(Kitco News) - For the second week in a row, Main Street retail investors are pessimistic about gold’s direction over the next week, while Wall Street is bullish, according to the weekly Kitco News gold survey.
Wall Street
60%
25%VS
Main Street
33%58%Last Friday, 56% of Main Street voters called for gold to head lower. This was the first time this camp was collectively bearish since this reporter started handling the weekly Kitco gold survey in May. And, they were right, at least as of late Friday morning in New York. As of 11:52 a.m. EST, Comex February gold was down $3.20 for the week to $1,177.80 an ounce. Sixty percent of Wall Street voters were bullish a week ago.
Both sides are sticking to their prognostications for the week ahead.
Twenty Wall Street analysts and traders took part in this week’s survey. Twelve, or 60%, called for gold to rise. Five, or 25%, were bearish, while the remaining three, or 15%, were either undecided or expected prices to be flat.
Meanwhile, 1,070 Main Street participants submitted votes in either an online or Twitter survey. A total of 622 respondents, or 58%, said they were bearish for the week ahead, while 354, or 33%, were bullish. The neutral votes totaled 94, or 9%.
Going back to mid-May, the largest Wall Street voting camp forecast correctly 21 times and was wrong seven times, a winning percentage of 75%. Main Street had a 17-11 mark during this period for 61%.
The most frequently cited factor on why Wall Street analysts see gold rising is the fact that the precious metal has already tumbled so much – a loss of more than $160 per ounce since the Nov. 9 high – therefore seems due for a bounce. After all, there’s an old adage that markets don’t go one way forever.
“The market is short-term oversold and due for a bounce next week,” said Jim Wyckoff, senior technical analyst with Kitco.com.
Ken Morrison, editor of the newsletter Morrison on the Markets, said sentiment remains near extreme bearish levels for gold, but the exodus of many market participants -- as reflected by the decline in open positions -- indicates selling pressure is passing.
“Gold remains in a downtrend, but I expect it trades through $1,180 in the week ahead, in which case sentiment will improve and shift the balance of money flow more positively,” he said. “$1,185 is a reasonable upside target in the week ahead.”
Sean Lusk, director of commercial hedging Walsh Trading, figures some buying will emerge in the form of traders looking to offset or exit trades in which they previously sold into the market.
“I think you’re going to see some evening up,” he said. Also, “You’ll probably find some bargain hunting down here and some profit-taking (on short positions).”
George Gero, managing director with RBC Wealth Management, looks for gold to start recovering since the market has already factored in tightening of monetary policy by the U.S. Federal Reserve.
“There’s a lack of inflation in the numbers, but I think we’ve discounted so much ---all of the interest rate hikes – that now we’re going back to basics,” he said. “So I’m looking for a better market.”
Some of the voters looking for further weakness point to gold’s downtrend on the technical charts.
“The technical picture in gold is increasingly gloomy,” said Adam Button, currency analyst with Forexlive.com.
Despite the sharp fall that has occurred already, “the picture is not one for complacency nor a place to look for a buying opportunity,” said Greg Harmon, founder of Dragonfly Capital. “Gold could be on the verge of a major move lower.”
Several observers said they are undecided or neutral for now until a weekend Italian constitutional referendum is out of the way, or else they see gold largely sideways until a Federal Open Market Committee meeting wraps up on Wednesday.
“I see it sideways,” said Bob Haberkorn, senior commodities broker with RJO Futures. “We have the Italian referendum coming up and there seems to be a risk-on trade coming into it this (Friday) morning. But if anything, gold is waiting for the Fed (on Tuesday-Wednesday). It is oversold down at these levels…people looking to add positions want to do so closer to the Fed announcement.”
Peter Hug, director of global trading for Kitco Metals, said much will depend on Italian referendum.
“No vote -- gold up,” he said. “Yes vote -- gold down.”
By Allen Sykora of Kitco News; asykora@kitco.com
