Unprecedented bullish sentiment driving gold prices
(Kitco News) - The gold market is preparing to end its fifth straight week of gains with prices holding over $1,800 an ounce, near their highest level since 2011 and both Wall Street analysts and Main Street investors don ’t expect the trend to end anytime soon.
The latest results of the Kitco News Weekly Gold survey showed unprecedented bullish sentiment in the marketplace with Wall Street sentiment at its highest level in the survey ’s history. Most analyst note that gold ’s break above $1,800 an ounce has created significant momentum in the market.
“You have to stick with the trend, no matter how much I want to see a correction and a better entry point into this market,” said Phillip Streible, chief market strategist at Blue Line Futures.
Of the 17 Wall Street professionals who took part in this week ’s poll, 15, or 88%, called for gold prices to rise. Two analysts, or 12%, predicted lower prices. There were no neutral votes in this week ’s survey.
A total of 1,610 votes were cast in an online Main Street poll. Of these, 1078 respondents, or 67%, looked for gold to rise in the next week. Another 300, or 17%, said lower, while 232 voters, or 14%, were neutral.
In the last survey for the current trading week now winding down, Wall Street and Main Street were both bullish. As of 11:10 a.m. EDT on Friday, Comex August gold futures last traded at $1,805.90 an ounce, up nearly 1% compared to the previous week.
Not only has gold pushed above a critical long-term resistance point but analysts note that the COVID-19 pandemic continues to spread across the U.S. unabated, creating further uncertainty for economic activity.
“A correction would be healthy at these levels but there is no reason to sell gold right now,” said Afshin Nabavi, head of trading with MKS (Switzerland) SA. “The gold market looks healthy as the global economy worsens by the day.”
Charlie Nedoss, senior market strategist with LaSalle Futures Group, said that a weak U.S. dollar has room to move lower, which will be bullish for gold.
“The relatively stink in the U.S. dollar is starting to rise,” he said.
Nedoss added that he is bullish on gold as the price continues to bounce off support at its rising 10-day moving average.
Adrian Day, chief executive officer of Adrian Day Asset Management, said that he is bullish on gold but would also like to see a correction.
“So long as flows continue, it will move up. We see nothing imminent to stop those flows,” he said.
Colin Cieszynski, chief market strategist at SIA Wealth Management, said that not only does gold ’s technical momentum point to higher prices, but three major central bank meetings could support the yellow metal. He added that there are expectations that the Bank of Japan, the Bank of Canada and the European Central Bank will reaffirm their commitment to support the global economy.
However, not all analysts are bullish on the precious metal. Frank McGhee, precious metals dealer at Alliance Financial, said that he is bearish on gold as the trade is starting to look a little crowded.
However, he added that anyone selling in the current environment needs to be nimble.
“Selling news high is only somewhat less risky than trying to catch a falling knife on a big break,” he said.
Lukman Otunuga, senior research analyst at FXTM, was the second bear in this week ’s survey, saying that because of gold ’s big move above $1,800, the market could be hit with some significant profit taking.
“After charging to levels not seen in nine years, Gold may experience a technical correction back towards the $1,780-$1,765 regions before bulls gather fresh momentum,” he said.