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Wall St., Main St.: Post-Fed Gold Rally To Continue

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(Kitco News) - Wall Street and Main Street both look for gold to continue its post-Federal Reserve bounce next week.

Kitco Gold Survey

Wall Street

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Main Street

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The metal rallied sharply after policymakers wrapped up a two-day meeting Wednesday. Traders said the Fed’s 25-basis-point rate hike had already been factored into prices, letting gold recover on a sell-the-fact, buy-the-news move – just as a number of Wall Street voters had predicted last Friday. Further, Fed commentary was not seen as overly hawkish or moving ahead expectations for further tightening of monetary policy.

Eighteen market professionals took part in a weekly Wall Street survey. Eleven voters, or 61%, see gold prices rising by next Friday. Two, or 11%, said lower, while five voters, or 28%, look for a sideways market.

Meanwhile, 1,965 Kitco readers submitted votes in an online Main Street poll. The largest camp – 1,348 voters, or 69% -- is bullish. Another 392, or 20%, say that gold will fall, while 225, or 11%, are neutral.

In last Friday’s survey for prices during the current week, 58% of Wall Street voters saw gold rising, while the largest bloc of Main Street voters (46%) was bearish. As of 11:16 a.m. EST, Comex April gold was 2.4% higher for the week at $1,229.90 an ounce.

So far in 2017 but not counting the current week, Wall Street called gold’s direction correctly six of nine times for a winning percentage of 67%, while Main Street was 5-4 for 56%.Going back to mid-May, Wall Street forecasted correctly 27 times and was wrong 14 times, a winning percentage of 66%. Main Street had a 25-16 mark during this period for 61%.

“I think gold will continue to bounce,” said Daniel Pavilonis, senior commodities broker with RJO Futures. “We had the interest-rate decision. It (gold) was oversold, and the market got what it was looking for. Now we’re seeing some mean reversion. I think $1,250 is in the cards.”

Ralph Preston, principal with Heritage West Financial, said he looks for a price bounce into April as market focus shifts toward the U.S. debt ceiling, which in turn could undermine the U.S. dollar.

“I think dips are to be bought until there is some more clarity from the Fed down the road,” said Sean Lusk, director of commercial hedging with Walsh Trading. “With everything going on in the world, geopolitically and otherwise and general uncertainties in the market, I think if gold can hold the recent lows around $1,200, the chance to take out the yearly high are pretty good.”

Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, also looks for further gains, commenting that the Federal Reserve has again showed caution in its commentary despite hiking rates. “And with inflation having moved up in recent months, above the Fed’s target, the Fed is once again lagging inflation, so real rates—what really matters—are not increasing at all,” Day said.

Meanwhile, Kevin Grady, president of Phoenix Futures and Options LLC, is among those who look for gold to pull back. He commented that Comex open-interest data suggest the rally after the Fed meeting was in large part short covering, which is buying by traders to offset previous bearish trades. The number of open positions did not climb sharply with prices. If it had, this would have suggest more fresh buying enthusiasm.

“I think a lot of shorts got ran out of the market and covered….There were some longs that came into the market,” Grady said. “But I do not see this as a huge market shift.”

Ken Morrison, editor of the newsletter Morrison on the Markets, looks for consolidation.

“The dollar's 'sell-the-news' response to the FOMC's widely expected rate hike deserves most of the credit for gold's $30 recovery the past week,” he said. “But the fact remains gold's uptrend line of support extending off the December low was broken in early March and is now resistance. Add to that the dollar index's three-day, post-rate-hike slide is back into support at 100. I expect gold has a consolidation week ahead in a range of $1,215-$1,240.”

Meanwhile, Kitco Main Street voters shared their thoughts on Kitco’s new commenting feature – Kitco Chat -- that began last week. One reader wrote:

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 precious metal products, 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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