Wall. St. Sees More Weakness In Gold Price; Main St. Leans Bullish
(Kitco News) - Wall Street looks for the recent slide in gold prices to continue, while the largest block of Main Street voters is bullish, according to the Kitco News weekly survey.
Nineteen market professionals took part in the survey. There were 12 votes, or 63%, calling for gold prices to fall. There were four votes, or 21%, calling for gold to rise, while three voters, or 16%, look for a sideways market.
Meanwhile, 642 voters responded in an online Main Street survey. A total of 280 respondents, or 44%, predicted that gold prices would be higher in a week. Another 263 voters, or 41%, said gold will fall, while 99, or 15%, see a sideways market.
For the trading week now winding down, 69% of Wall Street and 56% of Main Street voters were bullish. Just before 11 a.m. EDT, Comex August gold was down 1% for the week so far to $1,242.90 an ounce.
“I remain bearish on gold for next week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “This is more of a technical call. It just looks like the U.S. dollar wants to break out while gold is struggling to hold $1,240.”
Jim Wyckoff, senior technical analyst with Kitco, said bears are in “solid technical control” of the market. The “path of least resistance for prices will remain sideways to lower until there is a bullish near-term technical development to suggest otherwise,” he added.
Adam Button, managing director of ForexLive, also looks for further weakness in gold prices.
“The U.S. dollar has been relentless and Fed officials aren’t signaling any sign of slowing down rate hikes,” Button said. “Technically, a break of the December low could start a quick, aggressive sell-off.”
Neil Mellor, senior currency strategist at BNY Mellon, is also bearish on gold in the near term.
“I think you need to look at gold as a contrary play to the U.S. dollar,” Mellor said. “If the dollar is heading higher, then gold is going lower. Looking at the technicals, it is difficult to be bearish on the U.S. dollar right now.”
Richard Baker, editor of the Eureka Miner Report, described the depreciating Chinese yuan as one of the most “startling correlations” with the foreign-exchange market.
“This relation goes back to the erosion of U.S.-China trade tensions beginning in late March. As the yuan weakens, so does gold,” Baker said. “Interestingly, gold's relation to the yuan is stronger than correlation to the U.S. dollar index over this period. If this correlation holds, Comex gold will trend toward the $1,230 level as the yuan approaches 6.7 CNY/USD.”
Kevin Grady, president of Phoenix Futures and Options LLC, looks for a test of the $1,232 area in gold. There are a number of shorts (bearish traders) in the market, he said, pointing out that the trade war is providing a safe-haven boost for the U.S. dollar, not gold.
China cannot put tariffs on as many goods as the U.S., he said, but could sell U.S. Treasury bonds, which would mean higher interest in the U.S. “That is a perceived threat to gold,” Grady added.
However, Sean Lusk, director of commercial hedging with Walsh Trading, commented that gold should at some point draw a bid from concerns about the escalation of the trade war. However, he added, gold also has to hold trendline support around $1,240; the metal dipped below this but then climbed back above.
“Worries are going to start to come to the forefront as these tariffs are expanded,” Lusk said, adding that a seasonally strong period is approaching for gold. Historically, the metal has fared well in late summer and autumn on a pickup of buying from India during the country’s so-called “wedding season.”
Phil Flynn, senior market analyst with at Price Futures Group, is among those who anticipate at least a partial recovery in gold. There appears to be confidence in the economy, thus “there isn’t a lot of fear in the marketplace” that generally might support gold, he said.
“Having said that, next week we should rebound,” Flynn said. “The market is oversold and we are due for some kind of [upward] correction.”
Meanwhile, Mark Leibovit, editor of the VR Gold Letter, commented that cyclical lows often occur due in July, but he is waiting for upside volume to confirm this. Any rally “may only be a dead-cat bounce. Too early to tell,” he said.