Wall St., Main St. Look For Gold To Extend Recent Gains
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(Kitco News) - Wall Street and Main Street remain bullish on gold for next week, looking for the metal to extend recent gains that have been attributed largely to geopolitical worries and weakness in the U.S. dollar, according to the results of Kitco’s weekly gold survey.
Gold hit its highest price in a year on Friday as the U.S. dollar tumbled to its lowest level in more than two years.
Sixteen market professionals took part in a Kitco News Wall Street survey. Ten voters, or 63%, see gold prices rising by the end of next week. Four, or 25%, call for lower prices, while two, or 13%, see gold trading sideways.
The Kitco online Main Street poll resulted in 869 votes, with 506 participants, or 58%, calling for gold to climb over the next week. Another 277 voters, or 32%, said that gold will fall, while 86, or 10%, were neutral.
In last Friday's survey for the current week, 56% of Wall Street voters and 58% of Main Street called for gold to rise this week. As of 11:19 a.m. EDT, they were right, with Comex December gold up 1.5% for the week to $1,350.90 an ounce.
So far in 2017, but not counting the current week, Wall Street forecasters collectively were right 22 of 34 times for a winning percentage of 65%. Main Street was right 21 of 33 times for 64%.
“Gold is breaking out to the upside,” said Phil Flynn, who is part of the majority forecasting more gains. “There are a lot of reasons. A lot of people point to the increased tensions with North Korea, and I do think that has added to the gold situation.”
He also cited a recent divergence in rhetoric from central bankers, with European Central Bank President Mario Draghi saying quantitative easing will continue for now but perhaps abate in the future, while Federal Reserve officials are now sounding more dovish than at one time. Further, Flynn said, natural disasters such as hurricanes in the southern U.S. and wildfires in the west could make the Federal Reserve less aggressive on interest-rate hikes. “That should give gold a free rein next week,” Flynn said.
Peter Hug, global trading director with Kitco Metals, also looks for higher prices, although he said this could hinge on Hurricane Irma, which is approaching Florida.
“Right now, it’s a bet on Irma,” Hug said. “If it hits directly, gold goes up. If it skirts the coast, I see some profit-taking next week, as the dollar should bounce. Tracking shows a direct hit so think up in gold, but I hope I am wrong [about potential hurricane damage].”
Adam Button, currency analyst with Forexlive.com, also looks for gold to keep rising. “It’s been on a great run and it might get to $1,365 in the week ahead, but I don’t see the momentum just yet to break the 2016 highs,” he commented.
Richard Baker, editor of the Eureka Miner Report, looks for gold to make another run at $1,360 an ounce.
“The drivers for gold this week are dramatic U.S. dollar weakness, uncertainty surrounding the impact of multiple super storms on the U.S economy, and residual global uneasiness about the North Korean missile threat,” he said. “Other factors favorable to the yellow metal are seasonality and strength relative to falling U.S. equities.”
Some, however, figure the metal is due for some kind of profit-taking pullback.
“I just find it a bit overbought and due for a short-term pullback,” said Colin Cieszynski, chief market analyst in Canada for CMC Markets.
Ken Morrison, editor of the newsletter Morrison on the Markets, expressed a similar view.
“It's time for the bulls to be taking some money off the table in gold,” he said. “Gold reached its near-term target this week….It's had an ideal tailwind with the weak dollar/declining Treasury yields, but those markets are now into extreme sentiment readings (dollar index 10% bullish and euro 93% bullish). An additional indication of exuberance is gold's open interest nearing end-September 2016 levels, when gold began an $85 decline in two weeks before finding support. Any daily close below the prior day's close will trigger a pullback. Gold will be lower a week from now.”