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Respondents mixed on short-term price direction

Kitco News

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(Kitco News) - After a roller-coaster week in which gold futures scaled a cliff only to fall off, the Friday high and low so far are both within Thursday’s trading range. This is referred to an “inside day” on the daily charts and a sign of market indecision about the next short-term move.

Wall Street participants in the weekly Kitco News gold survey are in fact conflicted on where the metal will head next week. The largest camp – by a small margin – said lower, but garnered less than 50% of the vote.

In the Main Street survey, no voting bloc got 50% either, although this poll leaned bullish.

Gold began the week by soaring to seven-year highs. The rally began last Friday after a U.S. airstrike in Baghdad killed Qassem Soleimani, commander of Iran’s elite Quds Force, with the U.S. saying its strike was disrupt an “imminent attack” that would have endangered U.S. citizens in the Middle East. The Comex February futures climbed as high as $1,613.30 on early Monday after Iran responded by firing missiles at a U.S. base in Iraq, with the rally fueled by worries about war.

The metal subsequently backed down nearly $60 from the highs after leaders of the two countries seemingly avoided ratcheting up the rhetoric further. Around 11:30 a.m. EST Friday, the February gold contract was trading at $1,560.40 an ounce.

Sixteen market professionals took part in the Wall Street survey. Seven, or 44%, called for gold to fall. There were five votes, or 31%, saying gold would rise, with the remaining four votes, or 25%, neutral or calling for a sideways market.

Meanwhile, 1,171 votes were cast in an online Main Street poll. A total of 556 voters, or 47%, looked for gold to rise in the next week. Another 365, or 31%, said lower, while 250, or 21%, were neutral.

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

Those who look for gold to keep pulling back from the early-week high week mostly cited the abatement of tensions between the U.S. and Iran.

“I think it [gold] is going to be down unless the Iranian situation starts to flare up again,” said Daniel Pavilonis, senior commodities broker with RJO Futures. “We’re not going back to the lows, but I think maybe we’ll come back another 30 bucks or so…trade there for a little bit, then start to get built back up.”

Colin Cieszynski, chief market strategist at SIA Wealth Management, also sees more of a pullback.

“I am bearish on gold for the coming week,” Cieszynski said. “With tensions easing between Iran and the U.S., and the global economy improving, gold has been settling back toward the $1,450-$1,550 range, where it traded between August and December.”

John Weyer, co-director of commercial hedging with Walsh Trading, also said lower now that profit-taking has set in following the run-up late last week and early this week. However, he added, he would look for the metal to rise again if U.S.-Iran tensions heat up again after the two countries exchanged missile fire in the last week.

“Prior to those events, we were trending higher,” Weyer said. “We hit some technical [resistance] levels and came off of them. So there is a little bit of profit-taking and a little bit of trading the range on the technicals.”

Mark Leibovit, publisher of VR Metals/Resource Letter, said he is short-term bearish.

“It appears the mid-February cyclical peak could have come early,” Leibovit said.

Meanwhile, Phil Flynn, senior market analyst with at Price Futures Group, looks for gold to turn back higher next week even though the risk premium has eased in the aftermath of Iran’s retaliatory attack on the U.S.

“It is expected that Iran will stand down, so geopolitical risk premium is down,” Flynn said. “Yet with continued strong central-bank buying along with upbeat physical demand, we expect gold will come back next week.”

Jim Wyckoff, senior technical analyst for Kitco, looks for steady to higher prices, commenting that the charts still overall bullish.

“I am slightly bullish for gold next week,” said Kevin Grady, president of Phoenix Futures and Options. “I believe we have not heard the last from the Iranian situation and I think that this should keep a bid under the market.

“We hit an all-time record high in open interest in gold this week. There are a lot of longs in the market, which I think is capping the upside without any immediate news out. Barring any news, I believe gold will be in this $1,540-$1,590 range.”

Charlie Nedoss, senior market strategist with LaSalle Futures Group, commented that the market bias is probably still higher, with the metal still above the key moving averages. Still, in the short term, he anticipates sideways consolidation after the sharp run-up in prices several days ago. He pointed out that gold has come back to fill a price gap on a daily chart between last Friday’s high and Monday’s low.

“I think we moved pretty far pretty fast,” he said of the recent rally. Some “Jonny-come-lately longs” essentially got whacked when prices quickly fell back from the recent peak, he continued.

“I think the bulls are happy we’re staying back up here,” Nedoss said. “I think they’re disheartened that we came back off and had that reversal. In terms of the bears, I don’t know a bunch of people who want to stand in front of this thing right now. This thing is solid right now.”

Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, looks for gold to hold around current levels.

“Much will depend on the Iran situation, of course,” Day said. “Gold has held up well despite a lessening of tension but will likely struggle to go higher in immediate future absent new developments.”

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.