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Wall Street still bullish on gold prices but tempers enthusiasm

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(Kitco News) - Wall Street still leans bullish on gold, but the enthusiasm has cooled, with a number of traders and analysts saying the metal is due for a pullback after hitting a seven-year high earlier this week, based on the Kitco News gold survey.

During the last two weeks, 100% and 92% of the market professionals who take part in the poll gave bullish short-term outlooks on gold.

This time, only 47% of the participants are bullish, with seven out of 15 voters saying they expect the metal to rise next week. Six voters, or 40%, called for lower prices, while two, or 13%, were neutral.

Meanwhile, 1,683 votes were cast in an online Main Street poll. A total of 1,144 voters, or 68%, looked for gold to rise in the next week. Another 305, or 18%, said lower, while 234, or 14%, were neutral.

 

Kitco Gold Survey

Wall Street

Bullish
Bearish
Neutral

VS

Main Street

Bullish
Bearish
Neutral

In the last survey for the current trading week now winding down, Wall Street and Main Street respondents alike were bullish. They were right during the early part of this week, with June gold peaking at $1,788.80 on Tuesday. Since, however, the metal has slipped to $1,704 shortly before 11 a.m. EDT on Friday, leaving the contract down 2.8% for the week so far.

“Gold futures should get a boost next week,” said Phillip Streible, chief market strategist with Blue Line Futures. “They’re doing a real good consolidating around these higher levels. We’re holding on to $1,700.”

The market dipped below the $1,700 level briefly as some traders moved back into equities, Streible continued. However, stocks may have become “overextended” on their bounce, said the strategist, who calls for gold to hit $2,000 by year-end.

“If the equities show any kind of sign of weakness...I think you’re going to see people congregate back into safe-haven assets, and gold is going to [move] higher,” he said. “The amount of fiscal and monetary stimulus is going to create inflation.”

Phil Flynn, senior market analyst with at Price Futures Group, also looks for gold to rebound.
“Even though gold weakened this week due to a rally in the dollar, the outlook is still bullish as global governments will need to continue to print money to support the global economic recovery,” Flynn said.

Jim Wyckoff, senior technical analyst with Kitco, said gold’s charts “remain fully bullish.”

Meanwhile, several respondents look for gold to ease next week even though they remain bullish for the longer term.

“Gold had gone up a little too far, too fast,” said Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, commenting that gold is due for a pullback. “As stocks recover based on optimism about the economy reopening, gold slips. We remain very bullish fundamentally for this year and beyond, based on the new global monetary situation.”

Sean Lusk, co-director of commercial hedging with Walsh Trading, said he looks for a continued correction to around $1,675 or so in the short term. However, he also added that he thinks the long-term trend remains bullish.

Lusk cited news that coronavirus patients have been responding positively to an experimental drug from Gilead Sciences Inc. This has helped the stock market continue its recent recovery, which in turn could hold back gold, he said.

“We’re getting plans to get the economy rolling again,” he said. “It’s going to take some time, and I think everybody realizes that. But a bad plan is better than no plan, and the market is reacting off of that….It’s all an equity play here.”

Richard Baker, editor of the Eureka Miner’s Report, said “some of the boil” needs to come out of the market, so gold may retest $1,700 per ounce with silver retreating to $15.42 per ounce.

“What is the future? I believe after consolidation, gold returns on an inexorable path to $1,800-plus as realism cools optimistic expectations about vaccines and the health of the domestic and global economies,” Baker said. “Eventually, the extreme levels of monetary stimulus will also begin to wear on U.S. dollar strength, another bullish boost for the yellow metal.”

Kevin Grady, president of Phoenix Futures and Options LLC, described himself as neutral for next week, commenting that “gold has been having a hard time holding a rally this week.”

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.