Kitco’s latest News Weekly Gold Survey has revealed increasing bullish sentiment regarding the gold market among retail investors. Following weeks of lackluster investor interest and drifting sentiment, Kitco suggests that retail investors are once again turning their attention to gold and other precious metals.
Even though neither Main Street retail investors nor Wall Street analysts expect a major breakout in the gold market, retail investors are slightly more optimistic. Analysts, on the other hand, are more cautious about the gold market. RJO Futures senior market strategist Daniel Pavilonis says that although weak inflation data will keep supporting gold prices, there are several reasons for exercising caution.
Of the 20 Wall Street analysts polled during the recent Kitco survey, 9 saw gold prices increasing next week while a pair expected a bearish gold market in the short term.
An online survey with 592 votes had a majority (61%) expecting higher gold prices next week while 25% predicted lower gold prices in the short-term and 14% said they would stay neutral.
Plenty of investors are currently on the fence, warily watching the gold market and waiting for a signal from the U.S. Federal Reserve that it will stop raising inflation rates. As with most precious metals, gold traditionally attracts plenty of investor interest during times of economic upheaval because it doesn’t lose its value. Gold is a store of value that allows investors to preserve the value of their holdings during inflations and recessions.
However, with the Federal Reserve raising benchmark interest rates for several consecutive months, investors who would have traditionally bought gold instead invested in assets that would allow them to take advantage of the increasing interest rates. Consequently, aside from a recent record-breaking run of gold purchases by central banks, gold has attracted little investor interest in recent months.
Pavilonis encourages caution in the gold market because there still isn’t enough information on whether the Fed will stop raising interest rates. In fact, Pavilonis noted that the Federal Reserve may be reluctant to bring interest rates down as the economy still isn’t in “restrictive territory.” This would, in turn, keep bond yields high and cripple gold’s ascent before it has time to pick up steam.
Gold prices could “easily take off” if it becomes apparent that the Fed is stopping interest rate hikes, Pavilonis added. Investors will most likely increase their gold holdings to act as a hedge amid deteriorating economic conditions, shortages in critical industries and geopolitical turbulence.
You can bet that gold mining companies such as Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF) will closely monitor the evolving investor sentiment because it could impact their mid-term and long-term operations.
NOTE TO INVESTORS: The latest news and updates relating to Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF) are available in the company’s newsroom at http://ibn.fm/ELRRF
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