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Main St. Leans Bearish, Wall St. Mixed On Gold

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(Kitco News) - Main Street leans bearish and Wall Street is mixed on the direction of gold prices in the next week, according to the Kitco News gold survey.

This reflects a change in sentiment after both camps previously were bullish for three weeks in a row.

Twenty-one traders and analysts took part in a weekly Wall Street survey. Seven voters, or 33%, see gold prices rising by next Friday. Eight, or 38%, said lower, while six voters, or 29%, said sideways.

Meanwhile, 934 participants took part in a Main Street online survey. A total of 358 participants, or 38%, called for gold to rise, while 456, or 49%, saw lower prices. The remaining 120 voters, or 13%, were neutral.

In last Friday’s survey, 78% of Wall Street voters and 64% of Main Street participants called for gold to rise in the current week. Around 11 a.m. EST, they wrong for the first time in the new year, as Comex February gold was down 1.5% for the week so far to $1,186.50 an ounce.

Going back to mid-May when this reporter started handling the Kitco News survey, Wall Street forecast correctly 23 times and was wrong 12 times, a winning percentage of 66%. Main Street had a 22-13 mark during this period for 63%.

“The uncertainty surrounding the new Trump administration—and the reality of governing--should provide a bid under gold,” said Adrian Day, chairman and chief executive officer of Adrian Day Asset Management.

Richard Baker, editor of the Eureka Miner Report, sees gold getting a bounce after a “horrible” week in which it lost value.

“For more normal times, one might expect a bearish downtrend to continue with such a solid reversal of fortune…,” he said. “But these are not normal times given the uncertainty surrounding the new administration. Increase of trade tensions with Mexico or geopolitical turmoil caused by new foreign policies could spike gold considerably higher. Volatility is further exacerbated by the absence of Chinese traders for most of next week given their Lunar (New Year) holiday. I believe it is likely that gold will find support around $1,180 and then close the week higher next Friday.”

Ken Morrison, editor of the newsletter Morrison on the Markets, looks for a “mild” recovery.

“The quick 'touch' up to $1,220 resistance provided a good opportunity for some profit-taking and long liquidation as first-delivery intentions approached on the February contract,” Morrison said. “Since Friday, 30,000 contracts have been erased from overall open interest on the $30-something pullback, evidence paring of longs dominated the money flow. New uncertainty over the administration's plan to finance the border wall with Mexico and the increasing risk of tit-for-tat border taxes will underpin gold while the dollar and Treasury yields remain range-bound.”

Henry To, analyst at CB Capital Partners, also said higher.

“Despite last week’s uptick, speculators’ positioning in gold futures remains oversold relative to the long run,” To said. “Gold ETF (exchange-traded-fund) positioning is also oversold.  For example, holdings in the GLD ETF (are) now below 800 tonnes, its lowest level since mid-March 2016. The oversold positioning in the speculative world suggests there is significant room for gold to rise not only next week, but throughout 2017 as well.”

Those who see weakness cite potential U.S. dollar strength and the absence of Chinese buyers during Chinese New Year celebrations.

“Gold futures should remain under pressure next week with a hawkish Fed meeting and optimistic jobs report that should be able give boost to the dollar index as well as U.S. equities, further reducing the need for safe-haven assets,” said Phillip Streible, senior market analyst with RJO Futures.

Two participants – MKS (Switzerland) SA head of trading Afshin Nabavi and Kitco Metals global trading director Peter Hug -- see potential for a retreat next week due to the Chinese New Year.

“A lot of the market will be absent,” temporarily taking away buyers from one of the world’s largest gold-consuming nations, Nabavi explained.

Mark Leibovit, editor of the VR Gold Letter, looks for a sideways market for now although higher later in the year.

“I am going to unchanged or neutral due to the recent run of $100 per ounce and the fact it appears we hit a short-term trading top,” he said. “Cyclical strength usually carries into February, but we may have peaked a bit early. Overall, I am looking for higher prices during the year targeting back to or through the $1,373 peak back last July.”

By Allen Sykora of Kitco News; asykora@kitco.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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