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Wall Street, Main Street Split On Whether Gold Ends Drought

(Kitco News) - Wall Street and Main Street are mixed on whether gold can finally rebound next week, based on the weekly Kitco News gold survey.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

Sixteen analysts took part in a Wall Street survey. The biggest camp – seven voters, or 44% -- see gold prices rising. Six, or 38%, expect the slide to continue, while three, or 19%, look for a sideways market.

Meanwhile, 627 participants took part in the Main Street survey. A total of 204, or 33%, called for gold to bounce, while 349, or 56%, see lower prices. The remaining 74, or 12%, were neutral.

Survey respondents were thrown a curve ball this week by the U.S. Federal Open Market Committee, which hiked interest rates by 25 basis points. In last week’s survey, 58% of Wall Street participants and 55% of Main Street called for gold to rise. Analysts cited an expectation that once this week’s widely expected rate hike was out of the way, gold could begin to recover from the recent freefall…assuming the Fed wasn’t overly hawkish.

Fed officials were in fact more hawkish than markets expected, with the so-called dot-plot suggesting three more rate hikes in 2017, rather than the previous two. Against this backdrop, as of 11:16 a.m. EST, Comex February gold was down by $28.10 for the week to $1,133.80 an ounce.

Still, going back to mid-May, Wall Street and Main Street alike have been right more often than not. During that time, Wall Street forecast correctly 21 times and was wrong nine times, a winning percentage of 70%. Main Street had an 18-12 mark during this period for 60%.

“The pullback in gold has filled a lot of chart gaps dating back to February, but I'm going strictly with extreme in expecting gold rallies into year end from the $1,125-30 area,” said Ken Morrison, editor of the newsletter Morrison on the Markets. “Bullish sentiment in gold at Thursday's close was 4%, contrasting with 96% bullish sentiment for the dollar index, the latter a level not seen since March 2015. We've probably not seen enough new short interest in gold to stage more than a $15-$20 rally by year end, but all rallies begin with short covering.”

George Gero, managing director with RBC Wealth Management, and Ira Epstein, director of the Ira Epstein division of Linn & Associates, both look for gold to benefit from short covering. Kitco technical analyst Jim Wyckoff also looks for a bounce, calling the market “oversold” from a technical standpoint.

“The dollar index is at an 18-year high, so it is getting a little too high,” said Phil Flynn, senior market analyst with at Price Futures Group. “So we should get a little bit of a rebound (in gold) next week.”

Meanwhile, before he buys, VR Gold Letter editor Mark Leibovit wants to see signals on the technical charts that the market has bottomed.

“Year-end panic sell-off will lead to a huge 2017 rally,” he said. “Have we seen the lows? Technical measurements suggest we could see $1,100 or below, so I'm going to buy when I generate technical confirmation of a bottom.”

Bob Haberkorn, senior commodities brokers with RJO Futures, looks for the yellow metal to continue its decline on the increased expectations for Fed tightening and renewed confidence in recently strong equities. “There is some short covering (in gold) now, but that’s all there is,” he said.

Colin Cieszynski, chief market analyst in Canada for CMC Markets, is neutral on gold for next week.

“The USD (dollar) rally is way overdone, gold is deeply depressed, oversold and overdue for a trading bounce,” he said. “Still with money still flowing into USD and U.S. stocks, I think gold is more likely to pause near current levels and start base building. I think it would take some kind of rare, low-probability out-of-left-field event -- like Greece unravelling or U.S. electors rejecting Trump or a big change at the Bank of Japan -- to knock gold out of its current doldrums.”

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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