Gold prices gridlocked, bears take wheel
(Kitco News) - Although Wall Street bears have an advantage, ultimately, gridlock in the gold market means prices are not going anywhere fast, according to the latest results from the Kitco News Weekly Gold Survey.
Main Street investors remain bullish on gold in the near-term. Retail investors have been bullish on gold since mid-May, which was the last time bullish bets were below the 50% level.
Bill Baruch, president of Blue Line Futures, said that gold is struggling as the investor sentiment in broader financial markets waffles between risk-on and risk-off sentiment. He noted that the door is open for lower prices. Still, the yellow metal continues to hold critical support just below $1,500 an ounce.
“I don’t expect a ton of volatility, but I am cautiously optimistic in the near-term and remain a long-term bull,” he said.
This week, 14 market professionals took part in the Wall Street survey. Seven analysts or 50% said they see lower prices next week. Two analysts, or 14%, predicted gold would rise. The remaining five voters, or 36%, saw a sideways market or else were neutral.
Meanwhile, 876 respondents took part in an online Main Street poll. A total of 490 voters, or 56%, called for gold to rise. Another 214, or 24%, predicted gold would fall. The remaining 172 voters, or 20%, saw a sideways market.
In the last survey, both Wall Street and Main Street proved to be correct as both sides called for higher prices for this week. As of 12.57 p.m. EST, December gold futures last traded at $1,495.50 an ounce, up nearly 0.5% from the previous week.
Wall Streets’ record is now 20-17 year to date, meaning respondents have been right 54% of the time. Meanwhile, Main Street’s record improved to 19-18, meaning this group has been right 51% so far this year.
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, said that he is bullish on gold in the near-term, but doesn’t see a dramatic rise in the price.
Although investor sentiment has improved in financial markets, he noted that there is still a lot of uncertainty in the marketplace.
“Despite some positive developments towards a China trade agreement and Brexit—which would both be negative for gold -- neither of these two agreements is yet final,” he said. “Brexit has to be approved by the U.K. Parliament, for example. There remain many uncertainties that are positive for gold, not least of which is the direction of monetary policy around the world.”
For many analysts, the Brexit vote over the weekend among British politicians could be an important event for gold.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said that he is neutral on gold ahead of the vote.
“I think it could potentially make a significant move depending on what happens this weekend in the U.K. If Parliament approves the recent UK-EU deal, confidence could improve and gold could decline,” he said. “If Parliament rejects the deal and Brexit is delayed again, gold could hold steady. If Parliament rejects the deal and chaos ensues, uncertainty could spark a gold rally.”
Even if Parliament does approve the proposed Brexit deal, Ashfin Nabavi, head of trading with MKS (Switzerland) S.A., said that investor angst won’t be fading away anytime soon. He explained that there is still a lot of ambiguity about how the British economy will fair once it leaves the European Union. Economic weakness in the U.K. could then bleed into the E.U., which could impact the entire global economy.
“A lot of this uncertainty is turning into nightmares for some investors,” he said. “We are in unchartered territory and it wouldn’t take much to push investors back into gold.”
Navabi said that he is neutral on gold in the near-term but still sees potential for higher prices.
“I would prefer to trade the range from the long-side,” he said. “I don’t want to be short in this market.”
Kristina Hooper, chief market strategist at Invesco, said that she is neutral on prices as prices remain trapped in a range; however, she added that selling pressure is starting to build.
“There is a lot of geopolitical risks out there, and so I expect prices to ebb and flow with the news on geopolitical developments,” she said. “However, yields have moved relatively higher in recent days, making the opportunity cost of owning gold to be higher and exerting downward pressure on gold prices.”