Wall St., Main St. Bullish After Dovish Powell Remarks
Traders and analysts point to dovish-tilted remarks this week from Federal Reserve Chair Jerome Powell, which created the impression that there may be fewer U.S. rate hikes in the current tightening cycle than previously thought. Others are upbeat that there will be progress on U.S.-China trade talks, thereby undermining some of the strength in the U.S. dollar.
Sixteen market professionals took part in the Wall Street survey. Eleven respondents, or 69%, predicted higher prices by next Friday. There was one vote, or 6%, for lower, while four respondents, or 25%, called for sideways.
Meanwhile, 476 people responded to an online Main Street poll. A total of 269 respondents, or 57%, called for gold to rise. Another 122, or 26%, predicted gold would fall. The remaining 85 voters, or 18%, see a sideways market.
For the trading week now winding down, 50% of Wall Street and 59% of Main Street was bullish. Around 11 a.m. EST, Comex February gold dipped 0.4% for the week so far to $1,224.50 an ounce.
“The path of least resistance is higher,” said Sean Lusk, director of commercial hedging with Walsh Trading. “With everything going on in Washington…who would want to be short?”
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, also said higher.
“Clearly, the Federal Reserve’s new more-dovish stance on interest rates is positive for gold, though much of that move may already be in the gold price,” Day said. “And the Fed is likely still to raise one final time this year when it meets in December. In addition, ongoing geopolitical turmoil in Europe, over Brexit and Italy, tension with Russia, and elsewhere support gold (notwithstanding support to the dollar).
“The income Democratic House of Representatives threatens non-stop investigations into all things Trump, and this will hurt the dollar and help gold, particularly if it leads to impeachment proceedings. Lastly, the Democrats are pushing for a government shutdown over the next budget, one they can blame on Republicans. With the outright hostility towards Trump, he may be in no mood to compromise on his pet projects.”
Charlie Nedoss, senior market strategist with LaSalle Futures Group, looks for gold to rise after consolidating above the $1,220 area. “The Fed has been a little more dovish and the charts have held up well,” he said.
Phil Flynn, senior market analyst with Price Futures Group, also looks for higher prices, commenting that with Powell coming off as more dovish than before, the U.S. dollar should have a have a harder time rallying. Ralph Preston also looks for gold to rise on ideas of a “short-term topping pattern” in the dollar.
Jasper Lawler, head of research at London Capital Group is bullish on gold in the near-term since any positive trade developments between the U.S. and China this weekend would take some momentum away from the U.S. dollar.
“We think the short-term trend remains positive,” said Janie Simpson, managing director of ABC Bullion. “The Daily Cloud top is now about $1,221 and the Daily Standard and Turning line supports are almost identical around $1,220.
“Short-term point and figure have turned bullish and targets build up to $1,233 through to $1,236. Downside targets lead back to $1,217 and $1,212 but the targets to $1,235 look more likely overall, where the price intersects with recent highs and the 50% retracement of the June-August downswing. I am neutral to bullish as the price has yet to break out of the recent range.”
Kevin Grady, president of Phoenix Futures and Options, said he remains bearish on gold.
“The 50 DMA [50-day moving average] is $1,222,” Grady said. “We are currently holding this area, but I am anticipating a breach of this level. My target below is $1,210. Open Interest is down over 70,000 contracts this week. I believe we saw a lot of traders flattening out prior to year-end.”
Jim Wyckoff, senior technical analyst with Kitco, looks for gold to be largely unchanged.
“However, the weekend U.S.-China trade meeting outcome—positive or negative—is likely to impact many commodity markets, including the precious metals,” Wyckoff said.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said that he remains neutral on gold in the near-term as prices are stuck between $1,200 and $1,240.
“It is going to take something big to shake gold out of this sideways trend and I just don’t see anything on the horizon,” he said. “There are just as many reasons to be bullish on gold as there are to be bearish.”