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Wall St., Main St. Look For Gold To Regain Luster

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(Kitco News) - Wall Street and Main Street both look for gold to regain some of its gloss next week after the precious metal got scuffed up this week.

Prices tumbled, with the most frequently mentioned factors being bouts of U.S. dollar strength, coupled with futures traders opting to exit the market instead of rolling their positions from the April to the June contract, which is now the most active month.

Fourteen market professionals took part in the Wall Street survey. Nine participants, or 64%, described themselves as bullish for the week ahead. There were two voters, or 14%, who see lower prices, while three respondents, or 21%, called for a sideways market or were neutral.

Meanwhile, 589 respondents took part in an online Main Street poll. A total of 301 voters, or 51%, called for gold to rise. Another 190, or 32%, predicted gold would fall. The remaining 98 voters, or 17%, saw a sideways market.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

In the last survey, Wall Street and Main Street were both bullish on gold for the current week. As of 11:14 a.m. EDT, Comex June gold futures were trading lower by 1.5% for the week so far at $1,298.80 an ounce.

Daniel Pavilonis, senior commodities broker with RJO Futures, looks for gold to start recovering from Thursday’s sell-off, much of which he chalked up to traders exiting their futures positions in the April contract instead of rolling over into the June. So-called “weak hands” who got into gold as it moved above $1,320 decided to get out when the market turned around and sold off, he related.

“It was a washout,” he said. “The roll hit it and we had a strong dollar that caused some downside momentum. I think the weakness is out and we can build up again.”

Adam Button, managing director of ForexLive, said gold should get a lift from better risk sentiment.

“The Federal Reserve's preferred inflation indicator, the personal-consumption expenditure index, fell in January against anticipation of a rise,” said Richard Baker, editor of the Eureka Miner Report. “This dropped 10-year inflation expectations to November 2017 levels. Fortunately, Treasury yields also fell this week, maintaining real rates around a low 0.5%. This and the re-emergence of negative 10-year bond yields in Germany, Switzerland and Japan maintain a bullish environment for gold.”

Sean Lusk, director of commercial hedging with Walsh Trading, pointed out that buying has re-emerged below $1,300 after a fund washout. “All of the uncertainties – regarding Brexit and everything else – will draw buying back,” Lusk said.

Both Kitco participants in the poll look for higher prices. “I am bullish from these levels,” said Peter Hug, global trading director. Jim Wyckoff, senior technical analyst, said the market “got too oversold in its latest downdraft.”

Charlie Nedoss, senior market strategist with LaSalle Futures Group, was the only Wall Street participant who correctly called for lower gold prices in the last survey. He looks for gold to fall again. He pointed out that gold has now put in a series of lower daily highs and lower lows, and the June futures fell below the 20-day average of $1,307.80.

“The market got ahead of itself,” he said, referring to the rally that occurred prior this week’s pullback.

Colin Cieszynski, chief market strategist at SIA Wealth Management, also said he is bearish on gold for next week. “The recent failure to retake $1,325 and subsequent [decline] appears to have carved out the right shoulder of a head-and-shoulders top and arrives at a time when gold is moving from its stronger season of the year into its weaker season of the year, which runs through to the late summer.

“Fundamentally, all the worry about Brexit and the related brief yield curve inversion appears to have been overblown and already run its course. The U.S. and China appear close to a trade deal, Brexit uncertainty is likely to get dealt with one way or another in the coming weeks, the VIX is dropping again, inflation is contained, so on balance, there appear to be more reasons for gold to go lower than higher in the near term.”

Kevin Grady, president of Phoenix Futures and Options, said he is neutral.

“I think gold broke down yesterday because we were going into first-notice day and a lot of the April longs decided to liquidate rather than roll into June,” he said. “Gold has not been able to sustain gains even [with] all the Brexit news. I think the longs decided to liquidate once we broke down under $1,305. That level is now my first level of resistance.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.