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Wall, Main Street See Gold Building On Post-Fed Rally -- Survey

(Kitco News) - Wall Street and Main Street both look for gold to keep building on this week’s gains that occurred after the Federal Open Market Committee left U.S. interest rates unchanged.

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Main Street

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Twenty analysts and traders took part in a weekly Wall Street survey. Twelve participants, or 60%, look for gold to be higher next week. Four each, or 20%, see prices either lower or sideways.

Meanwhile, 809 Main Street participants submitted votes in an online survey. A total of 596 respondents, or 74%, said they were bullish for the week ahead, while 150, or 19%, were bearish. The neutral votes totaled 63, or 8%.

For the trading week now winding down, the largest share of Wall Street and Main Street participants looked for gold to rise. As of 12:11 p.m. EDT, Comex December gold was up by 2.4% for the week to date to $1,341.60 an ounce.

Phil Flynn, senior market analyst with Price Futures Group, looks for more price gains since the Federal Reserve left interest rates steady this week and does not appear to be moving toward an aggressive tightening cycle.

“The perception – even if we raise rates in December – is it won’t have that much of an impact on gold because it looks like interest rates are going to be lower for a longer period of time,” Flynn said. “We feel that way because if you look at the odds of an interest-rate increase in December (based on the Federal funds futures), they’re hanging around 60%....If you look at the back end of the curve, the odds of a subsequent increase have gone down. So there is a sense that if the Fed acts in December, it is not going to lead to a succession of interest-rate increases, and that’s going to keep support under gold.”

Charlie Nedoss, senior market strategist with LaSalle Futures Group, cited technical-chart strength.

“The 100-day (moving average) has been a big support level,” he said. “We tested it earlier this week and rocketed out of it.”

Kevin Grady, president of Phoenix Futures and Options LLC, looks for the market to be mostly sideways during a week with an options expiration and the potential for some profit-taking. He pointed out that open interest, the number of open positions at the end of the business day, rose by some 5,000 contracts on Thursday.

“We are adding a lot of open interest after this (steady) Fed announcement, so you might get a little bit of a pullback,” he said. “But I don’t think it’s going to be a deep discount.”

Meanwhile, Ralph Preston, principal with Heritage West Financial, suggested that the rally so far this year has petered out.

“The onus is now on the bulls to prove (they) can drive this market higher on a monthly closing basis,” he said. “Being that the market is channeling and has not been able initiate a new monthly closing high above $1,362, I therefore am on guard for the market to test monthly support at $1,200 before year’s end.”

Ken Morrison, editor of the newsletter Morrison on the Markets, also sees potential headwinds.

“The rush to extend long positions in gold following the FOMC's no-rate-hike-for-now decision has run into resistance at $1,348 at the downtrend line extending from the early August and September highs,” he said in an e-mail. “That the dollar remains in an uptrend following a brief pullback will remain a headwind for gold, especially considering the odds of a December rate increase is now at 50%. In the near term, gold pulls back to $1,330 to digest the week’s gain but in the next 2-4 weeks, I still view the downside risk of gold trading to $1,300 is more likely than a rally to $1,375 (the August high).”

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

 

 

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