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Kitco Weekly Gold Survey Shows Bear Market Has Room To Grow

(Kitco News) - Another Friday and another five-year low for gold prices are not helping investor sentiment, which continues to grow more negative, as a strong majority of retail investors see lower prices next week, according to the latest Kitco News Wall Street vs. Main Street Weekly Gold Survey.

The gold market is preparing to end its fifth week in negative territory as prices continue to push further below $1,100 an ounce, hitting their lowest point since February 2010. If negative sentiment in the retail market is correct, then prices could fall even lower next week.

This week, Kitco News saw the highest participation in its online weekly gold survey since it launched in April, with 555 participants. According to the results, 416 participants, or 75%, are bearish on gold next week. At the same time, 99 people, or 18%, are bullish. Seven voters, or 40%, are neutral on the yellow metal.

Kitco’s market professional survey was a lot closer, hitting a statistical tie once again, with a slight edge going to the bearish camp.  Out of 34 market experts contacted, 20 responded, of which eight, or 40%, said they expect to see higher prices next week. At the same time, nine professionals, or 45%, said they see lower prices, and three people, or 15%, are neutral on gold. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Last week, 68% of market professionals and retail investors were negative on the gold market, expecting prices to fall lower, and that majority was obviously not disappointed.

One of the biggest factors for the bullish market analysts is the fact that gold prices appear to be oversold in the short-term and could see some technical buying and short-covering next week.

Ted Sloup, senior market strategist at iiTrader, said the gold market is the most oversold in the last two years and the risk/reward scenario points to a short-term rally.

“There is no denying the overall weakness but for a short-term rally, you can’t find a better spot to enter the market,” he said. “In an options market like this, you are risking pennies to make dollars.”

Colin Cieszynski, senior market strategist at CMC Markets, remains bearish in the long term on gold but agreed that the technical picture and some fundamentals should help to support the yellow metal next week.

He noted that the $1,080-an-ounce area is the 50% retracement level from the 2001 to 2011 bull market.

“Also, gold is starting to head for a more seasonally favorable period in August and September and I think the USD has fully price in interest-rate lift-off this year and any surprises from next week’s FOMC meeting could be to the dovish side,” he said. 

However, on the other side of the market, some analysts don’t see an end to the current rally in the U.S. dollar, which will continue to weigh on markets.

“The [gold] market is a little oversold but the U.S. dollar remains strong and the inflation outlook remains tame, so [gold] is not that oversold,” said Bart Melek, head of commodity strategy at TD Securities.

In a recent research note, Melek said that investors should prepare themselves for gold to possibly fall to $1,000 an ounce in the short-term.

Chris Beauchamp, senior market strategist at IG Markets, is neutral on the gold market, saying it has room to move higher in the near-term but investors might be quick to sell any rallies as prices could end up trading in a range between support at $1,080 an ounce and resistance between $1,105 and $1,110 an ounce.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow Neils Christensen @neils_C

 

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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