(Kitco News) - One thing Wall Street agrees on when it comes to the gold market next week is that the precious metal is unlikely to fall when the Federal Reserve makes its accelerated tapering announcement, according to Kitco's gold price survey.
The 13 participating analysts on the Wall Street side were largely split between higher gold prices and sideways price action next week, with 46% in each camp. The remaining 8% said that prices could decline.
The Main Street side was more decisively optimistic. Out of the 1,039 participating retail investors, 53.6% were bullish on prices next week, 23.9% were bearish, and 22.5% were neutral, Kitco's survey showed.
Wall Street
46%
8%VS
Main Street
53.6%23.9%The main event to watch will be Wednesday's Federal Reserve interest rate announcement. Markets have already largely priced in an accelerated tapering schedule after the central bank Chair Jerome Powell dropped "inflation is transitory phrase" and testified in front of the U.S. Congress that a more aggressive tapering might be in order.
Gold is ending the week flat, with February come gold futures last trading at $1,784.30, up 0.43% on the day.
This week investors were zeroed in on the latest U.S. inflation number, which was the determining factor ahead of the FOMC meeting.
The November data showed U.S. consumer prices rising at the fastest annual pace in nearly 40 years, up 6.8%. However, the monthly change was smaller than in October, rising 0.8%, giving the markets hope that price pressures could be peaking.
"I'm bullish on gold next week. There is a lot that is baked into the cake already. People know what the Fed is going to do. We've heat peak inflation. And those inflation expectations will start to come down, and Fed will be tightening into a slowing economy. You'll see bond yields dip lower, and the dollar index will soften. Gold is a better place to be at the moment. Same with silver," Blue Line Futures chief market strategist Phillip Streible told Kitco News.
Plus, with inflation hitting the highest level since 1982, investors are bound to finally turn towards gold for protection, said Adrian Day Asset Management president Adrian Day.
"More and more investors realize that inflation is real and will be more persistent than the original narrative; and equally that the Federal Reserve, the European Central Bank and other major central banks are seriously lagging in fighting a phenomenon that they don't believe exists," Day said.
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Gold prices moving higher after U.S. CPI rises 6.8%, biggest jump since 1982 |
At the end of the day, the Federal Reserve is boxed in and will have to let the economy run hot before raising rates, said RJO Futures senior commodities broker Daniel Pavilonis.
"The U.S. economy will continue to pump more money out. Inflation will move higher. But the Fed doesn't want to do anything to rock the U.S. stocks market. So, it will be hesitant to raise rates next year," Pavilonis said.
Next week, gold's initial resistance level will be $1,794 an ounce, said Darin Newsom Analysis Inc. president Darin Newsom.
"The February contract looks to be moving into Wave 3 of its 5-wave short-term uptrend. Initial resistance is at this week's high of $1,794.30. Once this is taken out, the next upside target is near $1,808.00," Newsom explained.
One of the analysts bearish on gold next week said that the hawkish Federal Reserve was the reason for this outlook. "I like gold lower next week on a hawkish FOMC. Gold turned back from the 200-day moving average (~$1794), 20-day moving average ~$1803," said Bannockburn Global Forex managing director Marc Chandler.
