Gold may be in oversold territory as retail investors become less optimistic

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(Kitco News) – Wall Street analysts are once again bullish on gold as the precious metal sees some technical support around $1900; However, sentiment among retail investors has weakened, according to the latest Kitco News Weekly Gold survey results.

The shift in sentiment among Main Street investors comes as gold prices struggle to find steady upward momentum in the face of a stronger US dollar. The US dollar index rose last week to 103.93 points, its highest level in nearly 20 years. The US dollar index is up 3.5% since it briefly fell below 100 points on April 19.

According to some economists, the US dollar has found strong momentum as the Federal Reserve prepares to raise interest rates by 50 basis points next week.

Meanwhile, at the same time, gold prices were unable to break above $2000 and came under strong selling pressure, causing the price to drop nearly 5%. However, some analysts see signs of a turning tide in the market. The US dollar is looking to finish Friday lower from its highs, and gold is able to maintain support above $1900 an ounce.

“The dollar’s bullish trend looks very extended. This could bode well for gold if it finally pulls back,” said Matt Simpson, chief market analyst at City Index. “Given that gold closed higher on Thursday despite the dollar’s strength adds another level of confidence that its bearish move is losing steam. At least over the coming period.”

This week, 17 Wall Street analysts participated in the Kitco News gold survey. Among the respondents, nine analysts, or 53%, called for a rise in gold prices next week. Meanwhile, four analysts, or 25%, were bearish on gold in the near term, and three analysts, or 18%, were neutral on prices.

Meanwhile, 904 votes were cast in online Main Street polls. Of those, 446 participants, or 49%, looked for a gold rally next week. Another 306, or 34%, said less, while 152 voters, or 17%, were neutral in the near term.

This is the first time bullish sentiment has dropped below 50% since late September. Even though gold prices fell off their lows, they still ended the week with a 1% loss.

Looking ahead, the Federal Reserve’s monetary policy meeting remains the most important event for the precious metal. The Federal Reserve indicated that it is preparing to tighten monetary policy aggressively.

David Madden, market analyst at Equiti Capital, said the US dollar has outdone itself a bit ahead of next week’s monetary policy decision. He added that any neutral or pessimistic tone from the central bank may push the US dollar down, which will lead to higher gold prices.

Madden added that the Fed may not want to commit to raising more than 50 basis points.

“The last thing the Fed wants to do is make a policy mistake that pushes the economy into an early respite,” he said.

Adrian Day, head of Adrian Day Asset Management, said he is also looking forward to the dollar losing some of its gains next week.

“Monetary factors are bullish for gold, except for one thing: the cowardice or indifference of major central banks outside the US makes the Fed appear almost responsible by comparison, which boosts the dollar and weighs on gold. But the dollar has peaked; and then, the monetary dynamics mean that Gold is the only asset that can be trusted.”

Not giving an opinion: The opinions expressed in this article are those of the author and may not reflect the views of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, Kitco Metals Inc. cannot. Nor does the author guarantee this accuracy. This article is for informational purposes only. It is not a solicitation to conduct any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. does not accept The author of this article will be liable for losses and/or damages arising from the use of this publication.

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