Wall, Main St. Split On Price Direction
(Kitco News) - Sentiment in the gold market is mixed as Wall Street is bearish while Main Street is bullish on the short-term outlook for gold prices, based on the Kitco News weekly gold survey.
The market professionals who took part in the Wall Street survey look for further gold declines on signs of peace on the Korean Peninsula, which would mean less safe-haven buying of the precious metal. They also point to recent U.S. dollar strength and technical-chart factors.
The bulls, however, say it’s too early to assume peace, plus they look for the metal to bounce from chart support.
Twenty-three market professionals took part in the survey. Twelve respondents, or 52%, called for gold prices to fall over the next week. Another five voters, or 22%, looked for gold to rise, while six, or 26%, called for a sideways market.
Meanwhile, 903 voters responded in an online Main Street survey. A total of 522 respondents, or 58%, predicted that gold prices would be higher in a week. Another 295 voters, or 33%, said gold will fall, while 86, or 10%, see a sideways market.
For the trading week now winding down, 44% of Wall Street voters and 68% of Main Street – the largest bloc of voters for each poll -- were bullish. Just before 11 a.m. EDT, Comex June gold was down 1.1% for the week so far to $1,323.40 an ounce.
Kevin Grady, president of Phoenix Futures and Options, looks for gold to ease as some bullish traders liquidate positions. He suggested the metal could test the recent lows near $1,309 last month.
“The news coming out of Korea is very positive,” Grady said. “The dollar is looking strong with interest rates [in the U.S. rising].”
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management,
also sees short-term weakness in gold.
“The dollar looks to have turned, as least temporarily, but could have more strength over the next week or more, and the dollar seems to be the largest driver of gold at present,” Day said. “This is only a temporary view, since we believe the dollar is fundamentally overvalued, particularly against the Asian currencies, and other factors are favorable towards gold.”
Ken Morrison, editor of the newsletter Morrison on the Markets, commented that rising short-term interest rates and the dollar's strength could mean gold tests important support around $1,310 that has held every pullback since the January breakout.
“In the near term, there may be enough global uncertainty (trade tariffs and the U.S. decision on the Iran agreement) to enable the market to hold above $1,310, but gold is on shaky ground where a break of the support opens downside risk to $1,280,” Morrison said. “I expect gold trades to $1,300 sometime over the next week.”
Ralph Preston, principal with Heritage West Financial, agrees. “I’m looking for a test of $1,300 on a strengthening dollar,” he added.
Meanwhile, Charlie Nedoss, senior market strategist with LaSalle Futures Group, looks for gold to bounce as the 200-day moving average holds.
“We came close to the 200-day,” Nedoss said. “We are at the low end of the range. I look for the dollar to pull back.”
Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA, looks for gold to bounce but stay within the same range.
“The geopolitical situation will continue to be nervous,” he said, expressing doubt that the hoped-for Korean resolution will come about and also citing ongoing worries about the Middle East.
Colin Cieszynski, chief market strategist at SIA Wealth Management, is one of the respondents who are neutral.
“Gold is holding up surprisingly well considering the headwinds of a rising U.S. dollar (which is breaking out of a base) and easing political risks in the Korean Peninsula,” he said. “On the other hand, support for gold could come from increasing inflation (energy prices rising and demand for commodities growing in a strong world economic environment) and ongoing political risk in the Middle East.”