(Kitco News) - There seems to be more gold bears out of the woods on Wall Street this week with nearly half expecting prices to move lower post-Fedspeak.
Wall Street
39%
46%VS
Main Street
57%28%Friday, Federal Reserve Chair Janet Yellen spoke in Jackson Hole, where she implied conditions are moving more in favor of an interest-rate hike. Fed Vice Chair Stanley Fischer also reiterated this sentiment Friday, noting that monetary policy tightening could happen before year-end if data permits. As a result, gold prices were fickle on the day, dipping in the immediate aftermath of Yellen’s remarks and then moving higher. After peaking at around $1,346 an ounce, December Comex gold futures last traded at $1,325.20 an ounce.
Thirteen analysts and traders took part in the weekly Kitco News Wall Street survey, of which six participants, or 46%, called for lower gold prices next week. Five voters, or 39%, voted higher, while two, or 15%, are neutral.
Meanwhile, 1,060 Main Street participants voted on this week’s online survey. A total of 606 respondents, or 57%, said they were bullish for the week ahead, while 296, or 28%, were bearish. The neutral votes totaled 158, or 15%.
Most analysts agreed that since the Fed is now out of the way, gold will shift focus towards next week’s U.S. economic data as well as movements in the U.S. dollar.
“A lot of technical damage was done to gold this week as it broke an uptrend, and although gold has regained for now, momentum indicators also look bearish for the near term,” noted Colin Cieszynski, chief market analyst for CMC Markets.
“Gold trading is likely to be driven by swings in USD depending on whether PMI and payrolls data point toward a September rate hike or not.”
Ralph Preston, principal with Heritage West Financial, also called for lower gold prices in the week ahead, noting that as the metal coils between $1,315-1,369, he wouldn’t be surprised to see the price drop around $50.
“I’m looking for a break to the downside under $1,315, which would project a move back down to $1,275,” he said.
However, one analyst – who is also expecting lower gold prices – still made the case for the yellow metal over the longer term.
“Gold finds itself pulled in two directions; a stronger dollar is a headwind but monetary policy divergence between the U.S. and other central banks establishes a solid price floor around $1,300 per ounce,”Richard Baker, editor of the Eureka Miner Report, told Kitco News.
“Negative interest rates around the world should maintain strong demand for U.S. Treasuries, keeping the long end of the yield curve down even when the Fed raises short-term rates. This flattening should buffer gold somewhat from the curse of rising interest rates, keeping $1,400 still in sight for 2016.”
Baker added that he is shifting his attention to the Bank of Japan, which may bring about “September surprises” to the marketplace in reaction to the strong yen, which would bode well for gold.
One bullish vote came from Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, who said he sees higher gold prices ahead regardless of whether or not the Fed raises rates this year.
“The Fed, as evidenced by Yellen’s speech, wants to raise rates but many, including Yellen, are cautious, seemingly wanting perfect conditions before they act,” he noted.
“The headlines were negative but the speech as a whole remains cautious. Vice Chairman Fischer is attempting to force the issue, so we’ll probably see a rate hike before year end, but another quarter point would not detract from gold’s bullish case.”
By Sarah Benali of Kitco News; sbenali@kitco.com
