(Kitco News) - Gold lost nearly $100 this week as prices tumbled to $1,720, hitting fresh eight-month lows. But the selloff might not be over as Wall Street called for even lower levels next week, according to Kitco’s gold survey.
Next week will be all about the U.S. yields and the U.S. dollar, analysts told Kitco News, as gold accelerated its move down on technical selling pressures. Overnight, the 10-year Treasury yield rose above 1.6% — the highest level in a year.
“Gold’s nemesis, the U.S. dollar, appears to be on the rebound with investors taking notice of rising treasury yields,” said SIA Wealth Management chief market strategist Colin Cieszynski.
At the time of writing, April Comex gold futures were trading at $1,722, down more than 3.3% on the week.
A total of 13 market professionals took part in this week’s Wall Street survey. Eight analysts, or 61.5%, said they were bearish on gold next week. Another three analysts, or 23%, said they were bullish. And the final two, or 15.5%, said they were neutral on the precious metal.
On the retail side, 669 respondents took part in an online Main Street poll. A total of 351 voters, or 52.5%, called for gold to rise. Another 223, or 33.3%, predicted gold would fall. While the remaining 95 voters, or 14.2%, saw a sideways market. This week marked the lowest Main Street survey participation rate in nearly a year.
Wall Street
23%
61.5%VS
Main Street
52.5%33.3%In last week’s survey, Wall Street called for lower gold prices, while Main Street was split between bullish and bearish sentiment.
The next big support level gold is likely to test next week is the $1,700 level, according to analysts. And a lot will depend on whether the precious metal can hold it.
“Rally fizzled this week near the 20-day moving average. Rising rates took a toll, but maybe some climax was reached. The next 61.8% retracement is near $1,690. I suspect that is where it is headed in the medium-term. I would not be surprised to see broad consolidation in the near term,” said Bannockburn Global Forex Managing Director Marc Chandler.
Next week could bring “the final washout” in prices, said Adrian Day Asset Management CEO Adrian Day.
“Fundamentally, things are positive for gold, with massive excess liquidity around the world. The dollar is only bouncing off lows—it remains lower than at the U.S. election—while rates have moved up at the long end, not the short, and remain negative in real terms. Most of all, the market needs a washout and sentiment change,” Day said.
One of the most bearish votes from this week’s survey was V.R. Metals/Resource Letter publisher Mark Leibovit, who questioned whether markets could see prices go as low as $1,500 an ounce. “There are too many bulls. Technicals are neutral to bearish. Is $1,500 gold ahead?” Leibovit wrote.
Despite the overwhelmingly bearish gold survey, there were a few voices of optimism, projecting higher gold next week.
“For the first time in four weeks, I’m calling it higher,” said Saxo Bank head of commodity strategy Ole Hansen.
The reason for this is the fact that equity markets are starting to be affected by the rise in yields.
“The pain of rising yields has now spread to the wider market, thereby triggering a small safe-haven bid to partly offset galloping real yields. Powell’s resolve is likely to be tested following his horrendous misjudgment of the market this past week. The U.S. economy cannot afford higher yields, and the spike this week will increase focus on yield curve controls. An event that would send real yields and the dollar lower, and gold sharply higher,” Hansen said.
