30.01.202313:07 Forex Analysis & Reviews: The U.S. dollar will be the key to gold this week

Last week, Bank of America released a very optimistic report on gold, with analysts saying the precious metal will be the main asset for the next three years.

Bank of America is not alone in its optimistic outlook. In November, European fund manager HANetf surveyed 100 wealth fund managers from Europe and the UK. According to the results, 89% of these respondents said they intend to increase their investment in gold.

In terms of precious metals sentiment, the biggest factor still remains the weakness of the U.S. dollar, with the USD index down more than 10% from a 20-year high in September.

According to analysts, the U.S. dollar may lose strength as markets expect the Federal Reserve to slow down its aggressive tightening cycle.

Economist David Rosenberg said the February meeting will be the last rate hike by the Fed, and a looming recession will force the central bank to start cutting interest rates sometime in the second half of the year.

Under these conditions, he expects gold to be an attractive asset and sees prices climb to new all-time highs above $2,000 an ounce in 2023.

The gold market managed to record another gain in a week for the sixth time in a row, but sentiment, especially among Wall Street analysts, turned bearish as they would like to see some consolidation before prices rise to $2,000 an ounce.

The weekly gold survey shows that Main Street investors remain bullish on gold. This will result in the first discrepancy for 2023 between the two survey groups.

While most analysts are long-term bullish on gold, many say the Federal Reserve's monetary policy decision creates a lot of risk in the market and investors may want to lock in some gains at current levels. Investors wishing to enter the market are advised not to chase the market at current prices.

There is a risk that the Fed will raise interest rates by 25 basis points this week, but adopt a hawkish tone and could support the U.S. dollar and put pressure on gold. The U.S. dollar will be the key to gold this week.

Last week, 19 Wall Street analysts took part in the gold survey. Among the participants, ten analysts, or 53%, were bearish for the near term. At the same time, three analysts, or 16%, are optimistic, and six analysts, or 32%, believe that prices are trading sideways.

Meanwhile, 1,127 votes were cast in online polls. Of these, 723 respondents, or 64%, expected a rise in gold prices this week. Another 251, or 22%, said the price would go down, while 153 voters, or 14%, were neutral.

Not only is bullish sentiment among retail investors remaining at its highest, last week's survey participation hit its highest level since early December, indicating that investors are starting to turn their attention back to gold.