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Wall Street Split On Gold After Jobs Data; Main Street Bullish

(Kitco News) - A second straight stronger-than-forecast U.S. monthly jobs report has not completely spooked the gold market, with Wall Street participants in a weekly Kitco survey nearly evenly split on their outlook for prices next week. Main Street remains bullish.

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Main Street

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Eighteen analysts and traders took part in the Wall Street survey.  Despite a nonfarm payrolls report that boosted the U.S. dollar and pressured gold on Friday, the number of respondents in the bull and bear camps was the same -- seven each, or 39%. Another four, or 22%, see gold sideways next week.

 

Meanwhile, 1,230 Main Street participants submitted votes in online and Twitter surveys. A total of 822 respondents, or 67%, said they were bullish for the week ahead, while 222, or 18%, were bearish. The neutral votes totaled 186, or 15%.
 
For the trading week now winding down, 84% of the participants in the Wall Street poll and 69% of retail participants looked for gold to rise. They were all right as of early Friday morning, when Comex December gold was higher for the week. But then a U.S. jobs report came out showing a 255,000 gain in nonfarm payrolls for July, causing gold to reverse course. As of 11:32 a.m. EDT, Comex December gold was down by $13.10, or 1%, for the week to $1,344.40 an ounce.

That left Wall Street with a 9-3 record over the last dozen weeks, while Main Street was 7-5.

But while gold slid Friday, many do not look for the weakness to persist.

“The market is under a little pressure due to the nonfarm payrolls number,” said Kevin Grady, president of Phoenix Futures and Options LLC. “If you look again at what’s going on, I think the chances of raising (U.S. interest) rates in the near term are miniscule. The weak longs are getting out in gold. But under the market, I think you are going to see value investors…coming in to buy it.”

Echoed Peter Hug, global trading director with Kitco Metals: “I think the employment number is irrelevant to a Fed policy decision for September. That said, I expect the market higher basis today’s close next week.”   

Others, however, look for follow-through to the downside after the jobs data.

“Divergence of central-banker policies from the future direction of the U.S. Federal Reserve is highlighted by this morning's much-better-than expected NFP report,” said Richard Baker, editor of the Eureka Miner Report. “The latter increases the chances for a U.S. interest-rate hike later this year, perhaps even September. The Bank of Japan moved in the opposite direction last Friday with more (albeit less-than-hoped-for) monetary accommodation followed this week by the Bank of England's ‘Brexit Bazooka’ -- a cut in interest rates and resumption of quantitative easing.

“These developments will prolong an era of strong U.S. dollar and likely cap gold prices this year below $1,400 per ounce. On the other hand, negative interest rates in Japan, Europe and elsewhere put in a substantial floor for gold around $1,300 per ounce.”
 
Sean Lusk, director of commercial hedging with Walsh Trading, anticipates “a little back and fill on the charts,” assuming gold remains weaker into Friday’s close.

“I’d be looking for a move lower in the next week. At least we start lower, see the data and go from there,” Lusk said. “We’re getting a rebound in the dollar, and I look for a continuation next week, at least the first couple of days….I look for longs cutting positions and taking profits.”

Phil Flynn, senior market analyst with at Price Futures Group, looks for gold to ultimately finish sideways next week, anticipating a weaker start followed by a recovery.

“The big jobs number is going to give us some headwinds earlier in the week,” he said. “So we could start the week off a little bit lower in gold. But then I think we’re going to end the week strong because I think people are going to realize that despite the strong jobs number, the Fed is still going to have a difficult time raising rates any time soon since there are still a lot of concerns about the global economy.”

By Allen Sykora of Kitco News; asykora@kitco.com

 

 

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 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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