a significant headwind for gold. They note that gold’s rising opportunity costs are also stopping it from attracting safe-haven flows as a slowing Chinese economy spooks investors.

“Yields are at a level that is supporting the Federal Reserve’s monetary policies and that is a tough environment for gold,” said Ed Moya, senior market analyst at OANDA. “There will be a time when gold is attractive again, but now is not that time.”

Despite the uphill battle, Moya said that he is neutral on gold for next week as bond yields could be close to peaking; he added that selling momentum in gold appears to be slowing.

“For gold selling pressure to remain, global bond yields might need to surge higher,” he said.

However, most analysts said lower gold prices are more likely in the near term. There are growing expectations that Federal Reserve Jerome Powell, speaking at the annual Jackson Hole central bank retreat next week, will maintain his hawkish bias and signal rates will remain higher for longer.

“The markets are now pricing in an extended period of elevated US interest rates, a dynamic that supports the dollar and is bad news for the precious metal. Against this background, gold prices are likely to remain under pressure, with the next significant support level at $1875,” said Ricardo Evangelista, senior analyst at ActivTrades.

This week, 16 Wall Street analysts participated in the Kitco News Gold Survey. Among the participants, ten analysts, or 63%, were bearish on gold in the near term. At the same time, two analysts, or 13%, were bullish for next week, and four analysts, or 25%, saw prices trading sideways.

Meanwhile, 941 votes were cast in online polls. Of these, 415 respondents, or 44%, looked for gold to rise next week. Another 386, or 41%, said it would be lower, while 140 voters, or 15%, were neutral in the near term.

Kitco Gold Survey

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Adrian Day, president of Adrian Day Asset Management, said that while he expects gold prices to push higher in the next few months, investors shouldn’t ignore the near-term price action.

“It’s very rare to see a washout like this without seeing some follow through,” he said. “I think we should expect to see lower gold prices next week, but that won’t do anything to change the long-term outlook.”

James Stanley, market Strategist at Stone X, said that while he expects Powell to strike a neutral tone at Jackson Hole next week, it will be difficult for gold to shake its bearish technical outlook.

“[Powell will] have a little something for both USD bulls and bears without too much inference ahead of the September meeting, and I think removing some pressure from the situation could allow for gold to retrace some of this week’s losses,” he said. “I’m still retaining a bearish bias because spot Gold slipped below a big level this week at 1900 and that three-year range remains very much in play.”

However, there are still a couple of bulls in the marketplace. Michele Schneider, director of trading education and research at MarketGauge, said that despite the selling pressure, gold still holds critical support levels. The gold market has managed to hold support above its March lows.

“I’m not worried about gold,” she said. “I would be looking to buy at lower levels.”

Gold price outlook remains bullish but record highs pushed out to the end of Q1 2024 - ANZ

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