Wall St., Main St. See Gold Prices Regaining Their Shine
(Kitco News) - Wall Street is sticking with its bullish outlook and has been rejoined by Main Street in the weekly Kitco News gold survey.
Traders and analysts who make up the Wall Street survey collectively look for the metal to rise over the next week. They were also bullish each of the last two weeks only to see gold fall.
Still, they say they remain upbeat in part because gold is due for a corrective bounce after a sell-off since the September highs. There’s also that pesky North Korean geopolitical situation, and they doubt the dollar will maintain upward momentum despite a hawkishly construed Federal Open Market Committee this week, which sent gold back below $1,300 an ounce for the first time since August.
Sixteen market professionals took part in the Wall Street survey. Eight participants, or 50%, look for gold to be higher next week. Five, or 31%, called for lower, while three, or 19%, sees sideways prices ahead.
Meanwhile, the largest camp in the Main Street survey is back to bullish after a bearish call last week. A total of 525 votes were cast, with 237, or 45%, predicting gold will rise in the week ahead. Another 206, or 39%, were bearish. The neutral votes totaled 82, or 16%.
For the trading week now winding down, the largest bloc of Wall Street respondents (50%) was bullish, while the largest camp of Main Street participants (also 50%) was bearish. As of 11:25 a.m. EDT, Comex December gold was down by 2% for the week so far to $1,298.30 an ounce.
So far in 2017, but not counting the current week, Wall Street forecasters collectively were right 23 of 36 times for a winning percentage of 64%. Main Street was right 22 of 35 times for 63%.
“I think we are going to see a bounce next week,” said Daniel Pavilonis, senior commodities broker with RJO Futures. “It looks like the equity markets are a little toppy. That could put some buying back into the metals.”
Sean Lusk, director of commercial hedging with Walsh Trading, figures gold prices below $1,300 an ounce will prompt some bargain buying that takes gold higher again. One key, however, will be whether there is major profit-taking by longs ahead of end of the month and quarter.
“With this geopolitical situation [with North Korea] and the way the dollar has been acting, we’re going to firm up into the weekend and trade a little higher next week,” he said.
Richard Baker, editor of the Eureka Miner Report, commented that he sees gold moving back to at least $1,310 an ounce next week. He called this week’s decline an “overreaction” to the Federal Reserve's communications that kicked off a unwinding of the central bank’s balance sheet and upped chances for a rate hike in December.
“The exchange of threats between the U.S. and North Korea peaking on a threat for the latter to explode a massive H-bomb over the Pacific have brought new shine to gold this morning,” Baker said. “This, coupled with global banking policies that remain expansionary and the uncertain economic impact that hurricane devastation will have near term on the U.S. economy, mitigate some of the reaction to [Fed Chair] Yellen's comments.”
Jim Wyckoff, senior technical analyst for Kitco, said “a corrective bounce is due after recent strong selling pressure.”
Meanwhile, Kevin Grady, president of Phoenix Futures and Options LLC, described himself as bearish in the short term. Many of the traders who took out long positions during the recent North Korean saga may now be feeling “trapped” by the recent sell-off and looking to get out on a price bounce, he said. Further, some selling could re-emerge if geopolitical tensions flare, with worries about North Korea offering some support, he added.
Grady described the market as technical at the moment with key chart resistance around $1,305. Important support points lie at the 50-day moving average that is right around Thursday’s $1,291.20 low, plus $1,286.80, which is a 50% retracement of the rally from the July low to the high earlier this month. “I think if it gets under that level, you’re going to see some strong technical selling,” Grady said.
Ralph Preston also sees gold lower, adding that he is looking for the U.S. dollar to climb some more after Wednesday’s slightly more-hawkish-than-anticipated tone from Yellen.
Colin Cieszynski, chief market analyst in Canada for CMC Markets, is among those who is neutral on gold in the short term, calling for consolidation between $1,280 and $1,300.
“The U.S. dollar rally following the Fed meeting appears to be over,” he said. “Technically, gold has bounced up off of its 50-day average and overbought conditions have eased. So things could be looking up for gold. Still, a lot of technical damage has been done this week. Gold needs to retake $1,300 to signal the end of the current selloff, which it has not been able to do yet.”