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(Kitco News) - The gold market suffered another week of losses, falling for the third week as markets shifted expectations from a rate pause to a rate hike at the Federal Reserve's June meeting. The sentiment on Wall Street is now split on whether gold is done falling, according to Kitco's weekly gold survey.
Upbeat macro data and hotter-than-expected inflation numbers have pushed markets to re-price their Fed rate hike expectation, with the CME FedWatch Tool now projecting a 64% chance of another 25-basis-point hike at the June 13-14 meeting.
"The U.S. economy continues to confound the doubters, with strong spending keeping inflation far too high," said ING chief international economist James Knightley. "The Fed hawks will increasingly move into the ascendancy, and if the debt ceiling drama is resolved favorably and next Friday's jobs numbers are hot, we have to accept a June interest rate hike would look more likely than not."
June Comex gold futures were last down $35 on the week, seeing the most significant drop since February. At the time of writing, June futures were trading at $1,943.90 an ounce after opening the week at $1,979.40.
After turning bearish on gold last week, Wall Street is split on whether gold will keep falling or head higher. Out of 14 analysts on the Wall Street side, 43% were bullish when asked about their gold price expectations for next week. The same amount was bearish, projecting lower prices. And only 14% were neutral.
The Main Street side remained bullish. Of the 762 participating retail investors, 49% expected higher prices, 36% estimated a move lower, and 15% were neutral, Kitco's survey showed. Based on previous surveys, the bearish percentage remained elevated for the retail sector.
Retail investors' average gold price target for the end of next week was $1,981 an ounce, around $37 higher than current levels.
Many analysts who called for lower prices next week cited technical reasons.
"While gold has been trending downward recently, it doesn't look quite oversold enough or ready for a bounce, and with the U.S. closed on Monday, it may continue to drift listlessly for some time yet," SIA Wealth Management chief market strategist Colin Cieszynski told Kitco News.
Gold has lost more than $120 since trading above $2,062, but it might be too early to call a bottom, even though it could be close.
"The solid trade below $2,062.90 warns of solid pressure for days/weeks—we have seen $123.7 so far," said Moor Analytics founder Michael Moor. "I would also be aware we are likely in the last stretch of the lower timeframe move down from the highs, with areas of possible exhaustion to contend with on the way down at $1,937-40, $1,929, $1,906, and $1,882."
Those who are bullish expect the debt ceiling drama to accelerate next week, pushing prices higher. "The debt ceiling talks will struggle, and the X-date will likely get pushed back," OANDA senior market analyst Edward Moya told Kitco News.
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