Kitco News Gold Survey: Post-Fed Rally Expected To Continue
(Kitco News) - Participants in the weekly Kitco News gold survey look for the yellow metal to extend gains that occurred after the Federal Open Market Committee (FOMC) hiked U.S. interest rates this week, but did not signal any pick-up in hawkishness going forward.
Gold hit a multi-month low on Tuesday before rallying. However, observers say this has been the trend in recent Decembers – weakness as traders factor in a U.S. rate hike, then a rally once it’s out of the way. This is often referred to as a “sell-the-rumor, buy-the-fact” rally.
Nineteen market professionals took part in the Wall Street survey. Thirteen, or 68%, called for gold to rise. There were four votes or 21%, saying gold would fall, with the remaining two votes, or 11%, neutral or calling for a sideways market.
Meanwhile, 1,055 votes were cast in an online Main Street poll, the most since August. A total of 598 voters, or 57%, looked for gold to rise in the next week. Another 341, or 32%, said lower, while 116, or 11%, were neutral.
For the trading week now winding down, 53% of Wall Street voters were bearish, while the largest camp of Main Street voters (47%) was bullish. Around 11:06 a.m. EST, Comex February gold was up by 0.7% for the week so far to $1,257.30 an ounce.
So far in 2017, but not counting the current week, Main Street was right 28 of 47 times for a winning percentage of 60%.Wall Street forecasters collectively were right 28 of 48 times for 58%.
“Gold typically rallies after a Fed rate hike, having typically declined into it,” said Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, who is looking for an uptick in prices. “Gold certainly fell over last few weeks in anticipation of the widely anticipated rate hike. The hike was no surprise while the commentary was moderately ‘gold friendly,’ so we expect gold to make up much if not all of the recent decline in coming weeks.”
Kevin Grady, president of Phoenix Futures and Options, looks for gold to test its 200-day moving average, which was around $1,276 as he spoke. This was a key technical level that triggered additional selling when the market previously broke below it, he said.
“I’m bullish for next week,” Grady said. “You haven’t heard me say that in a long time. The interest-rate hike was looming over this market for a while. We had a lot of shorts entering in over the last two weeks, and a lot of longs exiting. That news has [already] hit the market. Gold has found some support around the $1,240s.”
Charlie Nedoss, senior market strategist with LaSalle Futures Group, said gold is “acting well” on the technical charts, thus has potential to test its 20-day moving average around $1,273.50. “To really get the ball rolling, if we can get a close above the 200-day, we can come back and test the upper end of the range.”
Phil Flynn, senior analyst with Price Futures Group, pointed out that the so-called Fed dot-plot continues to hint at three rate hikes next year, when some market participants had thought hawkishness might pick up. As a result, the dollar has fallen back, underpinning gold, Flynn says.
Gold may also benefit from the launch of Bitcoin futures on CME Group, he added. If the crypotocurrency remains as strong as it has been, he continued, “gold is probably pretty fairly valued at these levels and should move higher,” Flynn said.
Mark Leibovit, editor of the VR Gold Letter, looks for gains as well, but commented that all bets are off if support around this week’s lows fail.
“Market posted a short-term upward reversal pattern,” he said. “Giving the upside the benefit of the doubt. But, but, if we take out this week's lows, I'm out! If that happens, we could see $1,200 or lower.”
Meanwhile, Ralph Preston said he is “looking for a move down to $1,225.” Fawad Razaqzada, technical analyst at Forex.com, also said that he is bearish on gold next week since he thinks the U.S. dollar will rally into the start of 2018.
Ken Morrison, editor of the newsletter Morrison on the Markets, is among those neutral on gold in the short-term neutral.
“Gold has reached more stable footing this week as the exodus of market participants, as evidenced by the 20% decline in futures open interest, has also stabilized,” he said. “With open interest at 450,000 contracts, maybe it's just the 'hard-core' that remains. The path of least resistance is probably still to the downside with next solid support at $1,220, but near term I'm neutral on gold, expecting a trading range $1,240-$1,270 next week.”
Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA, also looks for gold to be in a range for a while, listing roughly $1,250 on the downside and the $1,285-1,295 area on the upside.
“Overall, it looks like it will trade in a range until year-end, unless we get some crazy news,” Nabavi said.