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(Kitco News) – The rise in bearish sentiment in the gold market does not bode well for prices next week as the precious metal attempts to maintain significant support around $ 1,750 an ounce.
Latest results from Kitco News’ weekly gold survey show Wall Street analysts pessimistic about gold as potential for tight US monetary policy supports the US dollar and pushes bond yields higher . At the same time, bullish retail investor sentiment remains at a seven-month low.
Some analysts have also noted that gold will continue to be the subject of anemic interest as the focus remains on a record valuation in the equity markets and what has been an unstoppable rally.
This week, 18 Wall Street analysts took part in the Kitco News gold survey. Among the participants, 4, or 22%, called for a rise in gold prices. At the same time, 11 analysts, or 61%, called for a drop in gold prices next week. Three analysts, or 17%, were neutral on gold in the short term.
Meanwhile, a total of 850 votes were cast in Main Street’s online polls. Of these, 382 respondents, or 45%, expected gold to rise next week. Another 309, or 36%, said lower, while 159 voters, or 19%, were neutral.
Gold’s strong bearish sentiment comes after the Federal Reserve held its monetary policy meeting and suggested it may release plans to cut monthly bond purchases after its November meeting. The central bank’s updated economic projections also showed that the committee sees the potential for an interest rate hike in December 2022 and that rates could reach 1% in 2023.
Some analysts have noted that the more hawkish-than-expected sentiment from the US central bank is strengthening the US dollar and pushing bond yields higher, two significant headwinds for gold.
“The break in 10-year yields this week signals a trend change in the markets,” said Adam Button, chief currency strategist at Forexlive.com. “Initially, that will keep the pressure on gold.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said it was also bearish on gold as the Federal Reserve plans to change monetary policy before the end of the year.
“I think that with the Fed down, the US dollar could continue to attract support, keeping a headwind against gold,” he said.
However, although gold is bearish in the near term, some analysts see the potential for prices to bottom. Darin Newsom, chairman of Daren Newsom Analytics, said gold prices appeared to be oversold.
“I think that with the Fed down, the US dollar could continue to attract support, keeping a headwind against gold,” he said. “Daily Stochastics are also below the 20% oversold level, paving the way for a potential bullish cross at some point early next week. This would be a signal that the short-term trend is about to break. to sort out.”
Marc Chandler, managing director of Bannockburn Global Forex, said the sale of gold may be limited as the current rise in bond yields has been overstated.
“While still bearish, I see a possibility of a rebound next week, maybe from a bit lower, say $ 1,730 or $ 1,735 in the spot market,” a- he declared.
Although sentiment is mostly negative in the gold market, there is still some bullish reluctance.
Adrian Day, chairman of Adrian Day Asset Management, described the Fed’s attempt to change monetary policy as a dog “the bark is worse than the bite”.
“Once it starts to reduce asset purchases, the market will realize that it is only taking small steps – reducing the rate of purchases – and doing nothing to actually reduce the inflated balance sheet. will be the fund for gold, ”he said.
Ole Hansen, head of commodities strategy at Saxo Bank, said he was bullish on gold in the near term as rising energy prices, especially in Europe, push inflation up. He added that investors were also ignoring the growing risk associated with the potential default of Chinese property developer Evergrande’s bonds.
He noted that the looming credit and liquidity crisis could create new demand for diversification.
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.