Wall St., Main St. bullish on gold price as coronavirus threat grows
(Kitco News) - The gold market is struggling to find momentum as it treads water around a critically important technical area; however, sentiment in the marketplace is still significantly bullish among both Main Street investors and Wall Street analysts.
According to comments from analysts in the Kitco News weekly gold survey, financial uncertainty, driven by the unknown impact of the rapidly spreading coronavirus will continue to supporting safe-haven demand for the precious metal.
Many economists are worried that the spread of the virus through China will lead to slower economic growth, which could have global implications.
“Gold typically rises on geopolitical risks and other surprising and uncontrollable risks. The coronavirus is likely to be a driving force for higher gold prices,” said Kristina Hooper, chief investment strategist at Invesco.
This week, 18 market professionals took part in the Wall Street survey. Ten, or 59%, called for gold to rise. There were only two votes or 12% saying gold would fall; five voters, or 19%, were neutral or called for a sideways market.
Meanwhile, 789 votes were cast in an online Main Street poll. A total of 525 voters, or 67%, looked for gold to rise in the next week. Another 145, or 18%, said lower, while 119, or 15%, were neutral.
In last week’s gold survey, a strong majority of Wall Street analysts and Main Street investors were bullish on gold. As of 11:50 a.m. EST, Comex February gold was 0.7% higher for the week, last trading at $1,571.90 an ounce.
While the coronavirus is currently the top worry driving market uncertainty, analysts note that there appears to be no end to the growing list of pressures weighing on investors sentiment.
Adrian Day, chairman and chief executive office Adrian Day Asset Management, said that he is bullish on gold as sentiment and momentum are on gold’s side.
“Impeachment, a shaky stock market, clueless central banks; nothing in the current environment is negative for gold,” he said.
Not only is market uncertainty creating episodic momentum for gold prices, but the market has a strong floor as next week the Federal Reserve is not expected to shift from its firmly neutral stance on monetary policy.
“The Fed will remain on hold and that could weigh on the U.S. dollar, which is at critical resistance levels,” said Charlie Nedoss, senior market strategist with LaSalle Futures Group. “The current interest rate structure support gold very well.”
Christopher Vecchio, senior currency strategist of IG Group, said that he is watching 10-year yields to determine gold’s next move. He added that the U.S. 10-year yield is trading at 1.69%, the lowest point since October. He added that with the Federal Reserve expected to be on hold next week, bond yields will struggle to move higher.
He added that in a low-yield environment, rising inflation pressures will make gold more attractive as real yields push lower.
“I think there is a nice fundamental floor for gold,” he said.
However, not everyone is convinced that gold can move higher in the near term. Mark Leibovit, publisher of VR Metals/Resource Letter, was one of only two bearish voters in this week’s survey.
Although he sees gold in a long-term bull market, he said that in the near term, gold appears to be in a “cyclical topping phase.”