(Kitco News) - After rallying as high as 21% since the start of the year, gold prices have fallen back and expectations for further gains are substantially lower, according to the results of this week’s Kitco News Wall Street vs. Main Street Gold Survey.
For the first time this year, less than 50% of retail investors are optimistic that gold prices can go higher. At the same time, market participants are outright bearish on gold prices.
Gold is preparing to end the shortened trading week in negative territory, with April Comex gold futures currently down more than 2.6% since Monday. The metal is looking to post its biggest weekly loss since early November.
This week, 682 people participated in Kitco’s weekly online survey and sentiment, while still modestly bullish, declined sharply from the previous week. Of the participants, 316 people, or 46%, said they are bullish on gold next week, down from 78% last week; meanwhile, 284 people, or 42%, said they are bearish on gold next week and 82 people, or 12%, said they are neutral on gold.
After showing signs of waning optimism, the majority of market professionals now bearish on gold in the near-term; however, some remain confident that prices will hold above the key $1,200 level.
Out of 35 market experts contacted, 19 responded, of which only two professionals, or 11%, said they expect to see higher prices next week. At the same time, 12 professionals, or 63%, said they expect to see lower prices, and five analysts, or 26%, are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
According to the analysts comments, most are bearish on gold as technical momentum indicators have started to lag, coupled with a stronger U.S. dollar.
Colin Cieszynski, senior market strategist at CMC Markets, noted that earlier in the week gold’s relative strength index (RSI) fell below 50 as prices dropped below initial support of $1,228 an ounce.
“With USD on the rise again, from here, gold could easily drop back to retest $1,200 or its 200-day average near $1,119.6,” he said.
Ken Morrison, editor of the newsletter Morrison On The Markets, noted that gold has posted lower lows for three consecutive weeks.
“The daily and weekly charts indicate signs of a major top. I expect the market is entering a period of consolidation in the $1190-$1235 range,” he said.
However, while gold is expected to see more weakness in the near-term, Bart Melek, head of commodity strategy at TD Securities, said that he sees a strong floor at $1,200 an ounce. He added that despite a hawkish tone from four Federal Reserve officials -- James Bullard, Charles Evans, Patrick Harker and Dennis Lockhart – earlier in the week, there is still a lot of doubt as to whether or not the Fed can actually raise interest rates.
“If we continue to see bad economic data then we can take any rate hike off the table. That is creating a firm floor for gold,” he said. “We also have growing uncertainty over a Brexit that should help to support the metal,” he said.
Wall Street
11%
63%VS
Main Street
46%42%
By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow me on Twitter @neils_C
