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(Kitco News) – Growing bearish sentiment among Wall Street analysts and Main Street investors suggests gold will rise below $ 1,700 an ounce in the short term, according to Kitco News’ latest weekly gold survey .
Sentiment in the gold market has worsened in the past few weeks as investors expect the Federal Reserve to aggressively raise interest rates to reduce inflation. In this environment, real yields have risen along with the US dollar, creating two big headwinds for the precious metal.
Gold fell to almost a one-year low this week as the U.S. dollar hit a major milestone: reaching parity with the euro for the first time in 20 years. Analysts have said that although gold has fallen to the 1,700 S, there has been no major capitulation move in the market.
Frank McGee, a precious metals trader at Alliance Financial, said he expects gold prices to fall as more traders are forced to liquidate their lost gold positions.
Jim Wyckoff, senior technical analyst at Kitco.com, noted that the technical outlook shows that bearish traders have control of the market in the short term.
“The charts are totally bearish and the path of least resistance to prices is still on the side to go down,” he said.
This week 16 Wall Street analysts took part in the Kitco News gold survey. Among the participants, three analysts, or 19%, are optimistic about gold in the short term. At the same time, six analysts, or 50%, were bearish with gold, and five analysts, or 31%, were neutral on the precious metal next week.
Meanwhile, 1,107 votes were cast in the Main Street online polls. Of these, 441 respondents, or 40%, sought gold to rise next week. Another 458, or 41%, said they were lower, while 208 voters, or 19%, were neutral in the short term.
Not only has the bearish sentiment among retail investors increased this week, but participation in the survey reached a one-month high, indicating that more investors are once again paying attention to the market.
While there is strong bearish sentiment in the market, some analysts are not yet willing to give up the precious metal.
Some analysts have said the gold needs to go back as it is technically oversold.
“In the short term, the August contract is heavily oversold. If the contract can hold Thursday’s low of $ 1,695 on Friday, it could be in a position to rebound next week,” said Darin Newsom, president of Darin Newsom Analysis. “Also, the US dollar appears to be overheating in the short term and could weaken somewhat next week.”
Adam Button, chief currency strategist at Forexlive.com, said he is optimistic about gold as markets begin to rethink expectations of a 100 basis point rise later this month. Markets began trading with the aggressive move after the US CPI showed that inflation rose to 9.1% in June, a 40-year high.
At its peak, markets had an 80% chance that the Federal Reserve would raise the federal funds rate by 1%. However, on Friday, expectations fell to 31%.
“Feedback from Fed officials and falling inflation expectations in the University of Michigan survey ensure only a 75 basis point rise on July 27,” Button said. “This leaves room for a concentration of relief for gold.”
As gold prices end the week, maintaining support at $ 1,700 an ounce, many analysts are looking to see if prices can maintain critical support at around $ 1,675, representing a consolidation zone in from 2020.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said he is neutral with gold.
“This is more of a technical opinion because gold is occurring in the RSI and a rebound is taking place, but a new test of support between $ 1660 and $ 1675 cannot be ruled out at this time,” he said.
Marc Chandler, CEO of Bannockburn Global Forex, said he is also looking to see if gold prices will maintain significant support levels. He added that gold is experiencing its fifth week of losses, the longest loss streak in several years.
“Gold still looks ugly after falling below $ 1,700 briefly. Impulse indicators would like to see a rebound.
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