(Kitco News) - The gold market is preparing to end its fourth week in negative territory, and prices could remain under pressure, with some analysts looking for a test of support at $1,800 in the near term as sentiment in the marketplace remains lackluster.
The latest Kitco News Weekly Gold Survey shows that Wall Street analysts remain significantly bearish on gold for next week. At the same time, gold is struggling to attract any significant bullish sentiment from retail investors.
Although sentiment in the gold market remains somewhat negative, some analysts are optimistic that economic uncertainty will continue to support the precious metal long term.
"For many investors, the gold price is falling to a major pain threshold," said Phillip Streible, chief market strategist at Blue Line Futures. "But the threat of a recession hasn't gone away. The Federal Reserve, with its aggressive monetary policies, is on track to break the economy, so gold's uptrend remains intact."
Marc Chandler, managing director at Bannockburn Global Forex, said that he sees gold prices falling to $1,800 an ounce in the near term; however, he added that a lower price might attract some investors looking for a safe-haven asset.
"Sentiment about the U.S. economy is overshooting," he said. "The economy appeared to stall in November and December when retail sales and manufacturing output fell by around 1% each month. The January bounce is unlikely to be repeated," he said. "I think buying [gold] on further weakness with a stop below $1,800 may offer an attractive risk-reward."
This week, 17 Wall Street analysts participated in the Kitco News Gold Survey. Among the participants, 13 analysts, or 76%, were bearish on gold in the near term. At the same time, only one analyst, or 6%, was bullish for next week and three analysts, or 18%, saw prices trading sideways.
Meanwhile, 831 votes were cast in online polls. Of these, 374 respondents, or 45%, looked for gold to rise next week. Another 327, or 39%, said it would be lower, while 130 voters, or 16%, were neutral in the near term.
Wall Street
6%
76%VS
Main Street
45%39%The dismal sentiment comes as gold prices look to end the week around $1,850 an ounce. April gold futures last traded at $1,851, down 1.2% from last Friday.
The lone bullish vote in this week's survey came from Darin Newsom, senior technical analyst at Barchart.com. He said that gold could see a short-term bullish correction as long-term support appears to be holding.
"April gold completed the short-term downtrend on its daily chart, reaching a low of $1,827.70 Friday morning," he said. "I'm looking for the contract to move higher short-term. It would not be a surprise to see daily stochastics establish a bullish crossover… Then we'll wait to see if the contract can complete a bullish reversal pattern."
For many analysts, the gold market faces growing headwinds as markets shift their Federal Reserve monetary policy expectations. Hotter-than-expected inflation data this week and hawkish comments from central bank committee members are prompting markets to price in the Fed Funds rate pushing to 5.5% in the first half of the year.
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"The Fed Pivot was a pipe dream," said Frank McGhee, head precious metals dealer for Alliance Financial. "Persistent inflation will cause a higher terminal rate and higher for longer Fed Funds rate. Higher interest rates translate into lower Metals Prices."
The yield on U.S. 10-year Treasury notes is currently trading above 3.8%, around its highest level since late December. At the same time, the U.S. dollar Index is trading above 104 points, its highest level since November.
Adrian Day, president of Adrian Day Asset Management, said that he is neutral on gold next week in the current environment.
"There will be have to be a little back-and-forth as gold corrects for the exaggerated January move-up. The longer-term remains intact, as we expect a sluggish global economy and persistent inflation, a positive environment for gold," he said.
