(Kitco News) - The gold market hovers in a precarious position and support at $1,700 could be tested next week as there is little bullish conviction in the marketplace, according to the latest Kitco News Weekly Gold Survey.
Wall Street remains slightly bullish in the near term as the U.S. dollar remains overvalued; however, bearish sentiment among retail investors has risen to a multi-year high.
The bearish sentiment comes as the U.S. dollar looks to end the week at a fresh 20-year high above 109 points.
Darin Newsom, president of Darin Newsom Analysis, said that he remains optimistic that the gold market could attract some bargain hunting and bounce off support around $1,700 next week; however, he added the midterm and long-term outlooks look bleak.
"The U.S. dollar is too high and some profit taking could support gold in the near-term," he said. "But you can't ignore the fact that investors still want to own U.S. dollars because they see it as the safest current and asset out there."
Newsom added that despite rising daily volatility in the gold market, broader trends remain in place.
"Ultimately, gold is stuck. Until we see something destabilize this U.S. dollar rally, gold investors will remain mostly on the sidelines," he said.
This week, a total of 17 market professionals took part in Kitco News' Wall Street survey. Seven analysts, or 41%, said they were bullish on gold next week. Six analysts, or 35%%, said they were bearish. Four analysts, or 24%, said they were neutral on the precious metal.
On the retail side, 898 respondents took part in online polls. A total of 337 voters, or 38%, called for gold to rise. Another 412, or 46%, predicted gold would fall. While the remaining 149 voters, or 17%, called for a sideways market.
Wall Street
41%
35%VS
Main Street
38%46%While gold prices are off their lows, the precious metal is still looking to end its third week in negative territory. December gold futures last traded at $1,725.40 an ounce, down 1.4% from last Friday.
Although market analysts are bullish on gold in the near term, analysts are not looking for any breakout. Marc Chandler, managing director at Bannockburn Global Forex, said that $1,740 remains the first resistance point he is watching.
"Gold has been acting more like a risk asset than a safe haven/anti-inflation protector," he said.
However, some analysts are slightly more optimistic on gold in the near-term. Colin Cieszynski, chief market strategist at SIA Wealth Management, said that monetary policy decisions from the Bank of Canada and the European Central Bank could take some focus on the U.S. dollar next week.
Markets see the Bank of Canada raising interest rates either by 50 or 75 basis points. Over in Europe, the calls for the ECB to raise interest rates by 75 basis points have steadily grown louder.
Adrian Day, president of Adrian Day Asset Management, said that he is bullish on gold next week as the euro could see some bullish traction next week. He added that gold's selloff below $1,700 is overdone.
Long-term, Day added that gold will regain its luster when investors realize that central banks worldwide will not be able to bring inflation down.
"The market will begin to understand that the Federal Reserve and European Central Bank can't bring inflation down to their target levels without inducing a serious recession. This will revolve to gold's benefit," he said.
On the bearish side, analysts note that gold is hovering around a very precarious level. If gold prices drop below $1,685, it could signal an end to its multi-year bull run.
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At $1,700 the gold market is on the cusp of ending its bull-market run – TD Securities |
