Sustained bearish sentiment in the gold market indicates that prices are not yet ready to move higher; however, some analysts see the sector as an attractive contrarian play with price potential close to the bottom.
The weekly gold survey shows that Wall Street analysts will remain firmly bearish on the precious metal this week. While there is no clear majority among retail investors, there is still a bearish bias in the market.
The survey showed that retail investors have been negative about gold since early September. In their opinion, the average price this week will be $1,811.
Also, according to analysts, persistently high inflation raises expectations that the Federal Reserve will continue its aggressive monetary policy longer than expected.
The continued change in the federal funds rate is pushing short-term bond yields to multi-year highs and creating new momentum for the U.S. dollar.
Last week, 20 Wall Street analysts took part in the Gold Survey. Among the participants, 13 analysts, or 65%, were bearish in the short term. At the same time, two analysts, or 10%, were optimistic, and five, or 25%, believed that prices were trading sideways.
There were 596 votes casted in online polls. Of these, 230 respondents, or 39%, expect gold to rise this week. Another 253 voters, or 42%, said the price would go down, while 113 voters, or 19%, were neutral.
Adam Button, head of currency strategy at Forexlive.com, said there is a growing possibility that the Federal Reserve will raise interest rates to 6% this year. And this may put pressure on gold in the short term, but as a long-term investment, the precious metal is necessary to diversify risks.
While fears of a recession have subsided for now, it is likely that the threat has simply been pushed further down the calendar to early 2024. At some point, higher interest rates will cool the economy.
According to Phillip Streible, head of market strategy at Blue Line Futures, any further increase in interest rates will eventually lead to aggressive cuts. In the near term, the precious metal lacks a short-term catalyst to create any sort of bullish momentum.
Also, according to some analysts, gold prices may drop below $1,800 and reach $1,785 per ounce.
However, there are also optimistic analysts such as Michele Schneider, director of trading education and research at MarketGauge. She is positive, explaining her position by saying that inflation and geopolitical uncertainty are bullish factors.
