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Main St., Wall St. Call For Gold To Extend Rally

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(Kitco News) - Main Street and Wall Street alike look for gold’s 2017 rally to continue next week, according to the Kitco News gold survey.

Eighteen traders and analysts took part in a weekly Wall Street survey. Ten voters, or 56%, see gold prices rising by next Friday. Three, or 17%, said lower, while five voters, or 28%, look for a sideways market.

Meanwhile, 1,187 respondents took part in a Main Street online survey. A total of 657 participants, or 55%, called for gold to rise, while 372, or 31%, saw lower prices. The remaining 158 voters, or 13%, were neutral.

In last Friday’s survey, 72% of Wall Street voters and 64% of Main Street participants called for gold prices to increase in the current week. Around 11 a.m. EST, they were right, as Comex April gold was up 1% for the week so far to $1,230.90 an ounce. April gold is up 6.6% so far in 2017.

Assuming gold remains higher for the week, both Wall Street and Main Street will be 3-2 so far this year. Going back to mid-May, Wall Street forecasted correctly 23 times and was wrong 13 times, a winning percentage of 64%. Main Street had a 22-14 mark during this period for 61%.

Jeffrey Nichols, managing director of American Precious Metals Advisors and senior economic consultant for Rosland Capital, said he looks for gold to break above recent resistance in the $1,230-$1,250 range “one of these days,” thus attracting new longs to the market.  

“Catalysts in the week ahead could be a further erosion of trust -- if there ever was any -- in the Trump administration and rising expectations that the Fed will not raise interest rates any time soon,” Nichols said. “Perhaps more importantly, I think we will see a continuing shift in asset allocation, with large-scale speculators and hedge funds lightening up on equities and taking on more gold via ETF (exchange-traded-fund) positions. These are momentum investors — and the momentum is self-reinforcing the current shift into gold and out of equities.”
    
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, also looks for higher prices.

“The U.S. stock market—leading other markets—is beginning to look a little wobbly, or at least less of a one-way street, so investors are turning to gold for a little hedge, all the more so with all the uncertainty in the world,” Day said.

Kitco senior technical analyst Jim Wyckoff said that the charts are “getting more bullish every week.”

Adam Button, currency analyst with Forexlive.com, also said higher.

“After Treasury Secretary (Steven) Mnuchin is confirmed, I expect the new administration to embark on a full-scale effort to weaken the U.S. dollar, and that could translate into large-scale gold gains at any time,” Button said.

Richard Baker, editor of the Eureka Miner Report, said Europe's political drama may re-emerge to give gold lift from Friday’s pullback.

“Soaring stock markets and a U.S. dollar bounce continue to be headwinds for the yellow metal,” he said. “However, the uptick in Treasury yields may be short lived as Europeans seek alternatives to rising yields on sovereign debt. I expect the net effect is a resumption in gold's seven-week uptrend.”

Phil Flynn, senior market analyst at Price Futures Group, said he looks for gold to ease next week even though he’s bullish for the longer term.

“Gold had its best move up since November. But now that we’re talking about a ‘phenomenal’ tax cut by President Trump, maybe the phenomenal move in gold will pause next week,” Flynn said. “With ‘phenomenal’ tax cuts coming, that is going to make the dollar a little bit stronger and it’s going to perhaps create higher yields in the Treasury market, which will maybe reduce demand for the yellow metal.”

Ken Morrison, editor of the newsletter Morrison on the Markets, also anticipates a pullback.

“The market has gone full circle for the week, trading up and stalling at $1,240 resistance and returning to last week's level near $1,220,” he said. “With the dollar and interest rates turning higher combined with slightly more moderate tone toward Mexico and China from the Trump administration, these are headwinds for gold. I look for gold to break $1,220 over the next week. It may not have much downside, but the drivers for a sustained rally are absent for now.”

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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