(Kitco News) - The gold market is walking a knife's edge as sentiment among Wall Street analysts is evenly split between the bulls and the bears and prices close the week with solid gains above $1,800.
At the same time, the latest Kitco News Weekly Gold Survey shows that retail investors are still bullish on gold as prices look to end the week at a four-month high.
Although there is a lot of uncertainty in the marketplace, the one factor that most analysts agreed on is that the Federal Reserve's monetary policy decision on Wednesday will have a significant impact on the precious metal heading into year-end.
The Federal Reserve is expected to slow the pace of its rate hikes to 50 basis points; however, some analysts have said that the central bank's updated projections are going to be more important to watch.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said that he is bearish on gold in the near term as the Federal Reserve is not done raising interest rates.
"Even if the Fed slows the pace of rate hikes, it may also increase the terminal rate, which could boost [the U.S. dollar]," he said.
However, Adam Button, chief currency strategist at Forexlive.com, said gold will continue to benefit from less aggressive action from the Federal Reserve.
He added that gold can still do well even if the Fed raises the terminal rate because it also increases the risk of a deeper recession.
"The bond market is signaling that the Federal Reserve has already gone too far," he said.
Along with supportive U.S. monetary policy, Button said that he is bullish on gold because of strong seasonal factors.
"This is the time to buy gold. You buy gold in December and sell it in February. The seasonal trade in gold is the most predictable," he said.
This week, 17 Wall Street analysts participated in the Kitco News Gold Survey. Both bullish and bearish sides garnered seven votes each, or 41%, and three analysts, or 17%, expected gold prices to trade sideways next week.
Meanwhile, 661 votes were cast in an online Main Street poll. Of these, 450 respondents, or 68%, looked for gold to rise next week. Another 115, or 17%, said it would be lower, while 96 voters, or 15%, were neutral in the near term.
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Sean Lusk, co-director of commercial hedging with Walsh Trading, said that after gold's solid move Friday he expects to see some investors take some profits early next week, which will lead to lower prices ahead of the Federal Reserve meeting.
However, he added that sentiment in the gold market has shifted from "sell the rally" to "buy the dip," which should provide some support for the market.
"With so much uncertainty still out there, investors are going back to what they know and are looking for assets with a history of wealth preservation," he said.
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Adrian Day, president of Adrian Day Asset management, said that he expects gold prices to continue to push higher as investors lose faith in central banks' ability to bring inflation under control.
"Maybe this week, maybe next, gold will break above $1,800 and convince more investors to jump on board as it becomes more obvious that the Federal Reserve and European Central Bank will be unable to attain their inflation goals without causing a recession," he said.
