(Kitco News) - The Federal Reserve is in the spotlight next week as investors anxiously wait on the central bank’s important September meeting to see if they will hurt gold by hiking interest rates.
Wall Street
38%
31%VS
Main Street
48%42%Gold prices have been under pressure all week, more so by the release of a mixed bag of U.S. economic data that left markets even more uncertain as to when the Fed will raise rates. December Comex gold futures were last down $7.80 at $1,310.20 an ounce, trading near key psychological support of $1,300 an ounce.
However, based on the latest Kitco News’ weekly Gold Survey results, the Fed is likely to stand pat, and this should bode well for gold next week.
The results of Kitco’s professional survey reflect significant uncertainty in the marketplace with most analysts unsure on gold’s short-term move. This week, 13 analysts and traders took part in the survey; of which 38% expect prices to move higher next week. The remaining participants – split evenly at 31% – see lower or sideways trading.
Despite a close race, Main Street appears to be a little more optimistic on gold next week based on the 1,251 votes tallied. A total of 591 voters, or 48%, are bullish on the metal next week while 530 voters, or 42%, and 130 participants, or 10%, are bearish and neutral, respectively.
The Wall Street experts focused most of their attention on the Fed meeting. Currently, markets are only pricing in a 15% chance of a rate hike next week and see a 53% chance of a move by the end of the year. One analysts also noted another major central bank meeting taking place: the Bank of Japan.
“The most bullish outcome for the yellow metal would be a Fed delay in interest rate hikes until December or beyond and a bold move by Japan that some believe could include ‘helicopter money,’” noted Richard Baker, editor of the Eureka Miner Report.
“Gold could take out its September high for the bullish case, bouncing above $1,360 per ounce. The bearish scenario test will surely shock test the $1,300 floor…I'll wager with the bulls. If this proves wrong, any dip below $1,300 is a buying opportunity,” he added.
Managing director with RBC Wealth Management George Gero agreed in that he expects gold to remain range-bound until the Fed meeting is over, but remains bullish over the much longer term.
Colin Cieszynski, senior analyst at CMC Markets, said higher gold prices are likely next week as a delayed Fed rate hike is likely.
“It could undermine the USD advance and give gold a chance to rebound,” he said.
However, Ken Morrison, editor of the newsletter Morrison on the Markets disagreed.
Last week, he was calling for gold to decline some $20 to trade around $1,310 an ounce, which is what happened. This week, he said the prospects for a gold rally have not yet improved.
“Open interest in futures has declined along with price indicating the dominant flow the past week has been the reduction of long positions,” he said. “I expect further strength in the Dollar that should pressure Gold below $1300 for the first time in 3 months.”
Kitco’s senior technical analysts is neutral on gold next week but remains tilted to the bullish side, noting that “prices are due for a corrective bounce.”
By Sarah Benali of Kitco News; sbenali@kitco.com
