The gold market is showing its worst weekly performance in about a year. According to the latest weekly review of gold, sentiment among Wall Street analysts and retail investors fell, thus price action this week may not improve.
Not only did the precious metal end last week with a 3.7% loss, but this is the fourth consecutive week of losses. The gold market faced significant selling pressure as the US dollar traded at its highest level in 20 years. While some analysts believe that gold is oversold, it still faces some challenges.
As the old saying goes, markets can stay overbought and oversold longer than most of us can stay solvent.
However, no matter how oversold gold may be, the fundamentals of the US dollar remain bullish. Accordingly, this week gold prices may fall to $1,780 per ounce.
Last week, 17 Wall Street analysts took part in the gold survey. Among the participants, two analysts, or 12%, voted for the increase in gold prices this week. At the same time, 12 analysts, or 71%, were bearish, while three, or 18%, were neutral
In online polls on Main Street, 932 votes were cast. Of these, 481 respondents, or 51%, expect gold to rise this week. Another 286 voters, or 31%, announced a reduction, while 165 people, or 18%, were neutral.
While retail investors remain optimistic in the short term, sentiment is down sharply from last week, when 61% were optimistic.
Along with the rise in the US dollar, many economists say rising bond yields will also put pressure on the precious metal.
DailyFX.com senior market analyst Chris Vecchio said real bond yields have reached pre-pandemic levels and the upward trend is just beginning.
Last week, the US consumer price index showed annual inflation rose 8.3% in April from 8.5% in March. While inflation was slightly higher than expected, there are signs that inflation is nearing its peak. This could force the Federal Reserve to continue aggressively raising interest rates. Accordingly, real interest rates will also rise, which is bad news for gold.
Perhaps by the end of the year, gold prices will be able to drop below $1,700.