Main St. Overwhelmingly Bearish On Gold; Wall St. Bullish
Over the years, Main Street has tended to be mostly bullish on the metal. However, retail investors have called gold to be lower in three of the last four weeks, and perhaps never by as large of a percentage as this week.
A total of 2,411 voters responded in a Main Street survey. Of these, 1,796 respondents, or 74%, predicted that gold prices will be lower in a week. Another 414 voters, or 19%, said gold will rise, while 150, or 6%, see a sideways market.
Respondents who voted in the Twitter portion of the Main Street poll were slightly bullish, however. Twitter voters leaned bullish by 45% to 41%, although this sampling (114 votes) was far smaller than the online poll.
Meanwhile, 14 market professionals took part in the Wall Street survey. Eight respondents, or 57%, called for higher prices, while five, or 36%, said lower. One respondent, or 7%, predicted a sideways market.
For the trading week now winding down, 67% of Wall Street voters and 45% of those on Main Street were bullish. Around 11 a.m. EDT, Comex December gold was down 2.7% for the week so far to $1,186 an ounce.
Ken Morrison, editor of the newsletter Morrison on the Markets, is among the Wall Street majority who figures gold is due for a bounce.
“Gold enters next week with an ideal set-up for a counter-trend rally,” Morrison said. “Bullish sentiment has touched 6% this week, the lowest level since December 2016. In contrast, sentiment in the dollar index [is] at 96%, the highest over the same period. Add to the sentiment extremes record net-short [position in] futures held by managed money and gold is set up for a recovery to $1,200-$1,210 next week.”
Ralph Preston, principal with Heritage West Financial, said he looks for a bounce off of $1,180 support as the Turkish lira crisis subsides for at least a short time.
Jim Wyckoff, senior technical analyst with Kitco Metals, sees steady to higher prices. “The bears appear to be exhausted on the downside,” he says.
Phil Flynn, senior market analyst with at Price Futures Group, also sees potential for a recovery, commenting that the U.S. dollar should ease if international trade talks go well.
“We should get a rebound [in gold],” he said. “Hedge fund are shorter [more bearish] than they ever have been in history and added to their shorts eight weeks in a row. That type of bearishness is unprecedented.”
Meanwhile, Bob Haberkorn, senior commodities broker with RJO Futures, said he sees more downside, but added that it should be limited. In particular, markets are factoring in another expected Federal Reserve rate hike next month, he said.
“We’re looking at two more rate hikes for the rest of the year,” Haberkorn explained. “I think it’s going to be hard for gold this week to year-end to hold rallies.”
Kevin Grady, president of Phoenix Futures and Options LLC, said he remains bearish but also cited one potential upside catalyst.
“I am looking for gold to test the $1,150 level,” Grady said. “I do, however think that traders need to keep a close eye on the U.S. dollar. The Trump administration cannot be happy with the strong dollar, and I would expect the president to try to talk the dollar down prior to any formal intervention. There are a large amount of shorts in gold and any news-driven short covering will be violent.”
Colin Cieszynski, chief market strategist at SIA Wealth Management, described offsetting factors.
“I am neutral on gold for this week,” he said. “The breakdown below $1,200/oz was a big bearish signal and I remain bearish on gold in the medium term. In addition to the rising U.S. dollar, negative sentiment toward China and a weakening Chinese economy could potentially cut into the demand for physical gold. On the other hand, for the short term, $1,160 has emerged as support and the weekly RSI [Relative Strength Index] on gold is the most oversold it has been in over five years. So I think gold could bounce back over the next week or two but it could struggle to regain $1,200.”