Wall St. Bullish, Main St. See Higher Gold Prices
Wall Street traders and analysts cited expectations for some kind of bounce from recent weakness, with worries about Turkey leading to potential safe-haven buying.
Shares of European banks with exposure to Turkey sold off sharply Friday, and weakness in the country’s currency intensified. There are worries about President Tayyip Erdogan’s influence on monetary policy worsening relations with the U.S. There are also concerns whether indebted companies in Turkey will be able to pay back loans taken out in euros and dollars during heavy borrowing to fund a construction boom.
Fifteen market professionals took part in the Wall Street survey. Ten respondents, or 67%, called for higher prices, while three, or 20%, said lower. Two respondents, or 13%, predicted a sideways market.
Meanwhile, 694 voters responded in an online Main Street survey. A total of 311 respondents, or 45%, predicted that gold prices will be higher next week. Another 271 voters, or 39%, said gold will fall, while 112, or 16%, see a sideways market.
For the trading week now winding down, 50% of Wall Street voters were bullish while 57% of Main Street respondents were bearish. Just before 11 a.m. EDT, Comex December gold was nearly flat for the week, gaining 90 cents so far to $1,224.10 an ounce.
“We should be up,” said Phil Flynn, senior market analyst with at Price Futures Group. “With hedge funds massing major short positions, any weakness in the dollar could be met with a very large short-covering rally.”
Ralph Preston, principal with Heritage West Financial, also said higher. “The $1,200 weekly support level is holding for now – looking for a bounce,” he said.
Sean Lusk, director of commercial hedging with Walsh Trading, looks for some safe-haven demand, particularly amid worries about Turkey’s economic picture and a spillover impact on Europe. A Financial Times report Friday said the European Central Bank is worried about exposure of European banks to Turkey. Lusk also looks for seasonal buying to pick up soon ahead of the so-called autumn wedding season in India.
“I don’t know how bullish the story is [for gold], but it’s certainly not bearish,” Lusk said. “From that, you might get some short covering…Combined with some seasonal buying, we could start to work higher.”
Daniel Pavilonis, senior commodities broker with RJO Futures, also looks for gold to get a bid from the Turkey story.
“The dollar is pretty strong [which hurts gold],” he said. “But with everything going on in Turkey, we might see some flight to quality in metals. So I think they’ll be up.”
Jim Wyckoff, senior technical analyst with Kitco, said the market is “due for a corrective bounce and the currency turmoil should at least limit downside, if not boost, safe-haven demand.”
Meanwhile, Kevin Grady, president of Phoenix Futures and Options LLC, said he remains bearish.
“We’ve had three [longtime daily] lows this week,” he said. “I still think we are going to see a test of the $1,200 level.”
The one factor that could reverse this, however, would be if U.S. President Donald Trump does something to try to move the U.S. dollar higher, Grady added.
Richard Baker, editor of the Eureka Miner Report, also said gold is heading lower.
“Gold finds itself just another embattled currency as the Turkish lira and Russian ruble tumble,” he said. “It has not demonstrated its usual safe-haven appeal as financial distress spreads in emerging-market economies. However, as the U.S. dollar index scores a level not seen since June of last year, the yellow metal has shown resilience around $1,220 level for most of August with only a few brief but scary dips.”