Gold Expected To Gain Some Luster After Fed
The U.S. Federal Open Market Committee meeting is widely expected to hike interest rates another 25 basis points next week. But that hasn’t deterred analysts, who suggest this is already factored into prices.
Eighteen market professionals took part in the Wall Street survey. Thirteen respondents, or 72%, predicted higher prices. There were two votes, or 11%, calling for lower prices, while three respondents, or 17%, were neutral or looked for a sideways market.
Meanwhile, 374 people responded to an online poll. A total of 215 respondents, or 57%, called for gold to rise. Another 105, or 28%, predicted gold would fall. The remaining 54, or 14%, see a sideways market.
For the trading week now winding down, 59% of Wall Street voters and 52% of Main Street respondents were bullish. Around 11:20 a.m. EDT, Comex December gold was up a modest 0.1% for the week so far to $1,202.60 an ounce.
“I think the Fed may moderate forward language, so I continue to be constructive on the gold price,” said Peter Hug, global trading director for Kitco Metals.
Jasper Lawler, head of research at London Capital Group, said that while the price action looks soft, positioning and market sentiment support higher prices. He said if the Federal Reserve maintains its current guidance, then gold will rally, as he would expect the U.S. dollar to weaken.
“After the strong rally we have seen in the U.S. dollar, the market needs something more than Fed’s current steady path for interest rates,” he said. “From a risk/reward standpoint, the gold market looks good at these levels.”
Darin Newsom, an independent technical analyst, cited chart-based factors, particularly for the U.S. dollar. Gold tends to move inversely to the greenback.
“Given this week’s bearish breakdown by the U.S. dollar index, gold could trade higher next week,” Newsom said. “With the USDX [U.S. dollar index] hitting a new four-week low this week, December gold could take out last week’s high of $1,218 and possibly challenge its four-week high of $1,220.70.”
Adam Button, managing director of ForexLive, is also bullish.
“Gold has likely bottomed for the year,” Button said. “The market is growing more upbeat on global growth and less worried about trade, despite the risks. That backdrop should weigh on the U.S. dollar and lead to a slow recovery in gold.”
Ralph Preston, principal with Heritage West Financial, lists a target of $1,226, commenting that he is looking for “an accelerated move out of the recent congestion.”
Meanwhile, Kitco senior technical analyst Jim Wyckoff said he looks for gold to be steady to lower since “charts remain bearish.”
Richard Baker, editor of the Eureka Miner Report, is also short-term bearish, listing an $1,190 target.
“The Dow Jones Industrial Average and S&P 500 are opening to set new intraday highs,” he said. “Asian stock markets bounced overnight with the MSCI AP posting over a 1% gain. This is a very bearish headwind for gold prices as investors move away from safe havens to risky asset classes. Gold has been in a downward channel relative to the S&P 500 since the presidential election – 470 market days – a tough trend to break.”
Kevin Grady, president of Phoenix Futures and Options LLC, described himself as neutral on prices at the moment.
“The higher interest-rate picture is keeping a lid on gold,” he said. “There is a big short [bearish] position in gold. A lot of people are looking to buy the bottom in gold. I don’t see a reason to do that unless you’re looking for a short-covering rally.”
Sean Lusk, director of commercial hedging with Walsh Trading, sees gold steady but choppy.
“Rallies continue to get hit,” he said, pointing out that gold climbed to a weekly high early Friday but promptly fell some $10, which was disconcerting for bulls. He later added, “It just doesn’t seem to me like we can get a run.”