(Kitco News) - Wall Street and Main Street alike look for gold to recover next week after the more-than-5% drop that occurred this week.
Wall Street
78%
17%VS
Main Street
57%30%Eighteen analysts and traders took part in a weekly Wall Street survey. Fourteen participants, or 78%, called for gold to rise next week. Three voters, or 17%, look for lower prices, while one, or 6%, sees gold sideways.
Meanwhile, 463 Main Street participants submitted votes in an online survey. A total of 264 respondents, or 57%, said they were bullish for the week ahead, while 137, or 30%, were bearish. The neutral votes totaled 62, or 13%.
For the current trading week now winding down, 95% of Wall Street participants and 69% of Main Street retail investors looked for gold to be either higher or sideways. Oops. Instead, as of 11:41 a.m. EDT, Comex December gold was down by 5.4% for the week to date at $1,245.90 an ounce.
Wall Street analysts -- who this summer had one stretch in which they were right 10 out of 12 weeks -- maintained their bullish outlook despite gold’s tumble. Some cited the softer-than-forecast U.S. nonfarm payrolls report on Friday; others suggested that gold was now “oversold” on a technical basis.
“Several signs point to an interim low in gold following a week when long liquidation dominated and volume for lead-month gold futures was the largest on a price-decline day since June 2013,” said Ken Morrison, editor of the newsletter Morrison on the Markets. “Open interest declined over 10% this week and is now the smallest since the June low. Since $1,340, I have said dollar strength would be gold's headwind but with the dollar Index now back to the July high, gold's pullback should build some support here. I expect a modest recovery rally to $1,280 over the next week.”
Mark Leibovit, editor of the VR Gold Letter, said gold has entered his “buy zone” of $1,220 to $1,270 an ounce.
Colin Cieszynski, chief market analyst in Canada for CMC Markets, is also bullish.
“I think the selloff has been overdone and gold is technically oversold so we could be ready for a trading bounce,” he said in an e-mail. ““Also, there’s a growing disconnect between today’s selloffs in GBP and EUR (indicating growing fear of political risk) and this week’s selloffs in gold and JPY (reduced fear of instability and increased complacency). It looks like defensive flows have gone into USD, which carries its own political risks with the election a month away.”
Richard Baker, editor of the Eureka Miner Report, cast a vote for lower prices, commenting “there is probability a little more short-term pain ahead.” Still, overall he is “cautiously bullish…with uncertainties surrounding the U.S. election still in play and still-questionable soundness of the European banking system.”
Ira Epstein, director of the Ira Epstein division of Linn & Associates, sees more downside on “follow-through selling.”
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, said gold could be flat next week, although he is bullish longer term.
“It takes time to recover from the kind of large drop we saw earlier in the week, in any market,” Day said. “But gold will recover in coming weeks; the decline this week was an exaggerated reaction to hawkish Federal Reserve statements and expectations that rates would be increased in December. Nothing new in that. The reality was that some holders were getting nervous, and these comments were simply a trigger to get out -- selling that fed on itself.”
By Allen Sykora of Kitco News; asykora@kitco.com
