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Retail Investors Remain Bullish On Gold; Wall St. Turns Negative

(Kitco News) - Gold prices continue their downtrend since Thursday’s price drop after markets digested the latest Federal Reserve statement, and sentiment towards the yellow metal among investors remains mixed, with most market professionals looking for lower prices, according to Kitco News' Wall Street vs. Main Street Weekly Gold Survey.

Friday, Comex December gold futures fell to a three-week low overnight after seeing strong selling pressure following Wednesday’s Federal Open Market Committee (FOMC) meeting. October’s statement has been deemed as hawkish, with a December interest rate hike still on the table. Gold prices seem to be heading into Halloween on a weaker tone, down $6.90 at $1,140.50 an ounce.

There were 272 retail investors that participated in Kitco’s online survey, of which the majority expect gold prices to make a comeback in the short term. Looking at the results, 154 voters, or 57%, expect prices to move higher next week, while 90 participants, or 33%, see the lower prices. The remaining 28 voters, or 10%, are neutral on prices for the week ahead.  

Gold's outlook among market professionals did not mirror retail investors' bullish sentiment with over half expecting prices to consolidate next week. Of the 36 participants contacted, 17 responded, of which 10, or 59%, say prices should move lower. The remaining 6, or 35%, were bullish while 1 participant, 6%, was neutral as he expects gold to look for direction.

According to the analysts, the reason behind a predominantly bearish forecast is central-bank monetary policy, particularly from the U.S. Federal Reserve. The FOMC left a potential December rate hike on the table, and this continues to hurt gold, some participants argued.

“This week saw a decisive bearish trend change with gold turning south against USD, EUR and JPY as the US took a hawkish turn, the Bank of Japan didn’t go dovish as some had thought and speculation of how dovish the ECB may go has eased back a bit,” said Colin Cieszynski, senior market strategist at CMC Markets.

“This suggests to me that central banks may not be as stimulative going forward, which could support the value of paper money and drag on gold,” he explained.

Phil Streible, senior market strategist for Chicago-based RJO Futures, agreed that Fed policy remains the key for gold investors.

“Gold will probably move lower, it looks like the focus is specifically on the December meeting and traders started liquidating once we couldn’t get through 1,200,” he said.

However, despite the effects of central bank policies on the yellow metal, some analysts remained optimistic, noting that not only are there other factors that may play in the metal’s favor, but technicals may be indicating higher prices.  

“Gold prices are down nearly 4% on the year and a little bit less for the month. We tested the 50 DMA this morning at 1,141 and held essentially doing a 50% retracement of this month’s gains,” said Ralph Preston of Heritage West Financial..

“I don’t believe the Federal Reserve will raise rates in December and there are a plethora of geopolitical flashpoints around the globe that hold the potential to rally gold and oil,” he added.

Ole Hansen, head of commodity strategy at Saxo Bank, agreed that prices should move higher next week despite the potential of a “challenging” week with the release of U.S. nonfarm payrolls data Friday.

“On balance, I believe we have seen most of the long liquidation and we could see gold finish higher come next Friday,” he said.

On a technical basis, most analysts agreed that gold remains “vulnerable” on the downside around $1,125-$1,135 an ounce in the week ahead, but noted that the metal has already reached low levels that may push it higher.

“Next week could see consolidation,1133 (61 % retracement of rally 1080 - 1191) is the price point to look for a bottom to form,” said Gary Wagner, editor of and star of Kitco News’ Chart This.

“It is very oversold and has retraced down to its lower Bollinger Band from which a bounce or at the minimum support should be found,” added Ira Epstein, director of the Ira Epstein division of The Linn Group.

One participant thought it worthy to note silver’s recent price action, which he says is showing more strength than gold and may come to the yellow metal’s rescue.

“Since August, silver has gained 11% while gold is only up 3%,” said veteran commodity advisor Robert Tebbutt, adding that silver’s reaction to Wednesday’s Fed statement was much better than its counterpart.

“The ratio between silver and gold though will keep the gold market steadier and while I think the market over the next few days will be weaker on gold, it will not fall much because of its ties to the stronger silver market,” he said.

Kitco Gold Survey

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By Sarah Benali of Kitco News;
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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