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(Kitco News) - Wall Street made a big U-turn and is now heavily positive on the short-term outlook for gold, while Main Street continues to lean bullish.
Wall Street
68%
16%VS
Main Street
49%37%The metal is headed for a higher weekly close, boosted by comments from Federal Reserve Chair Janet Yellen, which some observers saw as limiting any future U.S. rate hikes, as well as soft U.S. economic data on Friday. Retail sales fell 0.2% in June, while the Consumer Price Index was flat.
Nineteen traders and analysts took part in a Kitco News Wall Street survey. Thirteen voters, or 68%, see gold prices rising by the end of next week. That is the exact same percentage as the number of Wall Street voters who were bearish as of last Friday. Meanwhile, there were three Wall Street votes for both lower and sideways, or 16% each.
The Kitco online Main Street poll resulted in 808 votes, with 394 participants, or 49%, calling for gold to climb over the next week. Another 296 voters, or 37%, said that gold will fall, while 118, or 15%, were neutral.
In last Friday's survey for the current week, Wall Street was bearish and the largest camp of Main Street voters (47%) was bullish. As of 11:15 a.m. EDT, Comex August gold was up 1.6% the week to $1,228.60 an ounce.
So far in 2017 but not counting the current week, Wall Street forecasters collectively were right 17 of 26 times for a winning percentage of 65%. Main Street was right 15 of 25 times for 60%.
“Considering the CPI data we saw this morning along with retail sales, I think you will see more upside,” said Bob Haberkorn, senior commodities broker with RJO Futures, adding that this was the fourth straight month that CPI was below expectations. “The market is interpreting the data as bullish for gold and it made it look like a rate hike is less likely than it was last night.”
With Yellen’s congressional testimony this week in the rear-view mirror, market concerns about future U.S. interest-rate increases appear to have eased some, said Phil Flynn, senior market analyst with at Price Futures Group. Higher rates tend to hurt gold by underpinning the U.S. dollar and increasing the so-called “opportunity cost,” or lost interest earnings, from holding a non-yielding asset such as precious metals.
“It looks like we might have put in a nice little bottom for gold,” Flynn said. “So we look for it to be higher next week.”
Ken Morrison, editor of the newsletter Morrison on the Markets, commented that the cool CPI data for June pressured the U.S. dollar and paves the way for gold to test first overhead resistance at $1,240, which is the downtrend line off the June high. He also pointed out that the number of open positions had been rising on a “modest” rally, even prior to the CPI report, which he described as unusual during the index roll period, which ends Friday.
“Gold has a reasonable chance of getting through $1,240 setting up an advance toward $1,250, [which is roughly a] 50% retracement of the move over the past six weeks,” he said.
Darin Newsom, senior analyst at Telvent DTN, said that the short-term trend is higher. “Gold should have enough momentum to push to $1,240 in the near term, but the market really needs to push through the April and June double top for the bulls to really regain the upper hand,” he said.
Chris Vecchio, senior currency strategist at DailyFX, is among those bearish for next week. “With yields holding above [their] recent lows, it makes more sense to sell gold on the rallies in the near term,” he said.
Robin Bhar, metals analyst at Societe Generale, looks for the market to be sideways as participants await more clarity from central bankers on their intentions for future monetary policy.
“They’ve talked a lot about removing monetary stimulus,” he said. “This week, they rode back … and became a little more dovish.”
