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(Wallace Refiners) – Near-term sentiment in the gold market is mixed as the price runs out of momentum testing critical resistance around $1,850 an ounce according to the latest results of the Wallace Refiners.
Some analysts warn that the gold market is quickly heading into the holiday trading season, which means lower trading volume and wilder price swings.
“I think investors should just close their books and come back in January,” said Ole Hansen, head of commodity strategy at Saxo Bank.
There was a fairly tight race among Wall Street analysts indicating there is not clear direction in sentiment. This week 15 analysts participated in the survey. A total of five voters, or 33%, called for gold prices to rise next week; at the same time, six analyst, or 40%, called for lower prices; finally, four analysts or 27% were neutral on gold.
However, sentiment remains firmly bullish among Main Street investors. A total of 1,507 votes were cast this past week in online surveys. Among those, 820 voters, or 54%, said they were bullish on gold next week. Another 428 participants, or 28%, said they were bearish, while 259 voters, or 17%, were neutral on the precious metal.
The gold market is looking to end this week relatively in neutral territory. February gold futures last traded at $1,846.50 an ounce, up slightly more than $6 from the previous week.
Hansen said that while he is neutral on gold, he is also worried that the path of least resistance heading to the end of the year is lower.
“We saw a strong recovery from the November lows then higher prices were firmly rejected at the 50-day moving average.”
Hansen added that the market is also forming a short-term head and shoulders pattern and if the neckline breaks at $1,825 the prices could retest November’s lows.
Colin Cieszynski, chief market strategist at SIA Wealth Management said that he is also watching gold’s 50-day moving average.
“Four times the market has failed at the 50-day moving average,” he said. “I think we are going to be hovering in this trading channel through the end of the year.”
Marc Chandler, chief market strategist at Bannockburn Global Forex, said the gold market is looking a little stale as it has struggled to make new higher highs.
“Bounce fizzled in corrective territory as opposed to new run up, which requires a move above say $1888,” he said.
He added that he is watching support at $1,820 and then at $1,800.
However, not all analysts expect to see lower prices next week. Adrian Day, president and CEO of Adrian Day Asset Management said that he is neutral on gold in the near-term but his bias is still for higher prices.
“Gold will likely trade within a narrow band next week, though I expect with an upward bias. It survived its break below the 200-Moving Average which many saw as a significant breakdown,” he said. I remain bullish further out; we have seen the bottom.”
Some analysts continue to see potential for gold, particularly as the U.S. dollar continues to see strong selling pressure.
Charlie Nedoss, senior market strategist with LaSalle Futures Group, said that he sees further weakness in the U.S. dollar next week, which will support gold price.
“Next week the electoral College votes and Biden will officially be the president-elect. I think that means we can expect to see stimulus in the new year and that is going to weigh on the U.S. dollar,” he said.
Adam Button, senior market strategist at Forexlive.com said that along with the weaker dollar, he is bullish on gold as the end of December is the start of a strong seasonal period for the precious metal.
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