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Wall St. Sees Gold Bounce; Main St. Sees More Weakness

(Kitco News) - Wall Street looks for gold to recover next week, while Main Street is bearish, according to the weekly Kitco News gold survey.

Kitco Gold Survey

Wall Street

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Bearish
Neutral

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Main Street

Bullish
Bearish
Neutral

Gold fell this week while U.S. Treasury yields and the dollar hit longtime highs, and the S&P 500 and Dow Jones Industrial Average hit record highs.

Fifteen traders and analysts took part in the Wall Street survey. Nine, or 60%, look for gold to bounce over the course of the next week. Three, or 20%, look for gold to be weaker, with the same number forecasting a sideways market.

Meanwhile, 766 Main Street participants submitted votes in an online survey. A total of 232 respondents, or 30%, said they were bullish for the week ahead, while 428, or 56%, were bearish. The neutral votes totaled 106, or 14%.

In last week’s survey, 50% of Wall Street respondents and 44% of Main Street participants looked for gold to rise this week. As of 11:15 a.m. EST, Comex December gold was down by 2% since last Friday’s close, trading at $1,184.50 an ounce.

Henry To, analyst at CB Capital Partners, is among those looking for a bounce.

“Gold’s decline this week was primarily driven by two forces,” To said. “First, as a reaction to a strong dollar, which itself was tied another rise in U.S. interest rates. However, I believe gold’s decline was disproportional to the rise in the U.S. dollar, likely because of low liquidity due to the Thanksgiving holiday week in the United States. This means any selling in gold last week disproportionately drove the price down.

“Second, there have been significant speculative flows into gold since the June 23 Brexit vote, much of which exited over the last several weeks.…Much of the post-Brexit speculative flows have left the markets, and gold should thus stabilize and recover next week.”

Sean Lusk, director of commercial hedging with Walsh Trading, figures some traders with short, or bearish, trades will be buying to book profits and even up positions ahead of month-end.

“We’re a little oversold,” he continued. “It’s a good buy point….Traders will realize long term, there is still a lot of uncertainty out there. This stock-market rally is probably getting overdone and this move (higher) in the dollar is probably getting overcooked too.”

Phillip Streible, senior market strategist with RJO Futures, is also bullish for the week ahead.

“Gold futures should rebound from excessive liquidation last week due to the dollar strength,” Streible said. “I expect the election rebalancing to conclude and the adjustment for sector rotation to take a breather.”

Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, figures gold could fall some more in the near term but then looks for a rebound.

“We may see another down week ahead, on dollar strength and a sudden change in sentiment,” Day said. “Looking ahead, however, there are reasons to be bullish.  The euro zone is heading for another crisis with the Italian referendum, which is likely to lead to the downfall of the pro-euro government and more pressure for a referendum on Europe itself; upcoming French elections, where anti-EU National Front is a front-runner; Brexit negotiations, which may be tendentious; and renewed negotiations on Greece’s debt. Certainly turmoil in Europe would help the dollar but would also aid gold, as we saw in the last euro crisis n 2012. And any interest-rate increases by the Fed are likely to be modest, while the rest of the world remains very easy.”

George Gero, managing director with RBC Wealth Management, cast a neutral vote for next week, looking for some recovery after first-notice day for the Comex December futures.

For now, he said, gold may be off of the radar of many asset allocators because of strong stocks and a muscular U.S. dollar. “The only ones interested now in gold are bargain hunters,” he added.

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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