(Kitco News) - A strong start to December as prices end the week above $1,800 and near their highest level in more than three months is creating significant bullish sentiment in the marketplace; however, the question remains if sentiment will be enough to bring investors off the sidelines.
The latest Kitco News Weekly Gold Survey shows that Wall Street analysts and Main Street retail investors are significantly bullish on gold in the near term as the market sees solid technical bullish momentum.
The rally in gold started Wednesday when Federal Reserve Chair Jerome Powell said that it could be appropriate for the U.S. central bank to slow its pace of tightening in December.
At the same time, analysts have also said that growing recession fears are also providing a fresh safe-haven boost to gold.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said that he remains bullish on gold even if rising interest rates continue to support the U.S. dollar.
"Investors are starting to realize that gold is still an important defensive asset," he said. "It continues to play its role as a store of value."
Adam Button, head of currency strategy at Forexlive.com, said that gold is also benefiting from positive seasonal factors as demand picks up ahead of the holidays.
"The seasonal trend of gold-buying in December kicked in from the first day of the month. With the Fed tilting and the U.S. dollar sliding, the stars are aligned for gold," he said.
This week, 18 Wall Street analysts participated in the Kitco News Gold Survey. Among the participants, 12 analysts, or 67%, were bullish on gold in the near term and six analysts, or 33%, were bearish for next week. There were no neutral votes in this week's survey.
Meanwhile, 1,018 votes were cast in an online Main Street poll. Of these, 715 respondents, or 70%, looked for gold to rise next week. Another 188, or 18%, said it would be lower, while 115 voters, or 11%, were neutral in the near term.
Wall Street
67%
33%VS
Main Street
70%18%The solidly optimistic outlook comes as gold prices look to end the week with a 2% gain, with February gold futures last trading at $1,809 an ounce. Even a stronger-than-expected November employment report with strong wage growth has not been enough to dampen gold's new momentum.
Friday, the Bureau of Labor Statistics said 263,000 jobs were created in November; economists expected job gains of 200,000. At the same time, wages increased 5.1% for the year, well above expectations.
Darin Newsom, senior market analyst at Barchart, said that next week could be exciting for the precious metal as the current rally could be seen as a technical blowoff top; however, he added momentum is clearly on the bullish side.
"It's markets like gold that lead to drinking problems for technical analysts," he said. "Given weekly stochastics have not clearly moved above the overbought level of 80%, Feb gold looks to have time and space to move higher next week. However, and here's where things get fun, its target area is between $1,807.20 (with this week's high already $1,818.70) and $1,861.20."
However, not all analysts are bullish on gold, at least in the near-term. Adrian Day, president of Adrian Day Asset Management, said that while he remains a long-term gold bull, he does see gold prices dipping next week.
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"We will likely see some follow-through to the decline on the latest U.S. jobs report, which showed more new jobs than estimated, as well as a natural correction to a sharp weekly rally," he said. "But after that, a recovery, as more market participants come to appreciate that the Federal Reserve (and other central banks, particularly the ECB and BoE) simply will be unable to achieve their inflation targets without provoking a serious recession. Signs of an impending recession are gathering."
Marc Chandler, managing director of Bannockburn Global Forex, said that he is bearish on gold next week as markets are too optimistic on Powell's supposed dovish stance.
He added that rising wages in November's employment report show that the Federal Reserve still has to deal with a growing inflation problem.
"Gold then looks likely to reject the false break above the 200-day moving average. I look for $1765 and maybe $1750 before the FOMC meeting in the middle of the month," he said.
