(Kitco News) - For five straight weeks, Main Street and Wall Street participants in the Kitco weekly gold survey accurately forecasted that gold would post a weekly gain.
Wall Street
39%
33%VS
Main Street
69%20%A week ago, they called for gold to rally for a sixth straight week – by 64% of Main Street retail investors and 58% of Wall Street market professionals. But this time, gold had other ideas. As of 11:40 a.m. EDT, Comex August gold was down $28.70, or 2.1%, for the week to $1,329.70 an ounce.
Now, the views of Wall Street and Main Street are mixed for next week.
Eighteen analysts and traders took part in this week’s survey, and no viewpoint captured a majority. The biggest camp – seven votes, or 39% -- looks for prices to ease some more. Six survey, or 33%, respondents look for sideways action, while five, or 28%, called for gold to rise.
Meanwhile, on Main Street, 1,064 participants submitted votes in an online survey, the highest participation rate since mid-April. A total of 738 respondents, or 69%, said they were bullish for the week ahead, while 217, or 20%, were bearish. The neutral votes totaled 109, or 10%.
Many blamed the decline in gold this week on the record highs in equities, which took away some of the demand for safe havens. Some look for this trend to reverse.
“I think gold will break higher next week on the back of weaker equity markets,” said Peter Hug, global trading director with Kitco Metals.
“Macro events (are) still all positive for gold, including extension of ultra-low interest rates around the world and uncertainly over EU (European Union), while soon attention will start to focus on U.S. election,” said Adrian Day, chairman and chief executive officer of Adrian Day Asset Management. “Either result there will likely be negative for the dollar and thus positive for gold.”
Those anticipating lower gold prices expect this week’s correction to continue after the previous sharp run-up.
“Concurrent with the recovery/stability of financial markets, long liquidation was evident in gold the past week as futures open interest declined @ 5% from last week's record levels,” said an e-mail from Ken Morrison, editor of the newsletter Morrison on the Markets. “The thesis that gold's a safer haven in times of uncertainty became harder to justify (with) the record length held by managed funds. I expect the path of least resistance remains to the downside in the week ahead with a target of @ $1,310 for gold.”
Sean Lusk, director of commercial hedging with Walsh Trading, looks for a continuation of longs exiting their positions.
“Gold is still within a healthy correction phase with focus on key support at $1,300,” said Ole Hansen, head of commodity strategy at Saxo Bank. “On that basis, I see it lower next week.”
Added Ralph Preston, principal with Heritage West Financial: “As long as prices stay contained below $1,355, market disposition will be tilted to the downside. I’m looking for a test of $1,315 support next week based on this week’s softness. Let’s see were we go from there.”
Those who see a sideways market cite offsetting factors.
For instance, Kevin Grady, president of Phoenix Futures and Options, suggested there may be a trend for now in which some fund managers have been pulling out of gold to moving into equities lately as stock indices rose. However, he continued, exchange-traded-fund investors appear to be staying in the gold market, therefore he looks for buying to emerge on pullbacks.
There could be some initial pressure on gold next week from reduced worries about the impact of the so-called U.K. Brexit vote to leave the European Union, said Phil Flynn, senior market analyst with at Price Futures Group.
“My expectation for later in the week is when we start to realize the Fed is not raising rates any time soon and we see more stimulus from (central banks) around the globe, gold will get a little bounce,” Flynn continued.
By Allen Sykora of Kitco News; asykora@kitco.com
