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(Kitco News) - Gold tumbled well below $2,000 an ounce this week, falling nearly $50, with Wall Street analysts concerned that the selloff might not be over, according to Kitco's weekly gold survey. Main Street's bearish sentiment also ticked up significantly, but the bulls remained in the lead for next week.
Gold is looking at its worst week since the start of February. June Comex futures fell from above $2,013 an ounce at the beginning of the week to $1,964 Friday morning. This is the most in more than three months when gold fell nearly $70 on the week at the start of February.
One of gold's biggest downward drivers has been a move higher in the U.S. dollar. The greenback caught a bid on resilient U.S. macro data, which forced the market to re-price its Fed rate hike expectations. The CME FedWatch Tool now sees a 44% chance of another 25-basis-point rate increase in June.
Prior to this, it was almost unanimous that the Fed was going to pause in June after raising rates by 5% in just over a year. Several Fed speakers have also pushed back against the idea of a pause in June. With that, markets started reversing the year-end rate cut bets.
"Rising U.S. rates and a stronger dollar dragged gold lower," Marc Chandler, managing director at Bannockburn Global Forex, told Kitco News. "It is off around 2.3% after support near $1,950 held. The stabilization of the dollar, after key resistance levels held, saw gold steady ahead of the weekend."
Most of the 15 participating analysts on the Wall Street side were bearish when asked about their gold price expectations for next week, with 53% projecting lower levels. Only 20% were bullish on prices and 27% were neutral.
The Main Street side was still bullish, but the bearish sentiment saw a significant move up. Out of the 927 participating retail investors, 47% expected higher prices, 38% estimated a move lower, and 15% are neutral, Kitco's survey showed.
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Retail investors' average gold price target for the end of next week was $1,991 an ounce, which is nearly $30 higher than current levels.
At the time of writing, June Comex gold futures were trading at $1,960.70, up 0.05% on the day.
The first resistance level is at $1,979 and then $1,987 an ounce, according to Chandler. But momentum indicators leave room for another move lower. In that case, there is solid support at around $1,936. "The key to the outlook are U.S. rates and the dollar, and after big adjustments, consolidation may be in order in the coming week ahead," Chandler said.
There is likely to be strong pressure on gold going into next week after the precious metal fell more than $100 since testing levels above $2,060 two weeks ago, said Michael Moor, founder of Moor Analytics.
Optimism around the resolution of the debt ceiling debate is another short-term drag on gold, said Adrian Day, CEO and Chairman of Adrian Day Asset Management. However, Day noted that the long-term trend in the precious metal remains bullish.
"Central banks will find that they cannot meet their inflation targets through rate hikes without causing serious damage to the economy and financial system," Day told Kitco News. "It is playing out in slow motion, slower than otherwise because of the massive amounts of liquidity pumped into the system over the past decade plus, which provides a temporary cushion to rising rates, delaying the inevitable impact."
