(Kitco News) - The gold market remains stuck in neutral at around $1,850 an ounce, with bullish sentiment among Wall Street analysts starting to cool as the Federal Reserve remains on pace to aggressively raise interest rates through the rest of the year.
Meanwhile, the Kitco News Weekly Gold Survey also shows that retail investors remain significantly bullish on the precious metal as they look for assets to protect their wealth and purchasing power in a rising inflationary environment.
Although gold prices are ending the week above $1,850 an ounce, a critical psychological level, it is struggling to find consistent bullish momentum. Gold has managed to keep its head above the water line following stronger-than-expected employment data. Friday, the Bureau of Labor Statistics said 390,000 jobs were created in May, beating economists' expectations of around 325,000.
Phillip Streible, Chief Market Strategist at Blue Line Futures, said that gold's technical outlook remains constructive; however, the fundamental perspective is murky. He added that the economic data supports further aggressive monetary policy action.
"The Federal Reserve is going to remain firmly hawkish and we could see more than two 50-basis point moves," he said. "However, inflation remains a problem and is still too high. Market volatility is also picking up. For now, gold is caught in the middle."
Ole Hansen, head of commodity strategy at Saxo Bank, said that while any dip in the gold price could be seen as a long-term buying opportunity, he is neutral on gold next week as prices remain below $1,870 an ounce.
"The stronger than expected U.S. job report did nothing to alter the view that the Fed will bump up rates by successive 50 bp hikes during the next couple of meetings. Prior to the release, gold had a quick peek at key resistance around $1,870, a level that it as a minimum needs to penetrate in order to force a change in the sentiment among those looking for lower gold as yields rise," he said.
This week 15 Wall Street analysts participated in Kitco News' gold survey. Among the participants, seven analysts, or 47%, called for gold prices to rise next week. At the same time, five analysts, or 36%, were bearish on gold in the near term, and three analysts, or 20%, were neutral on prices.
Meanwhile,637 votes were cast in online Main Street polls. Of these, 448 respondents, or 70%, looked for gold to rise next week. Another 117, or 18%, said lower, while 72 voters, or 11%, were neutral in the near term.
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The gold market is caught in a tug of war between rising inflation and the Federal Reserve's hawkish stance to cool prices; however, there are growing expectations that the U.S. central bank's prospects of engineering a soft land are narrowing.
Adrian Day, president of Adrian Day Asset Management, said that he remains bullish on gold as it maintains its upward bias.
"Today's U.S. jobs report is only going to give the Federal Reserve reason to continue tightening, but the economy is simply not strong enough to sustain meaningful tightening without causing economic damage. A stagflationary period is ahead, and that's positive for gold," he said.
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While some analysts remain long-term gold bulls, they have noted that the U.S. dollar remains a critical headwind, especially as the Federal Reserve raises interest rates.
"With nonfarm payrolls beating expectations, there doesn't appear to be any reason for the Fed to slow tightening. On this news, U.S. Treasury yields have started to move up again, boosting the USD relative to other currencies, including gold. Things could change later in the week around the ECB meeting; we'll see," said Colin Cieszynski, Chief Market Strategist at SIA Wealth Management.
