(Kitco News) – Gold bulls need to be cautious next week as market sentiment fails to provide a clear direction for prices in the near term.
The gold market ends the week holding on to most of this month’s gains as the price holds support around $1,750 an ounce. But prices could struggle in the near term as sentiment among Wall Street analysts and retail investors is only mildly bullish, according to the latest Kitco News Weekly Gold Survey.
However, some analysts are noting that after gold’s nearly 11% rally over the past three weeks – with prices hovering within striking distance of $1,800 – some consolidation would be healthy.
Sean Lusk, co-director of commercial hedging at Walsh Trading, said gold prices could struggle next week as he expects the Federal Reserve to signal it will proceed with aggressive rate hikes.
“At the end of the day, inflation remains high, so the Federal Reserve isn’t done raising interest rates,” he said.
However, Lusk added that investors should continue to pay attention to the long-term prospects. Gold and silver will look attractive as rising interest rates push the US economy into recession, he said.
“I would try to buy the dips in this correction but not aggressively because we just don’t know what the Fed is going to do,” he said. “With a recession approaching, investors need to ask themselves whether they want to hold stocks or a safe haven like gold.”
Phillip Streible, chief market strategist at Blue Line Futures, said he was also bearish on prices in the short-term but also wanted to buy gold at lower prices.
“I think you just have to be patient,” he said. “The Fed’s work is not done yet.”
Streible noted that the inverted yield curve between 2-year and 10-year bonds continues to widen, signaling that the US economy may be headed for a severe, prolonged recession.
This week, 20 Wall Street analysts took part in the Kitco News gold survey. Among the participants, eight analysts, or 40%, called for gold prices to rise next week. At the same time, seven analysts or 35% were bullish on gold in the near term and five analysts or 25% were price neutral.
Meanwhile, 495 votes were cast in online polls on Main Street. Of these, 221 respondents, or 45%, expected gold to rise next week. Another 177 or 36% said it would be lower, while 97 voters or 20% were neutral in the short term.
Sentiment among retail investors has fallen sharply since last week’s five-month high; at the same time, interest in the precious metal has also fallen due to the low level of participation in this week’s online surveys.
The shift in sentiment comes as gold prices fell nearly 1% by the end of the week. However, gold prices are still up more than 8% since falling to a two-year low in early November. December gold futures last traded at $1,754 an ounce.
Some analysts have said renewed momentum in the US dollar, helped by hawkish comments from Federal Reserve members, could weigh on gold prices next week.
“We expect the Federal Reserve to continue to dampen the over-reaction to the Fed’s last meeting, and this will weigh on gold,” said Adrian Day, president of Adrian Day Asset Management.
However, Day also said that the central bank’s tightening monetary policy is about to start its course, which will ultimately be positive for gold.
“We are clearly approaching a time when the economic pain will be evident from what the Fed has already done,” he said. “With the ECB reportedly slowing tightening and other banks doing the same, this only reinforces that the Fed will soon start easing tightening.”
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