Wall St. Bullish, Main St. Leans Bearish On Gold Next Week
(Kitco News) - Wall Street and Main Street have flip-flopped their short-term views on gold for next week, when the Federal Open Market Committee is expected to hike U.S. interest rates.
Wall Street professionals, who last Friday were collectively bearish for the current trading week, now look for gold to rise. Several suggested that a Fed rate hike was already factored into prices during a recent selloff, thus a recovery can begin since the so-called bad news is out of the way. The view is not unanimous, of course, with others citing technical damage to the precious metal and potential for more U.S. dollar gains on any Fed hike.
Nineteen market professionals took part in a weekly Wall Street survey. Eleven voters, or 58%, see gold prices rising by next Friday. Six, or 32%, said lower, while two voters, or 11%, are neutral.
Meanwhile, a total of 1,646 Kitco readers submitted votes in an online Main Street poll. Whereas this group was bullish last week, now the largest camp – 765 voters, or 46% -- is bearish. Another 644, or 39%, say that gold will rise, while 237, or 14%, were neutral.
In last Friday’s survey for prices during the current week, 57% of Wall Street voters saw gold falling, while 58% of Main Street were bullish. As of 11:07 a.m. EST, Wall Street was correct, as Comex April gold was 2.1% lower for the week at $1,200.80 an ounce. The contract fell as far as $1,194.50 early Friday, its weakest level since late January.
So far in 2017 but not counting the current week, Wall Street and Main Street both had called the direction of gold correctly five of eight times for a winning percentage of 63%. Going back to mid-May, Wall Street forecasted correctly 26 times and was wrong 14 times, a winning percentage of 66%. Main Street had a 25-15 mark during this period for 63%.
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, looks for gold to rally again next week. Last Friday, he was among those who had expected gold would fall this week.
“Gold’s decline is overdone, so I think gold will move up next week,” Day said. “We have the Dutch election, plus the Fed. Once the Fed gets its one-quarter-point hike over with, the market will rally. After all, interest rates will still lag inflation, and likely continue to do so, and that’s what is important for gold.”
Phil Flynn, senior market analyst with at Price Futures Group, looks for gold to recover despite a “blockbuster” U.S. jobs report Friday morning and expectations for a Fed rate hike.
“Now that we have the news…we’ll probably see a bit of a recovery later in the week,” Flynn said. “We think a lot of the bad downside news has been priced in and we’ll edge higher.”
Kitco senior technical analyst Jim Wyckoff also said higher since the market “is short-term oversold and due for a corrective bounce.”
Meanwhile, Kevin Grady, president of Phoenix Futures and Options LLC, is among those who looks for gold to ease some more.
“It looks like this rate hike is going to be a lock,” he said, commenting that some traders have been establishing bearish positions lately. At some point, Grady continued, gold will bounce. But for now, “the headwind for gold next week is going to be tough.”
Colin Cieszynski, chief market analyst in Canada for CMC Markets, also said he is bearish on gold for next week.
“A lot of technical damage has been done to gold this week with it falling under its 50-day average, then $1,200,” he said. “Traders are leaving defensive havens with JPY [the Japanese yen] also breaking down, and political risk could ease if Wilders doesn't win the Netherlands election (he’s currently running second). On the other hand, if he pulls out a surprise win, gold could pop.
“The USD may continue to climb with expectations of additional rate hikes in June and September growing, which could keep the pressure on gold. Next potential support for gold at a Fibonacci cluster between $1,175 and $1,185.”
Meanwhile, Kitco Main Street voters shared their thoughts on Kitco’s new commenting feature – Kitco Chat -- this week. Here is a small sampling of e-mail comments from some of the voters:
“My take is it's going 1170 then to 1,300 since the dollar is going to go lower later this year and they will not be able to sustain interest rates higher,” said one Kitco user, looking for a bounce. “This is a great buying opportunity. $1,250-$1,375 this year.”
Another was not so optimistic, at least for the short term, commenting: “1080 or a little lower.”