Kitco News Gold Survey: Wall Street Split On Price Direction
Bulls say gold looks oversold after this week’s decline, plus they cite ongoing geopolitical uncertainty and a view that the U.S. dollar will give up some of its strength. Bears cite an expectation that geopolitical tensions will ease and say a decline in open interest, which is the number of open futures positions, at a time when prices fell, is a sign of bulls exiting the market.
Seventeen market professionals took part in the weekly survey. Six respondents, or 35%, called for gold prices to rise over the next week. Another seven voters, or 41%, looked for gold to fall, while four, or 24%, see a sideways market.
With the poll coming out a day early ahead of the long Easter weekend, Kitco News opted not to do a Main Street online survey.
For the trading week now winding down, Wall Street and Main Street majorities both expected gold to maintain the previous week’s rally. Instead, gold fell back. As of 11:20 a.m. EDT, Comex June gold was down 1.9% for the week so far to $1,327.50 an ounce.
Phil Flynn, senior market analyst with at Price Futures Group, said he looks for a recovery in gold next week although not a massive move higher.
“The market was oversold a little bit,” he said. “Recent strength in the dollar should abate next week….We’ll see some buying come back in gold looking for an alternative to stock-market volatility.”
George Gero, managing director with RBC Wealth Management, also looks for gold to recover.
“I think we will start looking at geopolitical headlines plus mid-term elections,” Gero said. “There will be talks on tariffs. There will be enough headlines that will support gold next week.”
Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA, said much of this week’s downward move can probably be chalked up to month- and quarter-end position squaring.
“With uncertainties going on in the geopolitical world, I would not be surprised to see gold go back up again, but continuing in the same range,” he said.
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, also said higher.
“The recent gold weakness, due to dollar strength, is a response to improved U.S. economic news,” he said. “This effect will be short-lived, in our view, and gold will start to respond to weak equities, particularly the U.S. tech sector. Investors will be looking for a hedge on their equities, and the best hedge is gold.”
Sean Lusk, director of commercial hedging with Walsh Trading, also looks for a bounce, commenting that “you’d rather be long [bullish] longer term than short [bearish], especially if the trade starts to price in reflation.”
Meanwhile, ForexLive managing director Adam Button looks for the recent slide in gold to continue.
“Technically, gold rejected the top of the recent range and fundamentally, [and] tensions around North Korea have diminished,” he said.
Ken Morrison, editor of the newsletter Morrison on the Markets, said gold could retest the $1,310-an-ounce level.
“June gold quickly rejected the rally to $1,360 resistance, an extension of the respective January and February highs,” he said. “The corresponding pullback toward support at $1,320 also saw open interest decline over 10% since last Friday. In part, the sharp decline in open interest is due to participants exiting the April contract prior to first-notice day, but it also indicates net long liquidation. I expect gold needs a solid re-test of support at $1,310 in the week ahead.”
Charlie Nedoss, senior market strategist with LaSalle Futures Group, also pointed to the decline in open positions in his call for prices to ease some more. He also noted that gold has fallen below its 20-day moving average.
“It looks like we are taking some longs out of the market,” he said, later adding: “The technicals look weak on gold.”
Peter Hug, global trading director of Kitco Metals, described himself as neutral for now. “It could break either way [and] really will depend on ‘new’ news.”