Strong Bullish sentiment in gold as Powell talks down inflation threat
(Kitco News) - Therising inflation threat is creating some significant bullish sentiment in thegold market, even as Federal Reserve Chair Jerome Powell tries to talk downthose growing concerns
EarlyFriday, gold prices rose to a six-week high, pushing above $1,800 an ounce;however, most of those gains proved to be short-lived after Powell reiteratedhis stance that the U.S. central bank is on track to start reducing its monthlybond purchase. He added that he expects the tapering to be completed bymid-2022.
Henoted that although there is a growing risk that supply-chain issues could keepinflation pressures elevated through 2022; however, he added that his base caseis for the supply bottlenecks to be resolved and for inflation to push back to2%.
BeforePowell's comments, analysts were significantly bullish on gold with manylooking for prices to test major resistance at $1,830 an ounce.
Thisweek 15 Wall Street analysts participated in Kitco News' gold survey. Among theparticipants, 13 or 87%, called for gold prices to rise. At the same time, twoanalysts, or 13%, were neutral on gold in the near term. No analysts werebearish on gold.
Meanwhile,A total of 598 votes were cast in online Main Street polls. Of these, 360respondents, or 60%, looked for gold to rise next week. Another 134, or 22%,said lower, while 104 voters, or 17%, were neutral.
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Bullish Bearish Neutral Althoughthe precious metal is down from its session highs, it is still on track to endits second week with gains. December gold futures last traded at $1,797.30 anounce, up 1.63% from last week.
Althoughsome analysts are bullish on gold, they don't see the market attracting majorcapital until resistance at $1,835 is broken.
"Withgold's push back above $1,800 you have to be bullish on gold," said Ole Hansen."But I also reserve the right to be disappointed given gold's lacklusterperformance so far this year."
Hansenadded that a break above $1,835 could create enough momentum in the market topush prices back to $2,000 an ounce.
DavidMadden, market analyst at Equiti Capital, said that Friday's initial rally ingold pushed prices above a critical downtrend from last year's record highs. Hesaid that he sees gold pushing back to $1,830 but doesn't expect that level tobreak.
Henoted that the U.S. dollar. Which has been in a strong uptrend since May hasbeen a significant headwind for gold. He added that he doesn't expect thattrend to change anytime soon.
"TheFederal Reserve is keen to tighten interest rates and that will support theU.S. dollar," he said.
ColinCieszynski, chief market strategist at SIA Wealth Management said that he isbullish on gold as inflation rises.
"Wemay see central bankers start to walk back their previous "transitoryinflation" statements and start to reduce stimulus. Although winding down thepaper printing party is a positive for paper money, that could take severalmonths, so I think gold can still benefit in the short term," he said.
DarinNewsom, president of Darin Newsom Analytics, said that he could see higher goldprices next week; however, he added that a lot depends on the U.S. dollar andif support at 93.50 in the U.S. dollar index will hold.
"TheUS dollar index looks to be approaching a possible short-term bullish turn asit tests support at this week's low of 93.50. If this holds and the dollarrallies, gold could put an early top in next week," he said.
By Neils ChristensenFor Kitco News
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