Wall Street turned decisively bearish on gold after the metal repeatedly tested the $4,000 support level, with 79% of analysts expecting further declines.
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Gold sentiment turns bearish as 79% of analysts predict further losses
Gold closed at $4,015.83 an ounce, down 1.8% for the week, after repeatedly testing the $4,000 support level.
"Gold has failed to inspire and looks poised to challenge the year's low near $3,943," Marc Chandler, managing director at Bannockburn Global Forex, said.
The metal opened the week at $4,108.18 an ounce before sliding to a weekly low of $3,959.37 on Friday. A brief rally to $4,122.63 on Monday faded after stronger-than-expected U.S. retail sales data — up 0.2% in June — reinforced expectations that the Federal Reserve will maintain restrictive policy. June CPI cooled to 3.5%, but the data failed to provide sustained support.
A sustained break below $4,000 could trigger further selling toward $3,600, according to Bank of America technical analysts, while the seasonal pattern suggests gold typically bottoms in early August before resuming its uptrend.
Wall Street Turns Bearish
The latest Kitco News Weekly Gold Survey showed Wall Street overwhelmingly bearish on gold's near-term prospects. Of 14 analysts, 11 — or 79% — predicted further price declines, while one expected gains and two saw sideways trading. Main Street sentiment remained divided, with 40% of 169 retail investors looking for higher prices, 36% expecting declines, and 24% forecasting consolidation.
"Unlikely to see a breakout to the upside until the sentiment clearly changes to a 'no-hikes' Federal Reserve," Adrian Day, president of Adrian Day Asset Management, said.
Alex Kuptsikevich, senior market analyst at FxPro, said he expects gold to decline toward $3,300 by September, citing a continuing downward trend that began with January's peaks. CPM Group issued a sell recommendation at $3,980 an ounce with a target of $3,820 and a stop loss at $4,090.
Oversold Signals Point to Potential Rebound
Despite the bearish sentiment, several indicators suggest the selloff may be reaching exhaustion. Paul Wong, managing partner at Sprott Inc., said gold is trading at minus two to three standard deviations oversold across multiple internal measures.
"It means that it's harder and harder to push down the price of gold," Wong said. "The bulk of the selling is probably done."
Jesse Colombo, independent precious metals analyst, noted that a triangle pattern has formed on the daily gold chart, with multiple failed attempts to push gold below $3,960.
"That's a sign that buyers are coming in at these levels," Colombo said. "My hope is that the selloff is reaching exhaustion."
Bank of America technical analyst Paul Ciana said gold's current correction remains disproportionately short relative to the preceding 121-week advance. While prices could test $3,600, he recommended investors consider averaging down to build positions, with accumulation below $4,000 and more aggressive buying in the $3,700 to $3,600 area.
The next major catalyst for gold will be the European Central Bank's monetary policy decision on Thursday, followed by July's S&P Global Flash PMI data on Friday.
This article is for informational purposes only and does not constitute investment advice.
[1] Wall Street breaks bearish, Main Street sentiment still split after gold struggles to maintain $4,000 support amid summer doldrums[2] Gold price struggling as U.S. retail sales rise 0.2% in June - KITCO[3] Disappointing U.S. pending home sales unable to push gold prices higher - KITCO[4] Gold prices can go lower, but Bank of America suggests buying the dip and averaging down - KITCO
