(Kitco News) - Renewed investor optimism on hopes that a vaccine will revive the global economy faster than expected is weighing on gold. According to the latest results from the Kitco News Weekly Gold Survey, Sentiment points to further weakness in the near-term.
The survey shows a majority of Wall Street analysts are bearish on gold next week and optimism among retail investors remains below 50% after falling to a multi-year low the previous week.
The bearish sentiment comes as the gold market has dropped below critical support levels. At the start of the week, gold prices fell to a four-month low after pushing below $1,850 an ounce. Heading into the weekend, the gold market has continued to fall, dropping below critical support at $1,800. Analysts say that the next major support point to watch is $1,750.
“The reopening trade will continue to put pressure on gold as people exit the safe haven,” said Gareth Soloway, chief market strategist at InTheMoneyStocks.com said. “Once gold hits approximately $1,750, gold will find a bottom and start trekking up again.”
This week 15 analysts participated in the survey. A total of six voters each, or 40%, called for gold prices to rise next week; meanwhile, eight analysts, or 53%, called for lower prices; 1 analyst or 7% were neutral on gold.
Meanwhile, a total of 1,270 votes were cast this past week in online surveys. Among those, 585 voters, or 48%, said they were bullish on gold next week. Another 424 participants, or 33%, said they were bearish, while 261 voters, or 21%, were neutral on the precious metal.
Wall Street
40%
53%VS
Main Street
46%33%
For many analysts, the biggest hurdle gold faces is ongoing news about potential vaccines.
“The prospects for a vaccine and firmer interest rates has spurred the powerful selloff, coming from stale longs and gold ETFs,” said Marc Chandler, chief market strategist with Bannockburn Global Forex. “Momentum traders have jumped aboard and are playing from short side.”
Along with growing general investor optimism due to vaccine news, some analysts have said they are negative on gold because of seasonal factors. Historically, the gold market is soft, heading into December and buying momentum picks up closer to January.
Although sentiment is overall bearish, some analysts see the current selloff as a buying opportunity.
Ole Hansen, head of commodity strategy at Saxo Bank, said that he remains bullish on gold in the near-term. He added that Friday’s selloff is on very thin volume as many traders continue to celebrate U.S. Thanksgiving.
Hansen added that there are no fundamentals reasons for gold’s current selloff as the U.S. dollar and bond yields have dropped, two strong support for the gold market.
“We have seen quite a significant change in investor sentiment based on hope not reality, just hope,” he said.
Hansen said that he sees weaker prices as a buying opportunity.
“This is the blowout we needed because gold has really been doing nothing since it dropped below $1,900,” he said. “We are seeing the market being tipped over the edge. If you liked gold at $1,850, then you have to like gold at $1,750. The fundamental reasons to hold gold haven’t gone away.
Adrian Day, chief investment officer at Adrian Day Asset Management, said that he expects to see lower prices next week as the market has room to move lower after pushing below the 200-day moving average.
However, he also said that gold’s long-term fundamentals remain in place.
“[Janet] Yellen at Treasury and [Jerome] Powell at the Fed will combine to support massive unfunded spending on everything from aid for bankrupt states to student debt forgiveness. That spending will be very bullish for gold,” he said.
