Falcon Fed rhetoric reduced gold prices and increased the bearish sentiment. Pressure from the Federal Reserve to raise interest rates “soon” has awakened the golden bears and forced the bulls into hiding as the precious metal saw its worst sale since mid-November. Detail cryptocoin.com‘in.
Gold is falling
The bearish sentiment among Wall Street analysts comes as gold prices have dropped nearly 3% this week since the Federal Reserve monetary policy meeting Wednesday set the stage for a rate hike in March. At the same time, Federal Reserve Chairman Jerome Powell opened a position for aggressive action this year to deal with mounting inflation pressure. Powell says:
There is plenty of room to raise interest rates without threatening the labor market. It’s a historically tight labor market in many ways – with record levels of employment, turnover and wages rising at the fastest pace they’ve had in decades.
Gold prices fell as markets began pricing in the potential for five rate hikes this year. But some analysts said the markets and the Fed were too aggressive. “Gold may fall, but I’m buying anyway because the Fed will get too tight and too hawkish and eventually they’ll have to step back,” said Phillip Streible, chief market strategist at Blue Line Futures. This week, 14 Wall Street analysts took part in Kitco News’ gold survey. 4% or 29% of respondents expect gold prices to rise. At the same time, seven analysts, or 50%, saw gold prices drop in the next week, and three analysts, or 21%, saw sideways price action.
Meanwhile, 495 votes were cast in online Main Street polls. Of these, 270, or 55%, expect gold to rise next week. Another 158, or 32%, voters said lower, while 67 voters, or 14%, remained neutral. As retail investors continue to rise on gold, this week’s survey turnout was at its lowest point since September. According to some analysts, there is room for gold to move lower in the near term with $1,750 an ounce as the new target; however, other analysts point out that the market is oversold and may be due to a bounce in the near term.
When is the price recovery?
Adrian Day, head of Asset Management, said he is neutral on gold in the short term but expects a final recovery in price. “The main argument is that at some point the Federal Reserve will lose its newly found disinflationary stance and gold will do what it has done every time the Fed has tried to tighten it over the past 20 years,” Day said. “They may not pull back at the first sign of distress in the markets, but when there is a choice between a slowing economy, troubled borrowers and floating markets on the one hand, or inflation and the dollar on the other, they will let go of inflation,” Day said. Gold prices could remain bearish in the near term as further wage inflation could add further support to the Federal Reserve’s hawkish stance, said Colin Cieszynski, chief market strategist at SIA Wealth Management, in next week’s nonfarm payrolls report.
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