(Kitco News) - Gold's breakout rally to a two-month high is generating significant bullish sentiment among Wall Street analysts and retail investors, with some expecting prices to hit $1,850 an ounce in the near term, according to the latest Kitco News Weekly Gold Survey.
The survey shows that sentiment among retail investors is at its highest level since mid-November, which was also the last time gold prices were at current levels. Meanwhile, bullish sentiment among market analysts is at its highest level since May 2018.
Analysts have said that gold is catching a strong big as investors start to pay more attention to the growing inflation threat, rising volatility in equity markets and geopolitical uncertainty as tensions between Russia and the U.S. continue to heat up.
This week 18 Wall Street analysts participated in Kitco News' gold survey. Among the participants, 16 analysts, or 89%, called for gold prices to rise next week. At the same time, two analysts, or 11%, were bearish on gold in the near term. There were no neutral votes this week.
Meanwhile, A total of 1134 votes were cast in online Main Street polls. Of these, 801 respondents, or 71%, looked for gold to rise next week. Another 197, or 17%, said lower, while 136 voters, or 12%, were neutral.
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71%17%Not only are retail investors significantly bullish on gold next week, but participation in the latest survey rose to its highest level since mid-November. The bullish outlook comes as gold prices look to end the week above its critical breakout level above $1,830 an ounce, up nearly 1% from last Friday.
Although gold is off its highs from earlier in the week, many analysts expect gold to remain well supported in the near term.
Ole Hansen, head of commodity strategy at Saxo Bank, said that while there is potential for gold prices to consolidate around $1,830 an ounce, he is looking for higher prices.
"Given the way stock markets are behaving and that gold continues to defy rising real yields. I think it can break $1,850 to challenge the 2021 high," he said.
For many analysts, the biggest driver for gold remains the Federal Reserve's monetary policy, which appears to get more aggressive every day. However, some analysts say that market expectations are running a little too hot and the U.S. central bank could push back on those expectations at next week's monetary policy meeting.
"The Fed watch tool is factoring in 4 rate hikes for 2022 as of today. This was echoed by JP Morgan and Goldman Sachs a few days ago. We disagree, as the Fed has to consider more than just CPI. If we see only 2 or 3 hikes in 2022, that may be positive for gold, silver and related equities," said John Feneck, CEO of Feneck Consulting Group.Adrian Day, president of Adrian Day Asset Management, said that he is also looking for Fed monetary policy to remain bullish for gold.
"Even if the most aggressive tightening mooted were to be implemented, the Fed's balance sheet at the end of the year would still be more than 50% higher than it was a year ago, while interest rates would still be negative in real terms, more so than on the eve of the great inflation of the 1970s. This is bullish for gold," he said.
Of course, not all analysts are optimistic about gold. One analyst said that although the Fed is likely to remain behind the inflation curve, real interest rates will be moving higher, and that is ultimately not a great environment for gold.
Marc Chandler, managing director at Bannockburn Global Forex, said that along with tightening monetary policies worldwide, gold's technical chart is starting to shift as momentum indicators start to turn over.
"I think with [a hawkish Federal Reserve] and likely rate hike by the Bank of Canada, gold can pull back," he said. "While the MACD still looks constructive, the Slow Stochastic looks like a potential bearish divergence and, in any event, appears to be rolling over."
