Is the gold market oversold? Main Street investors say no

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Editor’s note: The prices in the article were updated to reflect the late rally in gold as prices hit their highest levels in three years.

(Kitco News) – Gold prices may have room to move higher next week, with bullish sentiment among retail investors surging through the market as they try to guard against the biggest banking crisis since 2008. However, Wall Street analysts are taking a more conservative position position in the short term.

The latest Kitco News gold survey shows that sentiment among Main Street investors has pushed to a three-month high as gold sees its best weekly gains since March 2020. However, sentiment among Wall Street analysts is slightly more mixed, with a bullish sentiment , holding only a small advantage and a strong contingent sitting on the sidelines.

Many analysts are bullish on gold this year as growing turmoil in financial markets will force the Federal Reserve to end its aggressive year-long tightening cycle as early as next week. Although analysts have said gold is on the verge of hitting a new all-time high this year, the market looks overbought.

“The conditions for a strong gold bull market are here as the Federal Reserve abandons QT in the face of bank crashes. Many said the Fed would stay tight until ‘something breaks’; and now something has broken,” said Adrian Day , president. by Adrian Day Asset Management. “Nonetheless, after such a strong move, gold is at the ceiling reached in January and last April, so in the immediate term we may see some back and forth before it breaks through.”

This week, 22 Wall Street analysts participated in the Kitco News Gold Survey. Among participants, nine analysts, or 41%, were bullish on gold in the short term. At the same time, five analysts, or 23%, were bearish for next week, and eight analysts, or 36%, saw prices trading sideways.

Meanwhile, 707 votes were cast in an online Main Street poll. Of these, 445 respondents, or 63%, saw gold rising next week. Another 169, or 24%, said it would be lower, while 93 voters, or 13%, were neutral in the short term.

Main Street’s bullish outlook comes as gold prices rose more than 5% this week, notching their best weekly performance in three years. From 2:11 PM EDT April gold futures traded at $1,978.60 per ounces.

The Kitco survey found that retail investors, on average, see gold prices ending next week around $1,922 a barrel. ounces. But if you dig into the details of the results, less than a third of the surveyed gold prices see falling below $1,900 per ounce. ounce next week.

Bullish Wall Street analysts see significantly more potential in gold next week, with some eyeing $2,000 per ounce. ounces.

Kevin Grady, president of Phoenix Futures and Options, said gold looks good as the Federal Reserve tightens. Although markets see a 73% chance the US Federal Reserve will raise interest rates by 25 basis points next week, Grady said it could be a much tighter race than expectations suggest.

“I think there’s a good chance the Federal Reserve will leave interest rates unchanged because they don’t want to add more stress to what has become a global banking crisis. Another quarter-point increase could push another bank over the edge ,” he said. “If this happens, you will see gold prices much higher.”

Along with the Fed, analysts note that gold will be sensitive to improving market sentiment if government authorities can contain the crisis.

“I think gold could have a big move, but I’m not clear on the direction,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “Gold benefited from a weakening of the US dollar and a flow of capital into defensive havens due to stress in the global banking system. This trend could easily continue in the coming week. On the other hand… investor confidence could improve, which could change the current tailwind back to headwind. Mainly it depends on what the Fed does on Wednesday. A dovish Fed cold is bullish for gold, a neutral to hawkish Fed could potentially be bearish for gold.”

Disclaimer: The views expressed in this article are those of the author and may not reflect them Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. or the author warrants such accuracy. This article is for informational purposes only. It is not a solicitation to make any exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article does not accept responsibility for any loss and/or damage arising from the use of this publication.

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