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Wall St. Still Bearish On Gold; Main St. Flips To Bullish Tilt

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(Kitco News) - Wall Street traders and analysts look for gold’s suffering to continue next week, after a strong U.S. jobs report Friday, with the market also described as technically weak on the charts.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

Meanwhile, Main Street has flipped from bearish to the largest bloc of voters being bullish, looking for the yellow metal to finally get a reprieve.

As of late Friday morning, gold futures were headed for their fifth straight lower weekly close. The metal has been hurt by rising bond yields lately in response to perceptions that central banks globally have become more hawkish. Gold then hit its weakest level since March on Friday in the aftermath of a stronger-than-forecast U.S. employment report showing that 222,000 new jobs were created last month.

“This jobs report should propel the dollar higher, therefore the metals will be under assault, particularly at the start of the week,” said Sean Lusk, director of commercial hedging Walsh Trading.

Nineteen traders and analysts took part in a Kitco News Wall Street survey. Thirteen voters, or 68%, see gold prices falling by the end of next week. Four voters, or 21%, were bullish, while the remaining two voters, or 11%, looked for prices to be sideways.

Meanwhile, 814 votes were cast in an online Main Street poll. A total of 386 voters, or 47%, called for gold to bounce over the next week. Another 324 online voters, or 40%, said that gold will fall, while 104, or 13%, were neutral.

In last Friday's survey for the current week, 61% of Wall Street voters and 68% of Main Street expected gold prices to decline this week. Around 11 a.m. EDT, they were right, as Comex August gold was down 2.1% the week to $1,215.80 an ounce.

So far in 2017 but not counting the current week, Wall Street forecasters collectively were right 16 of 25 times for a winning percentage of 64%. Main Street was right 14 of 24 times for 58%.

“I am bearish on gold for next week,” said Colin Cieszynski, chief market analyst in Canada for CMC Markets. “Technically, gold still looks weak. It recently broke its 200-day average and continues to trend downward with bearish momentum increasing. JPY [Japanese yen] is decreasing as well, so it looks like traders are still pulling capital out of defensive havens. In the near term, a retest of the March low near $1,200 can’t be ruled out.”

Jasper Lawler, senior market analyst at London Capital Group is also bearish on gold for now.

“I think the trend is broken and prices are headed lower,” Lawler said. “We can reassess the trend again at $1,200.”

Kevin Grady, president of Phoenix Futures and Options LLC, also anticipates gold falling toward $1,200 an ounce.

“We are starting to see some shorts [bearish traders] enter the market,” he said, citing a rising number of open positions in gold futures during recent sessions as the price was falling. An expected unwinding of the Federal Reserve’s balance sheet may also result in pressure, he added.

Ralph Preston, principal with Heritage West Financial, commented that the market has broken below $1,250 support, thus he is looking for a move down to $1,180 in the weeks ahead.

“Considering the moving averages for gold are rolling over and next week is the index roll for the August contract, I expect gold to be lower in the week ahead,” said Ken Morrison, editor of the newsletter Morrison on the Markets. “There's a gap in the August chart at $1,176 from Jan. 4 that may get filled before the August contract expires. That may be too much of an aggressive target for the next week, but I expect that's where gold is headed soon.”

Phil Flynn, senior market analyst with at Price Futures Group, is among those who look for gold to bounce. He noted that the metal has been hurt lately by expectations for tighter monetary policy globally, but looks for this to abate.

“We think that next week, we [gold prices] should rebound a little bit mainly because we believe some of the optimism for the Fed to tighten on the strong jobs report will go away….We also don’t think Europe is as hawkish as people believe,” Flynn said.

Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA, suggested gold will be range-bound although perhaps with more upside potential than down. In particular, he looks for increased physical demand early next week after the recent price decline.

Here is a sampling of thoughts from Kitco Main Street voters on Kitco’s commenting Kitco Chat:

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.