Wall St., Main St. Look For Gold's Decline To Continue
(Kitco News) - Main Street and Wall Street alike look for gold to fall some more next week, according to the weekly Kitco News gold survey.
Gold futures are finishing a volatile week, especially on Wednesday. First the metal rallied on ideas that weak reports on retail sales and consumer inflation would result in the Federal Open Market Committee scaling back its moves to tighten monetary policy. However, after hiking rates by 25 basis points instead on Wednesday afternoon, policymakers continued to sound an upbeat tone on the economy, prompting a selloff in gold, pushing prices to a three-week low.
Twenty-one traders and analysts took part in a Kitco News Wall Street survey. The largest bloc of voters – at 10, or 48% -- see gold prices falling by next Friday. Nine, or 43%, said higher, while two voters, or 10%, were either neutral or expected sideways prices.
Meanwhile, 1,151 readers submitted votes in an online Main Street poll. A total of 658 voters, or 57%, are bearish. Another 393, or 34%, say that gold will rise, while 100, or 9%, are neutral.
Both camps have leaned higher so far in 2017 and thus have been right more often than not, as Comex August gold has risen 8.4% so far this year. This is the second straight week that the largest camp on Wall Street said lower, while it was the first time Main Street tilted bearish since March 10.
In last Friday's survey for the current week, 61% of Wall Street voters expected gold to fall this week, while 55% of Main Street respondents called for prices to rise. Shortly before 11 a.m. EDT Friday, Wall Street was right, as Comex August gold was 1.1% lower for the week so far to $1,257 per ounce.
So far in 2017 but not counting the current week, Wall Street forecasters collectively were right 14 of 22 times for a winning percentage of 64%. Main Street was right 13 of 21 times for 62%.
“Gold futures should be done fully digesting the Fed’s latest moves,” said Phillip Streible, senior market strategist with RJO Futures. And, despite discounting weaker economic data, the Federal Reserve remains on track to raise interest rates and shrink the balance sheet, he continued.
“This will ultimately weigh in on stock valuations, pushing investors back into safety in gold in the following weeks,” said Streible said.
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, looks for a bounce.
“The selloff following the Federal Reserve’s interest-rate increase is overdone, given the high expectation of such an increase,” Day said. “The commentary surrounding the increase—namely ‘weakness’ in inflation, and mixed economic reports—suggests a pause in the rate increases, which will be positive for gold.”
Meanwhile, Colin Cieszynski, chief market analyst in Canada for CMC Markets, described himself as bearish on gold for next week.
“I don’t think this down leg in gold has run its course,” he said. “Central banks turning hawkish this week in Canada, U.S. and U.K. is just the start and look at how JPY [Japanese yen] is plunging today. It’s not a good environment for gold.
“Technically the RSI [Relative Strength Index] for gold broke under 50, signaling a downturn. This pullback has a way to go before running its course, perhaps back into the $1,230-$1,240 area near the 200-day average.”
Kevin Grady, president of Phoenix Futures and Options LLC, looks for gold to ease further on more long liquidation, in which traders sell to exit bullish positions.
“I am not seeing any geopolitical news right now as a reason to buy gold,” he said. “The [recent] longs are holding on by a thread here. If you do not see a rally in gold, I think you’re going to see these guys liquidate.”
Further, he added, July silver futures are nearing the rollover period ahead of first-notice day at the end of the month, and this often prompts liquidation from traders who decide to exit the market rather ante up more money to move into a new contract month.
Charlie Nedoss, senior market strategist with LaSalle Futures Group, looks for gold to slip some more, citing technical-chart weakness. Also, “the dollar has some strength,” he adds.