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Wall Street, Main Street Bullish On Gold After Four Consecutive Weeks Of Bearish Calls

(Kitco News) - After four consecutive weeks of bearish calls, Wall Street and Main Street seem to be on the same page Friday, expecting gold prices to move higher in the week ahead.

Some profit taking from shorter-term futures traders pushed gold prices lower midday Friday after hitting three-week highs earlier in the week. December gold was down $2 at $1,113.60 an ounce as of 11:05 a.m. EDT.

The Kitco News weekly online survey shows that the majority expects to see higher prices in the near-term, after four consecutive weeks of bearish calls. This week, 316 people participated in the survey. Of those, 181 people, or 57%, said they are bullish on gold next week; 88 participants, or 28%, are bearish; and 47 people, or 15%, are neutral.

News out of China earlier in the week helped boost gold prices as the metal regained safe-haven status among investors. The People’s Bank of China surprised markets on Tuesday when it devalued the yuan against the U.S. dollar for three consecutive days, tumbling the currency by about 3%. Comex gold reached a three-week high as a result, hitting $1,123.10 an ounce on Wednesday.

Wall Street shares the sentiment with Main Street participants as a majority expects gold prices to fare better next week.

This week, out of 33 market experts contacted, 14 responded, of which 7, or 50%, said they expect to see higher prices next week. At the same time, five professionals, or 36%, said they see lower prices, and two people, or 14%, are neutral on gold. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Although the Chinese central bank left the yuan alone on Friday, two participants expect more support for gold to come out of the Chinese currency situation next week, which, they say, is not finished.

“China’s devaluation has reignited another battle in the currency wars, and gold—the only form of money that is no-one else’s liability and that governments can’t arbitrarily create—is the sure winner,” said Adrian Day of Adrian Day Asset Management.

“I see gold higher next week. China has not finished adjusting its currency lower and this will lend support,” added Ole Hansen, of head of commodity research at Saxo Bank.

However, Colin Cieszynski, senior market strategist at CMC Markets, said he expects gold prices to remain flat next week as the market digests the surprise move made by China’s central bank.

“This week’s move up was a surprise on the CNY devaluation and I think the PBOC is done for now,” he explained. “I think [gold] needs to digest this week’s rally so I’m leaning toward a flat week to come.”

On a technical basis, some participants say the cyclical picture for gold is still positive, and they expect gold to move higher. Some targets for the week ahead include $1,140 and $1,142 an ounce.

However, not all Wall Street experts were bullish on the metal, with some expecting gold to go as low as $1,095 an ounce next week.

“I still remain bearish on near term gold. It is likely the USD rally will fade next week as we near the fateful September Fed call on interest rates,” said Richard Baker, editor of the Eureka Miner Report.

 Despite this, he still noted that gold was able to hold ground amid falling oil and copper prices, which he said is another “moderately bullish sign.”

Baker also chimed in on the yuan situation from earlier in the week and said that gold held up well.

“It is instructive to note that after all the market turmoil caused by the Chinese devaluation of the yuan this week, gold priced in euros this morning trades less than 0.2% from last Friday's close (€1003.2 versus €1001.1). Comex gold by contrast has bounced more than 2% ($1,117.6 versus $1,094.1),” he noted. “Stability relative to major devalued currencies is important -- if gold priced in euro and yen falls below its respective 2013 lows, descent into triple digit USD territory is highly likely.”

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By Sarah Benali of Kitco
Follow me on Twitter @SdBenali



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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