Retail investors see no urgency to buy gold as prices remain stuck at neutral

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(Kitco News) – Gold remains stuck in its months-long consolidation pattern, and analysts note that a lack of urgency in the market could keep retail investors away.

However, beyond the short-term ambiguity, many analysts view the price decline as a buying opportunity, as market uncertainty and volatility will remain dominant features in the financial landscape.

“Gold failed to generate excitement that would lead to higher prices, but it continues to hold its own in a tough market with a strong US dollar and higher bond yields,” said strategist Adam Button. Chief Currency Officer at Forexlive.com. “Gold prices are hurting because investors have no sense of urgency to buy.”

Phillip Streible, chief market strategist at Blue Line Futures, said the Federal Reserve’s stance to aggressively tighten monetary policy is weighing on retail investor sentiment. However, he added that if the US economy fell into recession, the US central bank would be forced to reverse some of its rate hikes, which would trigger the next rally in gold.

“Right now you want to look at strategist buying opportunities,” he said. “You want to buy either side of $1800 and maybe take profit at $1875 because we’re still stuck in a range. What you don’t want to do is buy your entire position at $1,875,” he said.

This week, 15 Wall Street analysts participated in the Kitco News gold survey. Of the participants, six analysts, or 26%, were on short-term bullish gold. Meanwhile, six analysts, or 32%, were bearish on gold and nine analysts, or 42%, were neutral on gold next week.

Meanwhile, 681 votes were cast in Main Street online polls. Of these, 301 respondents, or 44%, expected gold to rise next week. Another 185, or 27%, said lower, while 195 voters, or 29%, were short-term neutral.

Bullish sentiment among retail investors is at its lowest in almost three years. However, participation in the online survey fell to its lowest level in a month.

Due to lackluster investor interest in gold, many analysts expect gold prices to decline but remain within their current consolidation pattern with support at $1,800 and resistance around $1,850 per ounce.

“As the rest of the commodities complex explodes and implodes, all at the same time, the August edition of King Gold lurks comfortably in its bunker between support at $1,806.10 and resistance at 1,861, $50. I guess it will stay low until shrapnel from other commodities stops flying,” said Darin Newsom, president of Darin Newsom Analysis,” he said.

Marc Chandler, managing director of Bannockburn Global Forex, said he also expects gold to consolidate next week.

“I think further consolidation is the most likely scenario and I note that the 20-day moving average has converged with the 200-day moving average (1842 and 1845 respectively),” he said. “Lower interest rates and a weaker dollar could help it recover from today’s weekly low. Still, the yellow metal remains mired in the range.”

The relatively neutral outlook comes as gold prices end the week down 0.5%. Gold prices have struggled to attract further bullish momentum after Federal Reserve Chairman Jerome Powell did not rule out the possibility of a 100 basis point hike next month.

“Over the coming months, we will be looking for compelling evidence that inflation is declining, in line with inflation returning to 2%. We expect the ongoing rate increases to be appropriate; the pace of these changes will continue to depend on incoming data and the changing outlook for the economy,” Powell said in his semiannual testimony before the U.S. Senate Banking Committee.

Frank McGee, precious metals dealer at Alliance Financial, said he expects gold prices to continue falling as the reality of rising real interest rates affects investor sentiment.

Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.

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