Strong bullish sentiment in gold points to higher prices following critical breakout rally
(Kitco News) - Sentiment in the goldmarket has turned significantly bullish as the precious metal sees its bestweekly gain in six months.
This week gold pricesbroke their current downtrend. They pushed to a five-month high as inflationfears flooded back into the market after the U.S. Consumer Price Index showedan annual rise of 6.2%, the highest reading in more than 30 years.
"A lot of investorshave been waiting for this. Gold did exactly what it was supposed to do, whichis protect investors from rising inflation," said Philip Streible, chiefmarket strategist at Blue Line Futures.
December gold prices lasttraded at $1,865.80 an ounce, up nearly 2.7% for the week.
This week 18 Wall Streetanalysts participated in Kitco News' gold survey. Among the participants, 15analysts, or 83%, called for gold prices to rise nextweek. At the same time, two analysts, or 11%, were bearish on gold in the nearterm, and one analyst or 6% was neutral on prices.
Meanwhile, A total of1,018 votes were cast in online Main Street polls. Of these, 722 respondents,or 71%, looked for gold to rise next week. Another 165, or 16%, said lower,while 131 voters, or 13%, were neutral.
Wall Street
Bullish
Bearish 
Neutral VS
Main Street
Bullish Bearish Neutral Sentiment among retailinvestors is at its highest level since early May, and participation in theKitco surveys is highest in a month.
Not only is gold findingrenewed interest as inflation continues to rise, but some analysts have saidthat the growing fear that the Fed is losing control will continue to supportprices.
"The inflation genieis out of the bottle and it won't be going back in for some time. As generalistinvestors turn to gold to take even a small allocation, the move could bedramatic," said Adrian Day, president of Adrian Day Asset Management.
Colin Cieszynski, chiefmarket strategist at SIA Wealth Management, said that he expects gold prices tocontinue to move higher as the break above $1,835 was a significant move. Headded that a rally in silver and platinum should also solidify gold's newuptrend.
"The prospect ofincreasing inflation, which ignited this week's precious metal rally, maycontinue into next week with Canada and the U.K. reporting inflationnumbers," he said.
Jim Wyckoff, seniortechnical analyst at Kitco.com, said that he is also bullish on gold. In aresearch note, he said that gold is in a five-week uptrend. The next resistancetarget is $1,900 an ounce.
Adam Button, chiefcurrency strategist at Forexlive.com, said that he expects gold prices to movehigher as sentiment in the futures market improves after this breakout.
"Sentiment is stillas bad as I've ever seen it, but that's the best starting point. Positive priceaction can quickly turn bears into bulls," he said.
However, not all analystsare bullish on gold in the near term. Ole Hansen said that he could see pricespull back to $1,830 an ounce before investors take another major run at $1,900.
Marc Chandler, managingdirector at Bannockburn Global Forex, said that while gold has made animpressive run. But, he is not convinced that the precious metal can withstandheadwinds from rising bond yields and a stronger U.S. dollar.
"Itcould be the drivers are changing, but I am skeptical. A stronger dollar andhigher yields are the traditional banes of the gold bulls. The U.S. economy isaccelerating after a soft 2% annualized pace in Q3. So next week's retail salesand industrial production data should be robust. I envision at test on$1815-$1825," he said.By Neils ChristensenFor Kitco News
Follow neils_C
nchristensen@kitco.comwww.kitco.com