Wall St., Main St. look for gold to regain its luster
Traders and analysts who make up the Wall Street poll continued to cite the mass liquidity being dumped into the global economy to offset damage from the COVID-19 pandemic. Also, they pointed to rising U.S.-China tensions that were helping gold pare some of this week’s losses on Friday.
The Trump administration was already taking China to task over the pandemic, which hit China first. Then came news on Friday that Beijing has proposed imposing national security laws on Hong Kong, which could mean mainland intelligence agencies start operating there.
“Not only do you have low interest rates and economic stimulus supporting gold, you also have increasing tensions between the U.S. and China that will keep [gold] on its quest for all-time high prices,” said Phil Flynn, senior market analyst with at Price Futures Group.
Ten out of 17 Wall Street voters, or 59%, said they are bullish for the week ahead. There were five voters, or 29%, calling for lower prices. Two respondents, or 12%, were neutral.
Meanwhile, 1,809 votes were cast in an online Main Street poll. A total of 1,038 voters, or 57%, looked for gold to rise in the next week. Another 467, or 26%, said lower, while 304, or 17%, were neutral.
In the last survey for the current trading week now winding down, Wall Street and Main Street respondents alike were bullish. Just before 11 a.m. EDT on Friday, Comex June gold was 1.2% lower for the week so far to $1,735 an ounce.
Gold bounced on Friday after a sell-off on Thursday. Sean Lusk, co-director of commercial hedging with Walsh Trading, said he looks for market participants to continue buying on price dips. As the week wound down, he was one of several market watchers who commented that the metal was being underpinned by renewed U.S.-China tensions.
“I just feel the level of uncertainty right now is greater,” Lusk said.
Richard Baker, editor of the Eureka Miner’s Report, also called for gold to rise, adding that industrial metal copper could come under pressure due to the U.S.-China situation.
“President Trump has decided to attack China for its lack of COVID-19 transparency as part of his re-election bid,” Baker said. “This will likely reignite trade tensions between the world's two largest economies. Adding to China's woes are rekindled tensions in Hong Kong, a domestic economy damaged by the virus, and concerns about the global environment. All of this uncertainty is a boost for safe-haven gold and a growing headwind for the red metal [copper].”
Bob Haberkorn, senior commodities broker with RJO Futures, also looks for the precious metal to be stronger. The economy is gradually reopening after COVID-19 lockdowns, generating optimism about future economic growth, he said. Nevertheless, governments and central banks around the world have pumped massive sums of money into the economy, which observers for some time have characterized as bullish for gold.
“The medicine we threw at the economy – all of this cash to confront the concerns of the shutdowns because of the pandemic – are going to come back to benefit silver and gold,” Haberkorn said. “Trillions of dollars have been created out of thin air between the European Union, U.S. Fed and other central banks. Interest rates are at or below zero at most places right now. It’s a ripe environment for gold to go higher, and I think that will continue next week.”
Charlie Nedoss, senior market strategist with LaSalle Futures Group, looks for gold to move higher after the market was able to hold above support at the 10- and 20-day moving averages this week. “I’m still very friendly toward gold,” he said.
Meanwhile, Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, suggested gold prices could ease next week before eventually rising again.
“As the U.S. economy opens, there will initially be optimism in the stock market, perhaps provoking an overdue pullback for gold,” Day said. “So next week down. But we remain fundamentally extremely bullish on gold because of the so-called ‘policy’ being pursued by the world’s leading central banks.”
Colin Cieszynski, chief market strategist at SIA Wealth Management, described himself as neutral for next week, commenting that gold “is still digesting recent gains.”
Adam Button, managing director of ForexLive, also said neutral.
“This is the gut-check moment in the gold market,” he said. “Everything is in place for the big breakout [on] the fundamental side, but the market is worried about sovereign and central-bank selling, or lack of buying. Ultimately, the path is much higher but in the short term the trade is to wait for a close above $1,750 to buy, so I’m neutral.”