Wall St., Main St. Expect Gold Prices To Remain Buoyant
Many traders and analysts cited a dovish Federal Open Market Committee after a policy meeting this week, in which officials indicated they are pausing in the monetary-tightening cycle while awaiting more economic data. This tends to undermine the U.S. dollar, which helps gold. It also limits the so-called “opportunity” cost of holding non-interest-yielding assets such as precious metals.
Wall Street voters remained bullish even in the aftermath of a strong U.S. jobs report on Friday that normally might hurt sentiment by rekindling rate-hike worries. The Labor Department said U.S. nonfarm payrolls rose by 304,000 in January.
Sixteen market professionals took part in the Wall Street survey. There were 10 votes, or 63%, calling for higher prices. Two respondents, or 13%, said lower, while four, or 25%, said sideways.
Meanwhile, 561 respondents took part in an online Main Street poll. A total of 357 voters, or 64%, called for gold to rise. Another 135, or 24%, predicted gold would fall. The remaining 69 voters, or 12%, see a sideways market.
In the last survey, 72% of Wall Street and 47% of Main Street was bullish on gold. As of 11 a.m. EST, they were right. Comex April gold futures were trading 1.4% higher for the week so far to $1,322.70 an ounce.
Bob Haberkorn, senior commodities broker with RJO Futures, looks for gold to keep rising on ideas the Federal Reserve has paused its rate-hiking cycle. Previously, rate hikes had limited gold’s upside for the last two years, Haberkorn said.
“He [Fed Chair Jerome Powell] said the Fed will have patience,” Haberkorn said. “They will be in no hurry to raise rates again….The dollar is getting softer [as a result]. That will help gold out.”
Colin Cieszynski, chief market strategist at SIA Wealth Management, also said he is bullish. “With the Fed apparently pausing its rate-hike program, U.S. Treasury yields have come down and so has the U.S. dollar, removing a headwind from gold,” he said. “Meanwhile, ongoing political and/or economic turmoil in Venezuela, Europe, China and elsewhere may continue investor interest in safe-haven plays like gold.”
Adrian Day looks for gold to rise, saying the Federal Reserve’s “capitulation” is “very significant,” hurting the dollar and boosting gold. “Gold, the ‘anti-central bank’ asset, is particularly helped by the increasing lack of credibility of the Fed,” Day added.
Kevin Grady, president of Phoenix Futures and Options LLC, said he is bullish after the market settled above the $1,305 level and brought about some short covering.
“Open interest was down 40,000 contacts Wednesday,” Grady said. “We are starting to see new longs enter the market now that we are holding $1,305. We did see an increase of 8,000 lots from yesterday’s rally. All eyes will be on geopolitical events next week, which could be interesting with the Chinese out of the market for their holiday. Our new level of resistance is $1,350.”
Peter Hug, global trading director with Kitco Metals, said he remains “constructive,” but adds that “with the Chinese holiday next week, we may see a more balanced tone to the market.”
Meanwhile, Ole Hansen, head of commodity strategy at Saxo Bank, said it’s time for gold to consolidate. He offered a “short-term bearish view targeting $1,300.”
George Gero, managing director with RBC Wealth Management, said he looks for range-bound prices next week as Chinese trade and tariff talks continue. Otherwise, “mostly everything [is] priced in for now,” he adds.