Wall St., Main St. expect gold prices to keep on shining
The precious metal sold off sharply at the end of last week when a stronger-than-forecast report on U.S. nonfarm payrolls led to improved optimism about the economy. However, the metal rose sharply this week as buying emerged on the price dip and accelerated around mid-week when equities corrected sharply lower and Federal Open Market Committee policymakers indicated that they don’t envision hiking interest rates any earlier than 2022.
Of the 14 Wall Street professionals who took part in this week’s survey, none predicted gold would fall next week. Ten, or 71%, called for higher prices, while four respondents, or 29%, were either neutral or said they expect a sideways market.
A total of 1,285 votes were cast in an online Main Street poll. Of these, 792 respondents, or 62%, looked for gold to rise in the next week. Another 308, or 24%, said lower, while 185, or 14%, were neutral.
In the last survey for the current trading week now winding down, Wall Street leaned bearish while Main Street was bullish. Around 11 a.m. EDT on Friday, Comex August gold was $64.50 higher for the week so far to $1,747.50 an ounce.
“I think it will be slightly higher, although it will struggle to get over that 18 handle [$1,800],” said Bob Haberkorn, senior commodities broker with RJO Futures.
Sean Lusk, co-director of commercial hedging with Walsh Trading, said gold will be “definitely up” for as long as the Federal Reserve keeps pumping money into the economy.
“They’re going to stimulate the economy the best they can through bond buying and other QE [quantitative-easing] measures. Until that gets unwound, why would you be short [in] metals?” Lusk asked rhetorically.
He cautioned that there will be bouts of selling in the form of traders booking profits. However, he also looks for some market participants to use price dips as buying opportunities.
“I’m going to vote for up again,” said Phil Flynn, senior market analyst with at Price Futures Group, commenting that the fundamental backdrop appears favorable with reports that physical demand is picking up in the No. 1 gold-consuming nation of China and monetary policy around the world remains accommodative.
“With the Fed’s pronouncement that they’re going to keep interest rates low until 2020, eventually it’s going to propel gold higher,” Flynn said.
Jim Wyckoff, senior technical analyst with Kitco, also sees more upside potential in gold.
“Bulls have had a good week and the charts remain overall bullish, meaning the path of least resistance for prices will remain sideways to higher,” Wyckoff said.
Charlie Nedoss, senior market strategist with LaSalle Futures Group, looks for gold to test resistance around the $1,760 area.
“We were able to put in a positive week,” he said. “We are trading above all of the moving averages.”
Phillip Streible, chief market strategist with Blue Line Futures, said he is “neutral to bullish,” optimistic about gold’s fortunes but at the same time pointing out that the market has been unable to generate momentum above chart-resistance levels.
“I want to be optimistic and say gold should go up and the stock market is going to go down, people are going to look for safety and it [gold] will break to the upside,” Streible said. “But the reality, though, is every time we get up to this spot on gold, it does nothing but disappoint me.”
Since the U.S. Memorial Day weekend, gold has put in several daily highs in the $1,750s and low $1,760s but has not generated further upside momentum.
“I want to be bullish, but we’ve got to prove ourselves,” Streible said of the chart pattern. “We’ve got to get through some of these next levels. It’s like silver; it gets to $19 and then goes down.”
Meanwhile, Adam Button, managing director of ForexLive, described himself as neutral on gold prices for the week ahead.
“The market is extremely emotional right now and there’s a risk that gold is caught in the cross-currents,” Button said, adding that “caution is warranted” until a break of the $1,760 area.
Mark Leibovit also expressed caution despite a decline in the U.S. dollar. He noted that precious-metals shares are losing momentum. However, Leibovit also said he thinks this is temporary but favors waiting for a “renewed buy signal.”
Kevin Grady, president of Phoenix Futures and Options LLC, said he is neutral for next week, although he also commented that massive stimulus will provide a floor under gold prices on any sell-offs.
“The Fed's comments about keeping interest rates at current levels until 2022 was also positive for gold,” Grady continued. “The sharp sell-offs are keeping some longs out of the market, however. We see this though the open interest in the active August contract, which is currently 338,000. I do not consider this to be a very robust number.”
Colin Cieszynski, chief market strategist at SIA Wealth Management, was yet another “neutral” survey respondent, commenting that gold remains in a sideways trend between $1,670 and $1,750 an ounce. “News flow has gone quiet into quarter-end and volatility has dropped off for now,” he added.
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, suggested prices may not change much next week.
“Gold has been overdue for a pullback, but it’s difficult to think the modest decline at the beginning of the month was all we are getting,” he said. “Gold will react to the Fed, to the stock market and other factors, but a correction is still possible. We say unchanged for the week ahead.”