There is a lot of doom and gloom in the gold market as prices ended the previous week at their lowest level since April 2020. For many analysts, a break below $1,675 would spell the end of gold's three-year upward trend.
Along with the fall in gold prices, Wall Street analysts and retail investors turned bearish, highlighting the downside risks in the near term.
Last week's gold sell-off is a continuation of a trend that began in early March as markets react to the Federal Reserve's aggressive monetary policy moves to curb inflation, which remains stubbornly high.
Markets are almost ready for a 75 basis point rate hike; however, surprisingly resilient inflation in August, with the US CPI rising to 8.3% from an expected 8.1% gain, has left markets priced in at a slim chance of a full 1% move.
Rising hawkish expectations supported the US dollar near its 20-year high and lifted 10-year bond yields to 3.5%, the highest level since April 2011.
Under these conditions, many analysts say that gold prices have suffered a lot of technical damage and it will be difficult for the precious metal to find any bullish momentum anytime soon.
Last week, a total of 22 market specialists took part in a Wall Street survey. Fourteen analysts, or 63%, said they are bearish this week. At the same time, four analysts, or 18%, were optimistic or neutral.
In the retail sector, 1,045 respondents took part in online surveys. A total of 395 voters, or 38%, called for gold to rise. Another 489, or 47%, predicted a fall in gold. The remaining 161 participants, or 15%, voted for a sideways trend.
Bannockburn Global Forex Managing Director Mark Chandler said his next gold price target is between $1,615 and $1,650 and does not rule out a fall to $1,500 by next year.
It is unlikely that the Fed will raise interest rates by 1% this week, the markets still expect further aggressive actions before the end of this year. Chandler noted that markets now see the final federal funds rate at 4.50%.