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(Kitco News) – A strong start to December is creating significant bullish sentiment in the market as prices finish the week above $1,800 and close to a more than three-month high; However, the question remains whether the sentiment will be enough to sway investors.
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 they see solid technical bullish momentum in the market.
A rally in gold began on Wednesday when Federal Reserve Chairman Jerome Powell said it may be appropriate for the US central bank to slow the pace of tightening in December.
At the same time, analysts said growing recession fears were also giving gold a new safe-haven push.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said he was bullish on gold even if rising interest rates continued to support the US dollar.
“Investors are beginning to realize that gold is still an important defensive asset. “It continues to play its role as a store of value.”
Adam Button, head of currency strategy at Forexlive.com, said gold was also benefiting from positive seasonal factors as demand increased ahead of the holidays.
“The seasonal trend of buying gold in December started on the first day of the month. The stars are aligned for gold with the Fed’s dovishness and the US dollar sliding,” he said.
This week, 18 Wall Street analysts participated in the Kitco News Gold Survey. Among participants, 12 analysts or 67% were bullish on the outlook for gold, while six analysts or 33% were bearish for next week. There was no neutral vote in this week’s poll.
Meanwhile, 1,018 votes were cast in an online poll on Main Street. Of these, 715 respondents or 70% were looking for gold to rise in price next week. Another 188 or 18% said it would be lower, and 115 voters or 11% said they were neutral in the near term.
The strongly optimistic outlook comes as gold prices end the week up 2%, with February gold futures last trading at $1,809 an ounce. Even a stronger-than-expected November jobs report, coupled with strong wage growth, wasn’t enough to dampen gold’s new momentum.
On Friday, the Bureau of Labor Statistics said 263,000 jobs were added in November; Economists had expected a gain of 200,000 jobs. At the same time, wages rose 5.1% over the year, well above expectations.
Darin Newsom, chief market analyst at Barchart, said next week could be interesting for the precious metal, as the current rally could be viewed as a technical bump; however, he added that the momentum is clearly on the upside.
“It’s markets like gold that cause drinking problems for technical analysts,” he said. “Given that the weekly stochastic has not clearly broken above the overbought 80% overbought level, February gold has time and place to move higher next week. However, here’s where things get fun, with its target area between $1,807.20 (this week’s with the highest level). 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 he sees gold prices heading lower next week despite remaining a long-term gold bull.
“We are likely to see a continuation of the decline, with the latest US jobs report showing more new jobs than estimated, as well as a natural correction to the sharp weekly rally,” he said. “But the recovery after that, as more market participants realize that the Federal Reserve (and other central banks, notably the ECB and BoE) cannot achieve their inflation targets without triggering a serious recession. Signs of an expected recession are gathering.”
Marc Chandler, managing director of Bannockburn Global Forex, said gold was bearish next week as markets were too optimistic about Powell’s supposed dovish stance.
He added that the increase in wages in the November employment report showed that the Federal Reserve still had to deal with the problem of rising inflation.
“Then gold looks set to reject a false break above the 200-day moving average. I’m looking for $1,765 and maybe $1,750 before the mid-month FOMC meeting,” he said.
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