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Main St. Speaks Out & Remains Bearish on Gold; Wall St. Bullish As Market Remains ‘Oversold’

(Kitco News) - As gold heads towards its fourth consecutive weekly negative close, retail investors remain bearish on the yellow metal for a second consecutive week. Meanwhile, market professionals see upside potential for an “oversold” gold market as they expect a technical bounce to occur in the coming trading sessions, according to Kitco’s Wall St. vs. Main St. Gold Survey.

Earlier in the week, Comex December gold futures hit an intraday low last seen five and half years ago. The metal hit what technical analysts now call the double bottom of $1,073 an ounce Thursday, a level last seen in late July. The downward pressure on gold, some analysts said, is mainly driven by expectations of a U.S. interest rate hike at the central bank’s December meeting. Dollar strength is also putting downward pressure on the yellow metal; however, gold saw some relief Friday as negative U.S. economic data was released. Comex December gold was last quoted down 60 cents at $1,080.40 an ounce.

There were 400 retail investors who participated in Kitco’s online survey this week, and the sentiment has remained negative on gold. The majority expect gold prices to make a move lower in the short term with 223 voters, or 56%, making bearish calls on the metal. The remaining 125 participants, or 31%, see higher prices, while 52 voters, or 13%, are neutral on prices for the week ahead.  

Vivek Khanna, one of the participants, told Kitco News that the main reason gold is under pressure is because it remains “overpriced” relative to its true cost of production, which he put at $700 an ounce.

“This is not sustainable in the long run and especially for those of us who want to see gold continue to be a store of value for centuries to come,” he said in an email response Wednesday.

Most market professionals didn’t mirror Khanna’s negative sentiment, expecting a technical bounce in gold in the coming week. Of the 37 participants contacted, 14 responded, of which 8, or 57%, say prices should move up. The remaining 4, or 29%, are bearish while 2 participants, 14%, are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Some analysts reiterated that the market is extremely oversold and noted that the market has “overreacted” to concerns of a Fed rate hike.

“Having sold off in recent days, at one point to $1075 an ounce, the lowest level since February 2010, we expect at the very least a technical rebound as some traders and institutional speculators wade back into the market,” said Jeffrey Nichols, senior economic advisor for Rosland Capital.

Richard Baker, editor of the Eureka Miner Report, agreed in that he expects gold to see relief next week on more bargain hunting. “Although Comex gold dipped to $1,073 per ounce yesterday, the yellow metal has fared better on the week than oil, copper or silver -- all touching new lows this morning,” he added.

Colin Cieszynski, senior market strategist at CMC markets, noted that prospects of a U.S. rate hike in December have been “fully priced” into the market with $100 looming as resistance on the U.S. dollar index. “Gold successfully retesting $1,070 suggests to me that it’s getting washed out here with limited downside in USD terms for a while,” he added.

The bears were convinced the metal would move lower as it would be hard for the metal to come back from the chart damage seen this week.

“Sideways to lower as fresh chart damage inflicted this week” was Kitco’s senior technical analyst Jim Wyckoff’s call for the gold price in the week ahead.

Veteran commodity advisor Robert Tebbutt shared Wyckoff’s outlook, noting that he expects this downward pressure in gold to persist into December once the Fed meeting is concluded.

“In my opinion, the gold market will be either weak or at least unable to rise for the next few weeks,” he said.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

By Sarah Benali of Kitco News; sbenali@kitco.com
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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