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The short-term outlook on gold remains bleak, with analysts turning overwhelmingly bearish on the precious metal as the $1,650 an ounce level breaks.
The precious metal is down nearly $90 from its October highs of $1,737 an ounce, with December Comex gold futures last trading at $1,648.70, down 1.69% on the day.
The technical picture is also quite bearish as the selloff opens the door to $1,600 an ounce. "Near-term technicals remain bearish," Kitco's senior analyst Jim Wyckoff said Friday. "Gold and silver bulls remain perplexed by their metals' inability to catch a safe-haven bid amid heightened geopolitical and marketplace uncertainties."
The main culprit making things challenging for gold is the hotter-than-expected inflation forcing the market to re-price the aggressive Federal Reserve rate hike expectations. And that is giving the U.S. dollar an additional boost.
"Gold is still struggling. In the cash market, it has fallen seven of the past eight sessions. The momentum indicators are trending lower," said Bannockburn Global Forex managing director Marc Chandler. "A break of $1,642 may signal a retest on $1,615. The most bullish development would be a move above $1,685. A close above $1,672 could help stabilize the tone."
Survey results
Kitco's weekly gold survey results revealed that Wall Street is now exceedingly bearish on gold prices next week. Out of nine analysts participating in the survey, 78% said they expected lower prices next week, and only 22% were bullish. There were no votes expecting sideways action next week.
The Main Street side remained bullish for next week, but the bearish segment was growing. Out of 858 retail participants, 45% expected higher prices, 35% called for a move lower, and 20% remained neutral, Kitco's survey showed.Kitco Gol
Re-pricing of Fed's rate hike expectations
Keeping the U.S. dollar near 20-year highs are the expectations of a 99.7% chance of another 75-basis-point hike in November, a 74% chance of an additional 50-basis-point hike in December, and possibly a series of smaller rate hikes in February and in March, according to the CME FedWatch Tool.
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As long this macro-environment exists, there will be more downside in gold.
"December gold has not finished off the short-term downtrend on its daily chart, with the target still down near $1,645. This past week got close as the contract hit a low of $1,648.30," said Darin Newsom Analysis president Darin Newsom. "The flip-side of the coin is the U.S. dollar index continues to indicate its intermediate-term trend has turned down, from a technical point of view."
And even those few analysts who remain bullish on the precious metal in the short-term are not ruling out a drop lower before the rally kicks in. "I am a bull on gold and silver, but I feel we will see the March 2020 lows (at least in the shares) taken out first," said VR Metals/Resource Letter publisher Mark Leibovit.
By Anna Golubova
For Kitco News
