Is the Fed in a hawkish height?  The rising sentiment in the gold market says yes

Is the Fed in a hawkish height? The rising sentiment in the gold market says yes

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(Kitco News) – The gold market is ending its third week in negative territory. However, bullish sentiment among Wall Street analysts and retail investors improved as the Federal Reserve lays out its monetary policy plan over the summer.

The short-term outlook for gold among main street investors has improved sharply after the upcoming US central bank’s monetary policy decision. Bullish sentiment among retail investors eased last week to an eight-month low.

Although a strong US dollar and rising bond yields present difficult headwinds for gold, many analysts said these markets could see a shift in momentum. As the US central bank looks to raise interest rates by another 50 basis points in the next two meetings, Federal Reserve Chairman Jerome Powell dismissed market expectations of a larger move of 75 basis points.

“I think we have reached the height of hawkishness with the Federal Reserve. Other central banks will have to step up their tightening measures,” said Philip Strebel, chief market strategist at Blue Line Futures. “The US dollar looks a bit bland like other central banks like [Bank of Japan] and the [European Central Bank] Inflation cannot be ignored any longer.”

Adrian Day, head of Adrian Day Asset Management, said he also sees monetary policy driving gold prices higher in the near term.

“The monetary environment remains favorable, as the Fed appears to be hawkish, but in reality, it is tightening too little and too late; while the ECB is hesitant and both China and Japan are pulling back,” he said.

Dai added that the increased volatility in the stock markets also supports the bullish outlook for gold next week.

“Initially, when the stock market goes down, it is not unusual for gold to be used as a source of liquidity, but after that, gold becomes a safe haven and an insurance against falling asset prices,” he said.

This week, 17 Wall Street analysts participated in the Kitco News gold survey. Among the participants, six analysts, with a share of 53%, called for a rise in gold prices next week. Meanwhile, four analysts, or 35%, were bearish on gold in the near term, and two analysts, or 12%, were neutral on prices.

Meanwhile, 1,049 votes were cast in online Main Street polls. Of those, 637 participants, or 61%, looked for a gold rally next week. 245 voters, or 23%, said less than that, while 162 voters, or 16% were near-neutral.

The shift in sentiment comes with gold prices last trading at $1,883.40 an ounce, down 1.5% from last week.

Colin Szyczinski, chief market strategist at SIA Wealth Management, said he is also bullish on gold next week as he looks to see the US dollar drop from 20-year highs.

“The US dollar is in oversold territory against many fiat currencies and is beginning to shrink, indicating that it may start a correction that may relieve some of the recent pressure on gold,” he said.

However, not all analysts are optimistic about gold in the near term. Fundamentally, there is no reason why the US dollar should top the top now that the Federal Reserve remains the most aggressive central bank in the global economy, said Darren Newsom, head of analysis Darren Newsom.

“Employment is strong and supports the economy, so the Fed has no reason to stop raising interest rates. This will continue to support the US dollar,” he said.

Newsom said he expects gold prices to rise in the near term as it technically appears to be oversold. He added that there is still a fundamental reason for the current downtrend for gold to end.

Sean Lask, co-director of trading hedges with Walsh Trading, said he doesn’t see the US dollar reversing course significantly anytime soon. “In the currency markets, this is the only game in town,” he said. “At the end of the day, gold is in a downtrend, and I don’t see that ending anytime soon.”

While gold may struggle next week and test the support around $1,850 an ounce, Lusk said that in the longer term, he remains bullish on gold.

“There is no doubt that gold will be a great trade in the future, but for now, investors need to be patient,” he said.

Not giving an opinion: The opinions expressed in this article are those of the author and may not reflect the opinions 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.

2022-05-06 17:51:00

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