Kitco News Gold Survey: Prices Seen Rising Rise On Trade-War Fears
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(Kitco News) - The biggest camps on Wall and Main Street look for gold to rise next week, with traders and analysts tending to cite economic uncertainty and U.S. dollar weakness as a result of President Donald’s Trump announcement of tariffs on steel and aluminum.
Twenty-one market professionals took part in the weekly Kitco News Wall Street survey. There were 14 votes, or 67%, calling for gold prices to rise over the next week. Another three voters, or 14%, looked for the metal to fall, while four, or 19%, look for a sideways market or are neutral.
Meanwhile, 541 voters took part in an online Main Street poll. A total of 272 voters, or 50%, said bullish. Another 189, or 35%, said lower, while 80, or 15%, were neutral.
For the trading week now winding down, there was not a majority viewpoint on either Wall Street or Main Street. Thirty-seven percent of Wall Street voters called for gold to rise and another 37% were neutral, while 47% of Main Street voters were bullish. Shortly before 11 a.m. EST, Comex April gold was down 0.6% for the week so far to $1,322.20 an ounce. But while on the defensive, the market snapped back from Thursday’s lows as stocks and the dollar slid amid news about tariffs.
Not counting the current week, Wall Street and Main Street are both 3-4 so far in 2018. This comes after Main Street had a winning percentage of 62% in 2017, while Wall Street forecasters were right 59% of the time.
Ken Morrison, editor of the newsletter Morrison on the Markets, is among the majority looking for gold to benefit from nervousness about an escalating trade war.
“The prospects of a trade war with most of the U.S. strongest trade partners and allies have suddenly changed the sentiment toward the dollar and thus gold,” Morrison said. “Thursday's big decline was accompanied by a shakeout of open interest, down 15,000 contracts on the day on above-average futures volume, signaling capitulation. Gold will likely have support until more details are known on the proposed tariffs, with a return to $1,335 possible. Will Canada and Mexico be exempted as they were in 2002? They account for 25% of all U.S. steel imports and [are] obviously important trade partners.”
Adam Button, currency analyst at Forexlive.com, looks for gold to be higher for similar reasons.
“The market is confused by Trump’s newly announced tariffs and the risk of more,” Button said. “Gold will be an increasingly attractive safe haven.”
Phil Flynn, senior market analyst with at Price Futures Group, commented that tariffs also could support gold due to the potential for inflation. Higher tariffs would raise the cost of a wide range of items, such as cars (metals for manufacturing) to soda (aluminum used for cans), he said.
“I am bullish on gold for next week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “On Thursday, the bottom of a $1,300 to $1,360 channel held with a bullish hammer candle, indicating a trading bounce may be starting. Also, the Trump steel tariff appears to be rattling market confidence and could send some people looking for havens like gold. Note that back in 2002, then-President Bush triggered a major downleg in the market by introducing a steel tariff.”
Richard Baker, editor of the Eureka Miner Report and who is also bullish, commented that one day’s worth of news can make a big difference in markets.
“Gold, after having a bad week against a broad set of assets and nearly breaching the $1,300 level, has a found safe-haven boost on global trade war and inflation fears…,” he said, calling for gold to rise. “The presidents surprising announcement on steel and aluminum tariffs yesterday brought the U.S. dollar index off its six-week high (90.91) and sent global equities reeling. Although the actual implementation of tariffs may be milder than anticipated, the yellow metal will no doubt remain in safe-haven mode for the near term.”
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, looks for the metal to gain ground on ideas that a sell-off after congressional testimony this week by Federal Reserve Chairman Jerome Powell was overdone.
“The Fed will remain cautious in raising rates, particularly given high levels of debt, including at the federal government level, where higher rates could significantly affect costs of debt,” Day said. “Slowly rising rates, when rates lag inflation, is positive for gold, as we saw in 2005-2007 and 1976 to 1980, for example.”
Meanwhile, Ralph Preston, principal with Heritage West Financial, was among those who see gold lower, commenting that the path of least resistance “appears to be down.”
Kevin Grady, president of Phoenix Futures and Options LLC, described himself as neutral but looking for volatility. He commented that the gains that occurred in gold after news of Trump’s tariffs were likely due to short-term speculative buying, and he doubts many big long-term bets have come into the market just yet.
“It [gold] is going to be moving all over the place,” he said. “It’s following the dollar. There’s a lot of turmoil in the markets.”
The largest bloc of Kitco News readers in the online poll were bullish, such as one who goes by Golden Goose, who commented: “The value of the major currencies are about to plummet as never before. Gold and silver especially will reach prices in fiat currencies which will make previous highs seem laughable.”
Here is a sampling of thoughts from Kitco Main Street voters on Kitco’s commenting Kitco Chat: