Seasonally gold price looks strong, but analysts ask if it can hold above $1,800 through the new year?
Welcome to Kitco News' 2022 outlook series. The new year will be filled with uncertainty as the Federal Reserve looks to pivot and tighten its monetary policies. At the same time, the inflation threat continues to grow, which means real rates will remain in low to negative territory. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2022.
Sentiment remains bullish on gold as prices head into the Christmas holidays above $1,800 an ounce; however, the advice from markets analysts is: if you don't have to trade next week, don't.
Most Wall Street analysts note that gold is starting a strong season period; however, the next two weeks will see high volatility on extremely low trading volume. Many firms have already closed their books for the year ahead of the holidays.
The low-volume environment was also reflected in the participation rate of this week's gold survey.
This week 13 Wall Street analysts participated in Kitco News' gold survey. Among the participants, nine analysts, or 69%, called for gold prices to rise next week. At the same time, bearish and neutral views garnered two votes or 15% each.
Meanwhile, a total of 638 votes were cast in online Main Street polls. Of these, 343 respondents, or 54%, looked for gold to rise next week. Another 134, or 21%, said lower, while 161 voters, or 25%, were neutral.
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The continued bullish sentiment comes as gold prices look to end the shortened trading week above $1,800 an ounce, relatively unchanged from last week.
Most analysts are bullish on gold in the near term as December and the early months of the new year are seasonally solid periods for the precious metal.
"Nine out of the last ten years, you would have made money buying gold on the last trading day before Christmas and selling by Jan. 11," said Phillip Streible, chief market strategist at Blue Line Futures. "There is always a lot of uncertainty at the start of the year, so investors probably feel comfortable holding a little bit of gold as a safe-haven hedge."
Along with bullish seasonal factors, analysts are also optimistic on gold as its technical outlook continues to improve, with prices holding above $1,800 an ounce. However, for some analysts, gold needs to break above initial resistance at $1,815 and long-term resistance at $1,835.
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However, not all analysts are optimistic about gold in the near term.
David Madden, market analyst at Equiti Capital, said that while gold has room to move slightly higher next week, it is difficult to be bullish as the U.S. dollar remains strong.
"The U.S. dollar hasn't broken above its November highs, but it is still in a strong uptrend, and that will weigh on gold," he said. "I wouldn't want to short the U.S. dollar when the Federal Reserve is looking to raise interest rates three times next year."
Christopher Vecchio, senior market strategist at DailyFX, said that he is neutral on gold in the near term but said that he is not optimistic about the precious metal.
"Gold lacks fundamental news to drive prices sustainable higher," he said. "With the Federal Reserve looking to raise interest rates next year, real yields should rise and that will be negative for gold."
By Neils Christensen
For Kitco News
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