(Kitco News) - Sentiment in the gold market remains extremely bullish as the precious metal continues to consolidate in the face of rising bond yields as the Federal Reserve looks to aggressively tighten its monetary policy through 2022.
The latest results of the Kitco News Weekly Gold Survey show no Wall Street analyst is bearish on gold in the near term, with a substantial majority expecting to see higher prices next week. At the same time, retail investors remain solidly bullish on the precious metal.
Many analysts have noted gold's resilience as 10-year bond yields have risen to their highest level in 3 years. Bonds have sold off as minutes of the March Federal Reserve suggested that committee members could raise interest rates by 50 basis points at the next two meets. The U.S. central bank also expects to start reducing its balance sheet following the May monetary policy meeting.
Despite all this bearish news, gold has managed to consolidate between $1,900 and $1,950 an ounce. While analysts don't see a breakout just yet, they expect prices to continue to test the top end of the range.
"Having had survived having the kitchen sink and more thrown at it by several FOMC members this week, I believe gold could move higher given how much has been priced in by now," said Ole Hansen, head of commodity strategy at Saxo Bank. "Gold is still caught between $1,890 to $1,950, but I increasingly favor the upside to be tested next."
This week, 16 Wall Street analysts participated in Kitco News' gold survey. Among the participants, ten analysts, or 63%, called for gold prices to rise next week. At the same time, six analysts, or 38%, were neutral on prices.
Meanwhile, 842 votes were cast in online Main Street polls. Of these, 478 respondents, or 57%, looked for gold to rise next week. Another 198, or 23%, said lower, while 166 voters, or 20%, were neutral in the near term.
Wall Street
63%
0%VS
Main Street
57%23%The bullish outlook comes as gold prices prepare to end the week with a 1% gain, last trading at $1,946.30 an ounce.
David Madden, market analyst at Equiti Capital, said that given what gold faced this week, he expects prices have room to grind higher to 1,960 an ounce next week.
"If gold can't be driven below $1,900 in this environment, then I don't know what would," he said.
However, Madden said that he doesn't expect to see a breakout soon. He added that for gold to get back to $2,000 an ounce, there would have to be a major escalation in Russia's war with Ukraine. He noted that significant geopolitical uncertainty if Russia threatens Europe's oil and gas supply could push equities down and energy prices up.
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"If stocks dropped, then investors would quickly want to hold something solid and that would drive gold prices back to record highs," he said.
Phillip Streible, chief market strategist at Blue Line Futures, said that gold remains an attractive asset for investors as volatility dominates financial markets.
"People who want to catch their breath are moving into gold," he said.
However, Streible said that investors should use caution as prices consolidate at the top of their range.
"You always want to maintain a core position in gold but look to scale in and out of the market. You want to take a little profit at the top of the range and look to buy against when prices fall below $1,900," he said.
