The gold market continues to see the strong bullish sentiment, but caution is growing as retail investors are starting to lose interest in the precious metal as it trades in a range waiting for a new catalyst.
In this week’s Kitco News Gold Survey, both the majority of Wall Street analysts at Main Street retail investors see higher prices next week; however, the sentiment is subdued as nobody expects prices to break out of the current range anytime soon.
George Gero, managing director of RBC Wealth Management, said that while he is bullish on gold in the near-term growing concerns that the U.S. and global economies could fall into a deeper recession are growing and could limit gold’s gains.
“Gold price can move higher, but you are going to see a lot more volatility as headlines shift back and forth,” he said.
This week, 16 analysts participated in the survey. A total of 10 voters, or 63%, called for gold prices to rise; two analysts, or 13%, called for lower prices next week; and four analysts, or 25%, said they see prices moving sideways.
Although sentiment among retail voters remains bullish, interest in the precious metal as prices continue to drop as prices remain stuck around $1,900 an ounce.
Participation in Kitco News’ weekly online surveys has dropped to its lowest level since early-May. A total of 1,076 votes were cast this past week. Among those, 616 voters, or 57%, said they were bullish on gold next week. Another 225, or 21%, said they were bearish, while 235 voters, or 22%, were neutral.
In the previous survey, both Wall Street analysts at Main Street investors were bullish on gold as they expected momentum to continue to drive prices higher. However, gold prices have struggled to find direction most of this past week, hovering around $1,900 an ounce. December gold futures last traded at $1,902.10 an ounce, down 1.25% from last week.
Although gold appears to be stuck in a narrowing trading range, some analysts see technical moving in a bullish direction.
Charlie Nedoss, senior market strategist with LaSalle Futures Group, said that he remains bullish on gold as prices have managed to bounce off support at the 100-day moving average.
“Gold has not seen a close below its 100-day moving average, and as long as that holds, you need to be bullish,” he said.
Nedoss added that it also looks like the U.S. dollar is hitting some resistance and could see some technical selling pressure in the near-term.
He added that growing U.S. government debt and more fiscal stimulus expected to be unleashed in the economy is not a strong environment for the U.S. dollar.
“With everything that has happened and expectations that more stimulus is coming, I have a hard time embracing the idea of a strong U.S. dollar,” he said.
Adrian Day, president and CEO of Adrian Day Asset Management, said that he also sees technical strength in the marketplace as gold prices have managed to make higher lows and higher highs in the last three weeks.
However, he added that gold prices continued to be well support in an environment of heightened political uncertainty ahead of the Nov. 3 General Election.
“We are unlikely to see meaningfully lower prices ahead of the U.S. election. There is so much buying power on the sidelines that will eventually jump in,” he said.
However, other analysts see the recent performance in gold prices as a short-term correction in a broader downtrend.
Darin Newsom, president of Darin Newsom Analysis, said that he is monitoring gold using his Benjamin Franklin rule of 3 technical analysis.
“Guests and fish start to stink after three days,” he said. “We have seen a three-week uptrend in gold, and now it looks like the market is going to turn. You look at the daily price action, and there is has been absolutely no movement, so I think gold is ready to break down.”
Although there are some analysts who see lower prices in the near-term, they don’t think gold’s broader uptrend is at risk. Andrew Hetch, a partner at bubbatrading.com, said that seasonally this is a poor season for gold prices. However, he added that he sees a drop in gold as a buying opportunity.
“You have to be in gold and silver right now,” he said. “You have to embrace the dip. In this environment, I love any dip and the opportunity to buy at lower prices.”
Richard Baker, editor of the Eureka Miner’s Report, said that he expects gold prices to push to $1,920 an ounce next week as the investment waters remain full of hazards.
“As gold holds its ground above the $1,900-level, market participants appear pleased to have the lustrous lifeguard on duty, but few are crying for help,” he said. “December Comex prices are locked in a new wedge defined by September highs and lows ($1,983.8 and $1,851.0) suggesting a breakout higher if a bad headline or two washes beachgoers out to sea.”