Gold bulls frustrated by disappointing price action and are taking a break
Friday April 30, 2021 13:11
Frustration is creeping into the gold market as the price has been unable to break above $1,800 an ounce even in a market environment that is seeing rising inflation pressures, ultra-accommodative monetary policy, and a government that wants to spend more money.
According to the latest Kitco News Weekly Gold buying Survey, analysts are warning investors that if gold can't go up in this current environment, then look for lower prices. However, many analysts say that a retest of recent support could attract new gold buying momentum to the marketplace.
"Now is not the time to throw in the towel for gold," said Bob Haberkorn, senior commodities broker with RJO Futures. "Gold is struggling now, but at some point, it will have its day in the sun."
The gold buyers market has seen a dramatic shift in sentiment as prices cannot push above critical resistance at $1,800 an ounce. Two weeks ago, the Kitco News gold survey saw, for the first time, no bearish votes among Wall Street analysts.
This week, for the first time in the survey's history, there were no bullish votes for gold.
"Gold is doing what it does best… frustrating gold investors," said Ole Hansen, head of commodity strategy at Saxo Bank.
This week, 15 analysts participated in Kitco News' gold selling survey. Of those, eight analysts, or 53%, said they were bearish on gold; at the same time, seven analysts, or 47%, said they were neutral on prices next week.
Meanwhile, a total of 954 votes were cast in online Main Street polls. Of these, 512 respondents, or 54%, looked for gold to rise next week. Another 249, or 26%, said lower, while 193 voters, or 20%, were neutral.
Some analysts have noted that while gold has been unable to break above $1,800 an ounce. It has also managed to find strong initial support above $1,750 an ounce. June gold futures last traded at $1,765.90 an ounce, down 0.61% from last week.
While sentiment has soured in the gold market, looking beyond the headlines, many analysts said that they would look to buy gold at a lower price.
"Gold needs to test the $1,745 level, a ceiling for the past two months from which it broke out earlier in the month. The sooner gold tests this new floor, the better. The longer term is very positive for gold, with increasing inflation now quite evident, but a Federal Reserve refusing to do anything about it," said Adrian Day, president of Adrian Day Asset Management.
The question many analysts are asking now is how low gold prices could go in the near term. Marc Chandler, managing director at Bannockburn Global Forex, said that if $1,750 an ounce doesn't hold, the next level he is watching is $1,724.
"The momentum indicators like the MACD and Slow Stochastic appear poised to turn lower. It already approached the $1752 area that holds the 38.2% retracement of the April rally," he said.
Although he sees long-term potential for gold, Haberkorn said that the precious metal would struggle as it faces tough competition from copper, lumber, equities, and even bitcoin as these markets are seeing significant upside momentum.
"There is strong risk-on sentiment in the marketplace right now, and nobody wants to hold and sit on boring gold," he said. "Investors see other exciting places in the commodity markets to invest their money."