(Kitco News) - The gold market is once again stuck in relatively neutral territory, holding support around $1,750 and mixed sentiment among Wall Street analysts and Main Street investors does not point to any kind of break out next week.
Gold continues to struggle to attract any bullish attention as the Federal Reserve maintains its aggressive monetary policy stance. Analysts note that gold faces further headwinds following comments from Fed Chair Jerome Powell in his much-anticipated speech at the central bank symposium at Jackson Hole, Wyoming.
Although Powell wasn't as hawkish as some analysts were expecting, he noted that rates still need to go higher as inflation remains the biggest threat to the economy. He added that interest rates could stay higher for longer to ensure inflation remains close to the central bank's 2% target.
Phillip Streible, chief market strategist at Blue Line Futures, said it could be difficult for the gold to rally as interest rates remain elevated.
"I'm not very optimistic on precious metals right now as the price hovers at these key support levels," he said.
However, other analysts have said that falling inflation pressures could prompt markets to price in less aggressive moves from the Federal Reserve, which would weaken the U.S. dollar and support gold prices.
Friday, the U.S. Department of Commerce said its core Personal Consumption Expenditures Index (PCE) increased 4.6% in July, down from June's annual increase of 4.8%.
"The inflation data was probably a lot more relevant than anything Powell said," said Adam Button, chief currency strategist at Forexlive.com. "Gold should do well as inflation continues to come down. The market is priced way too high for a 75-basis point move in September and gold should rally as those expectations start to come down."
The CME FedWatch Tool shows that markets are roughly split 50/50 on whether the Federal Reserve will raise the Fed Funds rate by 50 or 75 basis points next month.
Along with rate expectations, Kitco's weekly gold survey results revealed that Wall Street is split evenly on gold prices next week. Out of 16 analysts who participated, six (38%) see gold prices either higher or lower next week. Four analysts (25%) were neutral on gold in the near term.
However, retail investors remain bullish on the precious metal. This week 561 votes were cast on online surveys. 53% of respondents projected higher prices, 27% called for a move lower, and 20% were neutral, according to the survey.
Wall Street
38%
38%VS
Main Street
53%27%While market sentiment doesn't create a clear path for gold in the near term, the most significant factor remains U.S. interest rates. Analysts have said that despite Powell's latest comments, if inflation continues to weaken the Federal Reserve will start to slow the pace of interest rate hikes.
The mixed sentiment comes as gold prices end the week down 0.8% from Friday.
Colin Cieszynski, chief market strategist at SIA Wealth Management Inc, said he is bullish on gold next week as Powell's comments didn't add anything new to the current outlook.
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"He didn't really say much that was new and noteworthy enough to push treasury yields or USD higher in the short term," he said. "The U.S. Dollar is looking exhausted technically as it is and due for a correction which cold take some of the recent pressure off of gold."
Darin Newsom, president of Darin Newsom Analysis Inc, said he also sees a near-term top in the U.S. dollar.
"The U.S. dollar index looks to have established a double on its weekly chart, needing confirmation with a move below 104.64," he said.
