Head fake or new rally? Wall Street, Main Street optimistic on gold prices next week
(Kitco News) - What a difference 24 hours can make in the precious metals market. A late-week drive in gold prices is generating significant bullish sentiment in the marketplace among Wall Street analysts and Main Street investors, according to the latest Kitco News Weekly Gold Survey.
The question remains is whether this rally is the start of a new uptrend or just a head fake. Although prices are still stuck in a range, analysts say that technical momentum favors higher prices in the near-term. But, only time will tell if critical resistance at $1,525 will break.
This week, 18 market professionals took part in the Wall Street survey. Fourteen analysts or 78% said they see higher prices next week. One analysts, or 6%, predicted that gold will fall. The remaining three voters, or 17%, saw a sideways market or else were neutral.
Meanwhile, 890 respondents took part in an online Main Street poll. A total of 583 voters, or 60%, called for gold to rise. Another 193, or 22%, predicted gold will fall. The remaining 159 voters, or 18%, saw a sideways market.
In the last survey, Main Street proved to be correct as it called for higher prices for this week. As of 12:26 p.m. EST, December gold futures last traded at $1,505.20 an ounce. The market is off its earlier highs but remains up nearly 1% compared to the previous week.
Wall Streets’ and Main Street’s record is now 20-18 year to date, meaning respondents have been right 53% of the time.
Looking to next week, many analysts said that gold has room to move higher as it has made significant technical moves this past week with prices pushing above the 20-day moving average and briefly above the 50-day moving average.
Jameel Ahmad, described gold’s Friday rally as a “technical adjustment.” He added that there is a similar move in oil markets. “There is still some upside left in this move higher in Gold, although it looks like it will face a potential ceiling close to $1535,” he said.
Ole Hansen, head of commodity strategy at Saxo Bank said that he is looking for prices to test initial resistance at $1,525 an ounce in the near-term. He added that Friday’s move broke September’s downtrend, which was a lot shallower than some market players were expecting.
“This shows that there is still an appetite for safe-haven demand but we need to see just how strong it. It’s too early to tell if this move is the start of a new uptrend,” he said. “We continue to see that underlying demand for gold as quite strong and that is a positive sign.”
Afshin Nabavi, head of trading with MKS (Switzerland) SA, said that he remains bullish on gold because the global economy is still a mess and investors are still dealing with massive geopolitical uncertainty. However, he added that investors’ bullish sentiment needs to be kept in check.
“Gold prices can still go higher but we are still stuck in a range,” he said. “If gold faces to break $1,525 then we could see prices fall back to $1,480 very quickly. If resistance does break then we could see prices at $1,575.”
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, said that he is neutral on gold in the near-term as he doesn’t see any surprise news shaking the yellow metal out of its trading range.
“The Fed will likely cut rates, but that is expected, and the commentary may suggest no further cuts this year. Brexit will continue to be a mess, but that is also anticipated,” he said.
Clive Lambert, technical analyst at Futurestechs, said that the line in the sand for him is $1,509. That is the level gold has to hold above to break its current downtrend. He added that if this resistance level does break then he would expect gold prices to push back to $1,566 an ounce.
Some analysts have voiced some concern that the late-week rally could be a bull trap as the yellow metal has pushed higher despite record prices in equity markets, resilient strength in the U.S. dollar, and relatively unchanged bond yields.