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With gold hitting a four-week low at the end of a volatile week, market participants will be watching if key support, at $1,200 an ounce, will be tested in the near-term.

Looking ahead, gold prices could struggle to hold onto its recent gains as sentiment has dropped significantly. Kitco News’ Wall Street vs. Main Street Gold Survey showed that for the first time this year, less than 50% of retail investors are bullish on gold and market participants are outright bearish.Gold Maple

According to the results, 46% of participants in the online survey said that they are bullish on gold next week, down considerably from 78% from the previous survey. At the same time, 63% of market participants said they are bearish on gold.

Chris Beauchamp, senior market analyst at IG Markets, said that it is not surprising to see gold prices fall back, noting that this is the first major selloff after gold’s almost 21% rally since the start of the year. He added that there is room for gold to move lower in the near-term.

“I think $1,200 is the level to watch for this rally,” he said. “A drop below that could cause some concern about some investors.”

Bart Melek, head of commodity strategy at TD Securities, agreed that $1,200 is the key level to watch next week; however, he added that this is expected to be a “firm floor” for the yellow metal.

While hawkish rhetoric from Regional Fed presidents James Bullard, Charles Evans, Patrick Harker and Dennis Lockhart drove gold prices lower this week, Melek said that there is still a lot of uncertainty as to whether or not the central bank will be able to raise interest rates later in the year.

“If we continue to see bad economic data then we can take any rate hike off the table. That is creating a firm floor for gold,” he said. “We also have growing uncertainty over a Brexit that should help to support the metal,” he said.

Jessica Fung, precious metals analyst at BMO Capital Markets, agreed that there is a floor in the market but it could end up being below $1,200 an ounce. She added that a stronger U.S. dollar and seasonal factors could contribute to gold weakness in the near-term.

“We saw quite a bit of strength in gold since the start of the year but it wasn’t based on fundamentals,” she said. “I think the market overreached to [Fed Chair Janet] Yellen’s dovish comments and now markets are back to pricing in a chance of two rate hikes.”

Although Fung see the potential for lower prices, she added that this pullback could prove to be short-lived as investors could see it as a new buying opportunity.

With renewed focus on gold’s key support levels, analysts will also be paying close attention March’s nonfarm payrolls report, to be released April 1.

Fung added that another strong report could increase expectations for the U.S. central bank to raise rates, which would be positive for the U.S. dollar and negative for gold.

Matthew Turner, precious metals analyst at Macquarie, agreed that a stronger U.S. dollar on positive employment numbers is the biggest risk for gold next week; however, he added that the yellow metal could see some relief if the report shows a pickup in wage growth, which could drive up inflation expectations.

“In general, the fear trade in gold has been overdone and I think to see higher prices we are going to need to see higher inflation,” he said.

While March’s employment report will be the main focus next week, other data including pending home sales, consumer confidence and more national manufacturing data will also garner some market attention.

Reference : Kitco