(Kitco News) - Sentiment in the gold market has soured quickly as prices look to end their second week below $1,900 an ounce; however, while prices are expected to head lower, many still see a potential dip as a buying opportunity.
The latest Kitco News Weekly Gold Survey shows that Wall Street Analysts are bearish on gold in the short-term and bullish sentiment among retail investors has dropped to its lowest point since late October.
"Overall, the market's limited ability to respond to last Friday’s drop below $1,900 continues to weigh on the market," Ole Hansen, head of commodity strategy at Saxo Bank, said. Hansen added that he is neutral on gold, with the price action a "flip of a coin."
Darn Newsom, senior technical analyst at Barchart.com, said that gold could see some interesting price action next week. He noted that the precious metal has solid downside momentum but is oversold in the short term.
He added that the short-term technical outlook points to prices testing support at $1.823 an ounce.
"That’s a long way down there, and as I said, the contract is already short-term oversold. To pull this off, gold will need to see the US dollar index extend its short-term uptrend next week. This is also made more difficult by the greenback being short-term overbought," he said.
This week, 19 Wall Street analysts participated in the Kitco News Gold Survey. Among the participants, nine analysts, or 47%, were bearish on gold in the near term. At the same time, only two analysts, or 11%, were bullish for next week and eight analysts, or 42%, saw prices trading sideways.
Meanwhile, 733 votes were cast in online polls. Of these, 324 respondents, or 44%, looked for gold to rise next week. Another 274, or 37%, said it would be lower, while 135 voters, or 18%, were neutral in the near term.
Wall Street
11%
47%VS
Main Street
44%37%The rise in bearish sentiment comes as gold prices end their second week with a loss. April gold futures last traded at $1,868 an ounce, down 0.4%.
According to some analysts, the selling pressure in gold continues as the members of the Federal Reserve reiterated their hawkish stance on interest rates. Some have said that they expect the Fed Funds rate to peak above 5% before they are able to tame inflation.
Tuesday, in a conversation with David Rubenstein at the Economic Club of Washington, Federal Reserve Chair Jerome Powell said that while he sees signs of disinflation, monetary policy will have to remain restrictive for "some time."
With these comments, some analysts have said that inflation could pose a downside to gold prices and would need to be significantly weaker than expected to reverse the current correction.
"A hot CPI reading next week is a major risk for gold. A cool reading would be positive but not nearly to the same degree," said Adam Button, chief currency strategist at Forexlive.com. He added that he is bearish on gold next week.
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However, not all analysts see lower gold prices next week as a negative for the market, as it provides a new entry point as its uptrend remains in place.
Michele Schneider, director of trading education and research at MarketGauge, said she sees a buying opportunity if gold can hold support above $1,850. She added that gold’s safe-haven allure in a world filled with uncertainty will continue to attract long-term investors.
Adrian Day, president of Adrian Day Asset Management, said that he remains neutral on gold as there are still some headwinds.
"The Fed could try again to dampen market excesses, and the dollar could continue its counter-trend rally. But the fundamental environment is positive, and as the US economy weakens, that will be positive for gold," he said. "We may need to consolidate a little more before moving back up.
