Gold bullish sentiment is growing, but focus remains on increasing bond yields

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(Kitco News) – Sentiment continues to improve in the gold market among Wall Street analysts and Main Street investors. However, there is some concern that rising bond yields will limit gold in the critical resistance below $ 1,750 in the short term.

“Gold has had a good jump with its recent lows, but that may just be a short-term correction, as prices appear to be contained, as inflation is not yet an important story for investors,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

Although Cieszynski is falling on gold in the short term, he added that gold has room to rise in this corrective leap.

This week, 13 analysts participated in the survey. A total of 6 voters, or 46%, asked gold prices to rise next week. Meanwhile, four voters, or 31%, said they saw gold prices dropping next week. Three analysts, or 23%, saw prices fluctuating.

Both sentiment and participation in the weekly gold survey are improving among retail investors. This week, 1,698 votes were cast in online polls. Among them, 1,101, or 65%, said they were optimistic about gold next week. Another 355 participants, or 21%, said they were pessimistic, while 242 voters, or 14%, were neutral about the precious metal.

The increase in bullish sentiment occurs when the gold market ends the week with modest gains, but below a one-week high. June gold futures traded for the last time at $ 1,740 an ounce, up 1% from last Friday.

This week, the gold market registered a brief boost to $ 1,750 an ounce after the Federal Reserve left its ultra-loose monetary policies unchanged. The central bank also signaled that it does not expect to raise interest rates until at least 2024.

While the Federal Reserve is expected to remain extremely patient with the recovery of the US economy, the gold market has yet to cope with rising bond yields. Federal Reserve Chairman Jerome Powell indicated that he was not concerned by the recent liquidation in the bond market, which has brought yields to a 13-month high above 1.7%.

For many investors, higher bond yields, which are also supporting the US dollar, are the biggest challenge for the gold market. However, positive movements in gold this week may indicate that the bond market is having less impact on the precious metal.

Adrian Day, president of Adrian Day Asset Management, said he is optimistic about gold, as bond yields may be close to peak.

“Bond watchers may not have been defeated by Fed Chairman Jerome Powell’s assertions that the Fed would remain easy, but eventually, through more words or action, the Fed will stop the increase in long yields, and that will be positive for gold, “he said.

Sean Lusk, co-director of commercial hedge at Walsh Trading, said he is also looking for bond yields to find a natural ceiling, as the U.S. central bank expects to keep interest rates in the zero limit range for the next three years.

However, Lusk added that it is a little early to be excited about gold, as the market remains on a solid bearish trend.

“With interest rates at zero, bond yields can only go up to a point,” he said. “But I want to see gold hold at least $ 1,740 and see some weakness in the dollar before I start to get excited about the gold.”

Ole Hansen, head of commodity strategy at Saxo Bank, said he is also gold neutral in the short term, but wants to see a break above $ 1,765 an ounce before he starts to be optimistic.

He added that gold was “trying to restore its reflective credentials, something that has been gravely absent for the past four months”.