(Kitco News) -The Federal Reserve's push to raise interest rates "soon" has awakened gold bears and sent the bulls into hiding as the precious metal sees its worst selloff since mid-November.
The bearish sentiment among Wall Street analysts comes as gold prices have dropped nearly 3% this week since Wednesday's Federal Reserve monetary policy meeting, which set the stage for a rate hike in March. At the same time, Federal Reserve Chair Jerome Powell made a case for aggressive action this year to deal with the rising inflation pressure.
"There's quite a bit of room to raise interests without threatening the labor market. This is by so many measures a historically tight labor market — record levels of job openings, quits, wages are moving up at the highest pace they have in decades," Powell said.
Gold prices have dropped as markets have started to price in the potential for five rate hikes this year. However, some analysts have said that markets and the Fed are too aggressive.
"Gold could go lower, but I'm still buying because the Fed is going to overtighten and get too hawkish and they will ultimately have to backtrack," said Phillip Streible, chief market strategist at Blue Line Futures.
This week 14 Wall Street analysts participated in Kitco News' gold survey. Among the participants, 4, or 29%, called for gold prices to rise. At the same time, seven analysts, or 50%, saw gold prices dropping next week and three analysts or 21% saw sideways price action.
Meanwhile, 495 votes were cast in online Main Street polls. Of these, 270 respondents, or 55%, looked for gold to rise next week. Another 158, or 32%, said lower, while 67 voters, or 14%, were neutral.
Wall Street
29%
50%VS
Main Street
55%32%While retail investors remain bullish on gold, participation in this week's survey was at its lowest point since September.
According to some analysts, there is room for gold prices to move lower in the near term with $1,750 an ounce as the new target; however, other analysts note that the market is oversold and could be due for a bounce in the near term.
Adrian Day, president of Adrian Day Asset Management, said that he is neutral on gold in the near term but looks for an ultimate rebound in the price.
"The fundamental argument is that at some point the Federal Reserve will lose its newly found inflation-fighting demeanor and gold will then do what it has done every time in the last 20 years that the Fed tried to tighten," Day said. "They may not retreat at the first sign of trouble in the markets, but when it is a choice between a slowing economy, troubled debtors and sliding markets on the one hand or inflation and the dollar on the other, they will let inflation go."Colin Cieszynski, chief market strategist at SIA Wealth Management, said that gold prices could remain in a downtrend in the near term as more wage inflation in next week nonfarm payrolls report, could add further support to the Federal Reserve's hawkish posturing.
