(Kitco News) - Rising inflation pressures and renewed economic uncertainty continue to generate strong bullish sentiment in the gold market among market analysts and retail investors, according to the latest Kitco News Gold Survey.
Volatility picked up in the gold market this week. Still, analysts have said that a Goldilocks environment for the precious metal could push prices back above $1,850 an ounce, a vital technical area representing a critical retracement level and the 200-day moving average.
"The question is: because of rising inflation, will the Federal Reserve's hands be forced to raise interest rates sooner than expected," said Robin Bhar, an independent market analyst. "Although inflation is rising, because of the economic data we have seen, I think the Fed has room to be patient and that will support gold. As economies reopen, it is justified that inflation pushes higher, but the economic data is still uneven."
This week, 13 analysts participated in Kitco News' gold survey. Of those, ten analysts, or 77%, said they were bullish on gold; at the same time, one analyst, or 8%, said they were bearish on prices next week. Two analysts, or 15%, said they see gold prices trading sideways.
Meanwhile, a total of 464 votes were cast in an online Main Street. Of these, 330 respondents, or 71%, looked for gold to rise next week. Another 80 respondents, or 17%, said lower, while 54 voters, or 11%, were neutral.
Wall Street
77%
8%VS
Main Street
71%17%Due to technical issues, participation in the Main Street surveys were significantly lower than average.
Sean Lusk, co-director of commercial hedging at Walsh Trading, said that he is bullish on gold not only because inflation is heating up, but the growing geopolitical tensions in the Middle East as the conflict between Israel and Palestinians in the Gaza Strip continues to escalate.
"I think we can expect gold prices to attract some safe-haven flows in the next few weeks and that could push prices back above $1,850 an ounce," he said.
Lusk added that his target is for gold prices to eventually rally back to $1,900 an ounce and be neutral on the year before it starts a new strong uptrend.
Adrian Day, president of Adrian Day Asset Management, said that he is bullish on gold as investors once again embrace the precious metal as an inflation hedge.
"The sentiment has changed and investors who abandoned gold in the second half of last year are returning, along with inflation. The Federal reserve may say inflation is only temporary, but the gold market does not believe it," he said.
Darin Newsom, president of Darin Newsom Analysis, said that he is bullish on gold in the near term. He said he expects to see further technical weakness in the U.S. dollar. However, he added that the $1,843 level could represent a near-term resistance level.
However, not everyone is expecting gold prices to break out again. Adam Button said that after breaking above $1,800 an ounce last week, the precious metal could be due for some sideways price action.
"Gold has had a great bounce from the March lows. Now it's time for some consolidation ahead of the next leg," he said.
Marc Chandler, managing director at Bannockburn Global Forex, said that although the precious metal has been stronger than expected, he is still a little cautious when it comes to further upside for gold. He added that the market is a little overstretched.
"Gold looks like it wants to retest the 1845-1850 area, which holds the 200-day moving average," he said. "Momentum indicators are stretched. I would be more inclined to sell into strength at the start of next week, but keeping a watchful eye on yields."
