Wall. St., Main St. See Higher Gold Prices
The metal was range-bound for much of this week before tumbling with other commodities on Friday amid U.S. dollar strength as U.S.-China trade-war worries intensified again. Other significant news events this week were a North Korea-U.S. summit, 25-basis-point interest-rate hike by the Federal Reserve, plus a European Central Bank announcement that quantitative easing will end when 2018 comes to a close although interest rates likely will not rise until the end of the summer of 2019.
Sixteen market professionals took part in the survey. There were 10 votes, or 63%, calling for gold prices to rise. There were four votes, or 25%, calling for gold to fall, while two voters, or 13%, look for a sideways market.
Meanwhile, 1,081 voters responded in an online Main Street survey. A total of 683 respondents, or 63%, predicted that gold prices would be higher in a week. Another 306 voters, or 28%, said gold will fall, while 95, or 8%, see a sideways market.
For the trading week now winding down, 59% of Wall Street and 61% of Main Street was bullish. Around 11 a.m. EDT, Comex August gold was down 1.4% for the week so far to $1,284 an ounce.
“I am bullish on gold for next week for a number of reasons,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “It feels to me like the recent pullback for gold has run its course, momentum indicators like the RSI [Relative Strength Index] have turned back upward. Gold and silver stocks are rallying, often a leading indicator for gold. The Fed news is out, leaving me to wonder what it would take to push USD [the U.S. dollar] higher in the short term.”
Phil Flynn, senior market analyst with at Price Futures Group, and Daniel Pavilonis, senior commodities broker with RJO Futures, both look for gold to rise on inflation concerns. Both cited the metal’s ability to advance on Thursday even when the U.S. dollar had a stronger tone.
“Although gold and commodities appear in common retreat now, this could change quickly as investors return to the yellow metal for [a] safe haven,” said Richard Baker, editor of the Eureka Miner Report. “I suspect the U.S. dollar high will occur today, and [the dollar will] decline next week as the euro regains some strength after its freefall following Thursday's ECB announcement. It is likely gold will return to the $1,300 level next week, with silver regaining $17 territory.”
Mark Leibovit, editor of the VR Gold Letter, also said higher. “Seasonality seems to have kicked in early. Bullish for the next few weeks,” he said.
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, is also bullish.
“The gold market has pretty clearly already discounted the Federal Reserve’s higher rates,” Day said. “Indeed, this has been a pattern since the first hike at the end of 2015: gold falls into the hike, and then rallies immediately afterwards,”
Jim Wyckoff, senior technical analyst with Kitco, commented that “technicals have improved and risk aversion has upticked just a bit late this week.”
Meanwhile, Ralph Preston, principal with Heritage West Financial, was among the Wall Street participants who envision lower prices.
“Prices are technically capped at the $1,350 zone on a monthly/quarterly basis, hinting that it is not quite yet ready for a rally on a sustained basis,” Preston said. “We may see a pop higher on a geopolitical event; however, I do not see prices holding onto any significant gains in the face of a strengthening U.S. dollar.”
David Madden, market analyst at CMC Markets, said he is bearish on gold in the near term since the metal has been unable to break above its 200-day moving average.
Kevin Grady, president of Phoenix Futures and Options, said he is neutral on gold prices for next week, putting resistance around $1,313 and $1,320.
“I would not consider buying gold until I see a convincing settlement above that $1,320 area,” Grady said.
George Gero, managing director with RBC Wealth Management, is also neutral as the market awaits an options expiration later in the month and continues to digest Thursday’s meeting of the ECB.
“We had a bombshell with [ECB President Mario] Draghi announcing they will not raise rates for one full year,” Gero said. “It is unprecedented for a central bank to say that.”