Bullish Gold Calls Post-ECB, Ahead of FedBy Sarah Benali of Kitco News
Friday March 11, 2016 12:52
(Kitco News) - Retail investors and analysts expect gold’s winning streak to continue next week, based on the latest results of Kitco News’ Wall Street vs. Main Street weekly gold survey.
Gold hit another 13-month high overnight Friday, after the European Central Bank rattled the marketplace with more stimulus than investors had anticipated. Since then, prices have backed off with April Comex gold futures last down $13.40 at $1,259.40 an ounce. Gold will remain focused on inflation expectations, and as investors find more reason to seek safe-haven assets, gold will continue to benefit.
This week, Kitco’s online survey received 1,085 votes, of which 829, or 77%, were in the bullish camp for next week. The remaining 175 participants, or 16%, say they are bearish, while the other 81, or 7%, say they are neutral. Votes tallied for this survey start from Wednesday morning until Friday at 9:30 a.m. Eastern time.
What are the Wall Street experts saying?
Of the 34 analysts contacted, 11 responded, or which 7, or 64%, are bullish on gold. The remaining four votes were split with 18% calling for lower gold and the other 18% calling for sideways prices next week. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
Most analysts are bullish on gold because another major central bank meeting takes place next week. The U.S. Federal Reserve’s two-day policy meeting concludes Wednesday and many will be focused on the central bank’s next move. Prior to Draghi’s comments, virtually no investors expected Fed rate hikes next week; however, based on CME Group’s FedWatch tool, some investors see a nearly 4% chance the Fed will now need to look at cutting rates again.
“The Fed meeting with no interest rate hike encourages the bulls and implies more stimulus on the way,” argued Mark Leibovit, editor of the VR Gold Letter.
Veteran gold strategist George Gero of RBC Capital Markets said he expects volatility ahead of the Fed as investors focus on rate expectations and the dollar.
Henry To from CB Capital Partners also focused on the dollar. “The fact that the U.S. dollar cannot sustain a rally lasting more than an hour after the ECB meeting tells me that gold will likely continue to rally for the rest of this year,” he said. He also highlighted investor interest in gold, noting that most investors are still out of the market, which means the positive momentum should continue to run for the foreseeable future.
“Fear is hiding out in dark corners, not leaving the scene,” said Richard Baker, editor of the Eureka Miner Report. For that reason, he told Kitco News that he remains bullish on gold this year and has a price target of $1,290 an ounce for the week ahead.
However, Ken Morrison, editor of the online newsletter Morrison on the Markets, pointed to investor interest as a bearish sign. “Strong bullish sentiment in gold as evidenced by Kitco's weekly survey of Main St. gold enthusiasts indicate it's time to be cautious at this level,” he said. “The last time open interest was this high was September 2011 as gold was making its record high.”
Morrison said his gold price target for next week remains at $1,225 an ounce.
However, on the technical side, Kitco senior analyst Jim Wyckoff said he expects sideways to higher prices next week “as near-term technicals remain firmly bullish.”
Ira Epstein, director of the Ira Epstein division of Linn & Associates, noted that gold’s weekly chart has stabilized and has now activated long term upside objectives.