(Kitco News) - Wall Street and Main Street alike look for gold’s resurgence to continue next week, according to a pair of Kitco News gold surveys.
Wall Street
75%
6%VS
Main Street
54%38%In late Friday-morning trading, gold prices were on track for their second straight weekly gain after previously falling for seven weeks in a row. As of 11:21 a.m. EST, Comex February gold was up almost 2% for the week to $1,173.90 an ounce.
Sixteen traders and analysts took part in a weekly Wall Street survey. Twelve voters, or 75%, see gold prices rising by next Friday. Three, or 19%, see a sideways market, while only one voter looks for prices to fall.
Meanwhile, 1,007 participants took part in the Main Street survey. A total of 542, or 54%, called for gold to rise, while 378, or 38%, saw lower prices. The remaining 87, or 9%, were neutral.
Going back to mid-May, Wall Street forecast correctly 21 times and was wrong 11 times, a winning percentage of 66%. Main Street had an 18-14 mark during this period for 56%.
“Seasonal trends point up from early January to late in the month,” said Ira Epstein, director of the Ira Epstein division of Linn & Associates, who is among the majority seeing higher prices.
Phil Flynn, senior market analyst with at Price Futures Group, also looks for gold to maintain its recent upward momentum. “The continued concerns about the Chinese currency falling and the capital controls in China should keep demand for physical gold strong next week.”
Additionally, Flynn cited potential buying after a year-on-year 2.9% average hourly wage gain, the strongest since 2009, that was included in the December U.S. jobs report that came out on Friday. “The increase in the wages could spark some concerns about future inflation that could cause some buying in gold as an inflation hedge,” Flynn said.
Kevin Grady, president of Phoenix Futures and Options LLC, also said he is bullish. He suggested any correction lower in the U.S. dollar, after its previous run-up, is likely to bring in new bullish gold futures positions.
“As we get closer to the inauguration, the Trump team is going to have to address that dollar,” Grady said. “I think gold hit a short-term bottom here. I don’t see any reason for gold to sell off. I think new longs will come into the market, pushing gold higher.”
Sean Lusk, director of commercial hedging with Walsh Trading, also looks for a pick-up in prices although not a massive move. He looks for follow-through buying, particularly with equities stuck around key thresholds and the dollar retracing some of its gains lately. There is also potential for some seasonal buying, he adds.
“You’re probably seeing some fresh buying amid uncertainty at the start of the year with a new president (to be inaugurated this month),” Lusk said. “Gold fell too far, too fast.”
Ralph Preston, principal with Heritage West Financial, figures gold is simply due for more of a bounce after having sold off for so many weeks in a row.
Ken Morrison, editor of the newsletter Morrison on the Markets, figures $1,200 gold is a possibility.
“The year for gold is starting off very similar to last year with new buyers dominating the trend, as evidenced by the 30,000-contract increase in open interest during the recent $40 rally,” he said. “The five-day moving average crossed above the 25-day moving average Thursday, a first since Nov. 1, indicating upside momentum has returned to gold. The market may need a little time to consolidate recent gains, but a $1,200 target next week is doable.”
Richard Baker, editor of the Eureka Miner Report, said he expects gold to decline to perhaps $1,160 over the next week, calling for some consolidation after gold’s “solid advance” this week. Otherwise, he suggested the fate of the Chinese yuan will be a key for gold in the near term. The yuan soared against the dollar this week with aggressive tightening of liquidity by the People’s Bank of China, Baker said.
“Arguably, this began erosion of dollar strength against other currencies,” Baker said. “Even though this trend reversed after today’s reasonably solid (U.S.) labor market report, similar PBOC actions caused much market turmoil last January and sparked the 2016 gold rally….We may have to wait until after (the) Lunar New Year to see how the yuan story plays out.
Daniel Pavilonis, senior commodities brokers with RJO Futures, is among those looking for the market to be largely flat.
“It just seems like as we get closer to the (U.S. presidential) inauguration, I think everything will calm down a little bit,” he said. “Maybe a week prior to the inauguration, we’ll start to see more action. But I feel like next week is going to be a sideways market across the board, especially for gold.”
By Allen Sykora of Kitco News; asykora@kitco.com
