(Kitco News) - The gold market is clinging to $2,000 an ounce heading into the weekend; however, strong neutral sentiment in the marketplace suggests that the precious metal is in no hurry to go anywhere anytime soon.
In the latest Kitco News Weekly Gold survey, most analysts said that gold prices could continue to struggle next week as the Federal Reserve prepares to raise interest rates by another 25 basis points and reiterates its hawkish stance as elevated inflation threatens to embed itself in the broader economy.
"The meeting of the Federal Reserve next week will be a key determinant of gold's near-term direction, but the risk remains on the downside," said Adrian Day, president of Adrian Day Asset Management. "Gold will likely continue to pull back from the early April high of $2040 on concerns about tighter monetary policy; this follows overblown optimism in March about a Fed pivot."
So far, markets have all but fully priced in a 25 basis point hike next week; however, analysts note that gold will be sensitive to any forward guidance suggesting more rate hikes this year or that the central bank will maintain its aggressive policies longer than expected.
The CME FedWatch Tool shows markets are starting to price in a 25 basis point hike in June and are pushing back expectations of a rate cut until after the summer.
"Gold's biggest short-term challenge is the extent to which rate cuts have been cooked into the price. Will be watching SOFR futures and futures spreads like a hawk given the current strong correlation between gold and the Dec23 SOFR contract," said Ole Hansen, head of commodity strategy at Saxo Bank.
This week, 18 Wall Street analysts participated in the Kitco News Gold Survey. Among the participants, three analysts, or 17%, were bullish on gold in the near term. At the same time, six analysts, or 33%, were bearish for next week, and nine analysts, or 50%, saw prices trading sideways.
This is the second consecutive week investors have taken a solid neutral stance on gold. In the last two weeks, gold prices have traded in a range between $1,980 an ounce and $1,930 an ounce. Heading into the weekend, gold prices are currently trading at $1,999 an ounce, up 0.43% from last Friday.
Due to a technical problem, Kitco News could not run its weekly online survey; however, a Twitter poll showed that a majority of retail investors remain bullish on gold in the near term.
This week 160 votes were cast in a Twitter poll. Of these, 80 respondents, or 50%, looked for gold to rise next week. At the same time, bearish and neutral positions garnered 40 votes each, 25%.
Wall Street
17%
33%VS
Twitter poll
50%25%While there is a solid neutral bias in the marketplace, many analysts note that gold remains in an uptrend as it holds the line at an elevated level.
Phillip Streible, chief market strategist at Blue Line futures, said that the recent price action shows that gold investors are extremely comfortable with the $2,000 level, meaning any significant price dip could be seen as a buying opportunity.
Streible said that gold has more to gain on the upside, a dovish stance to the statement and comments from Chair Jerome Powell, compared to selloff risks from a more hawkish stance.
"I think any dip towards $1,950 will be bought. That is the buying opportunity," he said.
Some analysts noted that even though Federal Reserve could continue to raise interest rates, it only adds to the risk that the central bank pushes the economy into a recession. Analysts have said that this push-and-pull in the global economy is driving gold's neutral price action.
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World Bank sees gold prices outperforming broader commodity sector as economic growth weighs on demand |
Looking beyond U.S. monetary policies, Richard Baker, creator of the Eureka Gold Miner's Report, said that the ongoing debt ceiling debate poses a significant economic risk and could support gold prices.
"History may not repeat but looks set to rhyme in the next several months. The "raising the debt limit debate' will raise gold prices to $2,450 or beyond," he said. It is important to remember that a U.S. debt downgrade and not default set the ball rolling to record gold prices in 2011. Perceived inability to govern was the catalyst.
Earlier this week, the House, led by Republican's passed a bill that raised the debt ceiling and proposed steep spending cuts. However, the U.S. Senate, controlled by Democrats, said the legislation was "dead on arrival."
