Wall, Main Street Think Alike; 63% See Rising GoldBy Allen Sykora of Kitco News
Friday October 21, 2016 11:32
(Kitco News) - Retail investors and Wall Street participants were carbon copies of one another in the weekly Kitco News gold survey, with the same percentage – 63% -- looking for gold to rise over the next week.
Likewise, the same percentage – 25% -- looks for gold to fall. Twelve percent of the Main Street participants look for a sideways market, while the percentage from Wall Street is 13% -- with the one-percentage-point variation due to the effect of rounding off numbers.
Sixteen analysts and traders took part this week’s Wall Street poll. Ten participants called for gold to climb by the close next week. Four voters predicted gold will fall, while two look for the market to be sideways.
Meanwhile, 758 Main Street participants submitted votes in an online survey. A total of 480 respondents said they were bullish for the week ahead, while 189 were bearish. The neutral votes totaled 89.
Last week, 53% of Wall Street participants expected gold to rise, and 54% of Main Street participants were bullish on price direction from Oct. 14 to Friday’s close. As of 11:04 a.m. EDT, they were right. Comex December gold was up by $11.80 from last Friday’s close to $1,267.30 an ounce.
Both camps have had good luck at prognostication over the last several months. Since mid-May, the largest Wall Street voting camp forecast correctly 17 times and was wrong five times, a winning percentage of 77%. Main Street – which voted higher every single time – had a 14-8 mark during this period for 64%.
Some were upbeat on gold at least in part due the metal’s ability to hold up in the face of recent U.S. dollar strength. More often than not, gold moves inversely to the dollar.
“Even with a higher dollar, we (gold prices) are hanging in there,” said Sean Lusk, director of commercial hedging with Walsh Trading. “It seems to me nobody wants to be short (bearish) given what’s going on with the global economy and what else.”
Added Daniel Pavilonis, senior commodities broker with RJO Futures: “The dollar has been moving higher and gold has not been breaking down. That’s a sign of (gold) strength.”
Colin Cieszynski, chief market analyst in Canada for CMC Markets, is also bullish on gold for next week.
“Gold appears to have turned the corner this week,” he said. “Meanwhile, USD is looking technically exhausted. We’re heading into what is usually a stronger period for gold seasonally and with the (U.S.) election less than three weeks away, we could see political risk swings. “
Kevin Grady, president of Phoenix Futures and Options LLC, sees potential for a short-covering bounce. He pointed out exchange-traded-fund holdings of gold have held up lately, which suggests investors are staying the course despite gold’s retreat earlier this month. Meanwhile, the recent liquidation of long (bullish) futures positions was accompanied by some fresh shorts (bearish trades), he commented. Short covering is when these traders buy to offset or exit those positions.
“Right now, I don’t see anything that says gold should be selling off,” he continued. “So the fact that a lot of shorts have entered the market is going to give us the potential for a little pop.”
Phil Flynn, senior market analyst with at Price Futures Group, sees a sideways market. Recent U.S. dollar strength could be a headwind, but offsetting this, autumn is the time of year when the market tends to see increased physical buying ahead of festivals in the key consuming nation of India and ahead of the December holiday season in the U.S., he said.
“I think the bearish and bullish forces are going to be offset somewhat next week, so I’m really looking for kind of a sideways consolidation week.”