(Kitco News) - There's an old adage that says a market is in bull mode when it remains strong even in the face of bearish news, and vice-versa.
Wall Street
58%
32%VS
Main Street
64%25%Gold futures finished this week higher despite what normally would be considered a bearish U.S. jobs report on Friday. Against this background, market professionals and retail investors alike look the metal to continue its rally next week.
A total of 19 analysts and traders took part in Kitco’s survey of market professionals. Eleven, or 58%, are calling for higher prices next week. Six, or 32% expect prices to fall, while two, or 11%, are neutral.
The early survey votes that trickled in tended to be bearish, as Comex August gold was at one point down some $25 Friday morning after the Labor Department reported that U.S. nonfarm payrolls surged 287,000 last month, far above economists’ expectations. But the metal wasted little time snapping back, recouping the lion’s share of the session decline and was up by $14.50 for the week to $1,353.50 as of 11:36 a.m. EDT.
As gold bounced back, the flow of survey votes from Wall Street respondents became noticeably more bullish, with traders citing the strong buying that emerged on the price pullback.
“We had a $25 dump and they bought it right back,” said Sean Lusk, director of commercial hedging with Walsh Trading, expressing a sentiment listed by several traders. “It tells me nobody wants to be short (hold a bearish position) in this market.”
Meanwhile, on Main Street, 1,090 participants submitted votes in an online and Twitter survey this week. A total of 698 respondents, or 64%, said they were bullish for the week ahead, while 275, or 25%, were bearish. The neutral votes totaled 117, or 11%.
A week ago, 65% of retail participants and 71% of Wall Street participants were bullish on gold. This was the fifth straight week both Main Street and Wall Street looked for higher prices, and for the fifth straight week they were right.
“I think steady to higher,” said Ira Epstein, director of the Ira Epstein division of Linn & Associates LLC. “(The) market has now absorbed the increase in jobs data and (is) not breaking. I take this as a sign that the market is ready to move to new highs for this move.”
“We’re acting pretty well,” said Charles Nedoss, senior market strategist with LaSalle Futures Group, also citing the ability to recover from the post-jobs sell-off. “It has some underlying strength below it. So I’m looking for higher next week.”
Added Bob Haberkorn, senior commodity broker with RJO Futures: “What we saw this morning – that dip was just initial reaction off of the (jobs) headline. But that one number is not going to change the fact that global rates are at historic lows. Yields are so low right now that there is a flight to safety.”
Still, gold has risen for so long now that some observers anticipate the market is due for some type of retracement.
“I think gold is going to go down next week,” said Colin Cieszynski, chief market analyst in Canada for CMC Markets. “It’s looking overbought technically and I think the fear trade may ease as we get farther away from the Brexit vote with no major new developments coming there until September now.”
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, also looks for a correction, even though he’s upbeat for the longer term.
“Gold could settle back a little next week, after all the excitement of the past few weeks,” he said. “So for next week, I’ll go with down. But fundamentally, still very bullish and certainly would not be trying to play any correction.”
Phil Flynn, senior market analyst with at Price Futures Group, is also upbeat but nevertheless placed himself in the neutral camp for next week, figuring the precious metal is due for some consolidation after hitting two-year highs this week.
“The strong jobs report is going to slow down some of the risk aversion that we’ve seen,” Flynn said. “The market is a little overbought so we’re due for a retracement. But by no means do I think the bull market is over.”
By Allen Sykora of Kitco News; asykora@kitco.com
