Is Positive Gold Sentiment Starting To Wane?

Published: Mar 22, 2016 09:37 (GMT+8)
Positive sentiment in the gold market remains strong among retail investors but is starting to wane among market professionals.

By Paul Ploumis (ScrapMonster Author)

March 21, 2016 04:39:44 AM

(Kitco News) - Positive sentiment in the gold market remains strong among retail investors but is starting to wane among market professionals, according to the latest Kitco News Wall Street vs. Main Street Gold Survey.

After getting a boost from what analysts deemed a dovish Federal Reserve, gold prices are preparing to end the week in slightly positive territory, with a gain of around 0.25%.

Gold was unable to retest last week’s 13-month highs as the Federal Reserve left interest rates unchanged and lowered forward guidance to only two rate hikes later in the year, down from four in December. However, retail investors continue to expect to see higher prices in the near term.

This week, 877 people participated in Kitco News’ online survey. Of those, 682 participants, or 78%, said they are bullish on gold prices next week; at the same time, 118 people, or 13%, said they are bearish on the yellow metal, and 77 people, or 9% are neutral.

While a strong majority of retail investors remain bullish, the outlook isn’t very clear among market professionals. For the first time this year less than 50% expect to see higher prices in the near term.

Out of 34 market experts contacted, 15 responded, of which seven, or 47%, said they expect to see higher prices next week. Five professionals, or 33%, said they expect see lower prices, and three participants or 20% were neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Bullish analysts are optimistic that gold will continue to push higher as the market continues to digest the implications of the U.S. central bank’s actions. The fact that the Fed lowered expectations for rate hikes this year is causing some to question whether policymakers will pull the trigger at all this year.

“Gold obviously reacted well to the Federal Reserve’s ‘new’ dovish stance, but it’s clear that the market has not yet fully grasped the implications of a Fed that has no good options, and further, is clearly clueless and simply reacting week by week to the latest economic news,” said Adrian Day, president of Adrian Day Asset Management. “As the year goes on, and the Fed continues to push back and reduce its expectations of rate increases, this will lead to higher gold prices.”

Other analysts remain bullish on gold prices as the U.S. dollar losses ground in the new dovish monetary policy environment.

However, in the bear camp, some analysts are seeing falling momentum in the gold market. Most note that gold failed to retest the last week’s high at $1,287.80 an ounce despite a weaker dollar and loose U.S. monetary policy highlights the risk of profit-taking in the near term.

“Gold is no longer a one-way street and there are signs that investors are willing to take profits at higher prices,” said Ole Hansen, head of commodity strategy at Saxo Bank, who is neutral on the gold market.

Colin Cieszynski, senior market strategist at CMC Markets, added that gold is starting to enter a slower seasonal period, which could end up dragging prices to the bottom of its recent range at $1,225 an ounce.

Courtesy: Kitco News


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