(Kitco News) - Sentiment in the precious metals market is clearly bearish in the near-term as Wall Street and Main Street both look for gold to slide further in the next week, based on the Kitco News weekly survey.
In fact, this is the first week that Wall Street and Main Street both have been bearish at the same time since March 9.
Fifteen market professionals took part in the survey. There were eight votes, or 53%, calling for gold prices to decline. There were three votes, or 20%, calling for gold to rise, while four voters, or 27%, look for a sideways market.
Meanwhile, 878 voters responded in an online Main Street survey. A total of 406 respondents, or 46%, predicted that gold prices would be lower in a week. Another 325 voters, or 37%, said gold will rise, while 147, or 17%, see a sideways market.
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For the trading week now winding down, 59% of Wall Street was bullish, while the largest block of Main Street voters – 40% -- was bearish. Just before 11 a.m. EDT, Comex August gold was down 1.4% for the week so far to $1,252.50 an ounce.
“I think the bias remains lower,” said Peter Hug, global trading director of Kitco Metals.
Sean Lusk, director of commercial hedging with Walsh Trading, figures gold could test a trendline around $1,238 to $1,240. Some buying in the form of profit-taking by bearish traders enabled a modest bounce early Friday. Otherwise, recent U.S. dollar strength has eroded any safe-haven buying that otherwise may have occurred, he added.
“I think there will be a little more downside, then up,” Lusk said, noting a seasonal bounce in gold is still “down the road” a ways.
Adam Button, managing director of ForexLive, also called for gold to be lower.
“Gold is badly struggling and technically weak,” Button said. “There’s no near-term catalyst for a turnaround.”
Ralph Preston, principal with Heritage West Financial, also anticipates further gold weakness. Preston said he anticipates the U.S. dollar will remain underpinned, thus “tilting the entire commodity complex (except crude oil because of actual supply shortages) to the downside.”
Richard Baker, editor of the Eureka Miner Report, sees gold slipping to around $1,245, in particular citing the rapid depreciation of China’s currency.
“In the currency markets, the rapid depreciation of the Chinese yuan is striking,” Baker said. “Even more stunning is the tight correlation with the gold price going back to the U.S.-China trade tensions, which began to escalate in late March. As the yuan weakens, so does gold. Interestingly, gold's relation to the yuan is stronger than the correlation to the U.S. dollar index.
“If this correlation holds, further weakening of the Chinese currency does not bode well for a gold recovery from the present $1,250 level.”
Meanwhile, Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA, is one of those calling for gold to fare better at the start of a new quarter.
“The euro is edging higher and the dollar is losing a little value,” he said early Friday. Nabavi also cited news reports that U.S. President Donald Trump may withdraw the country from the World Trade Organization. “If it’s true, it should be bad for the dollar and helpful for the metals,” Nabavi added.
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, looks for gold to be mostly unchanged in the next week.
“In the short term, gold is reacting mostly to the dollar, and though the dollar has enjoyed a very strong run in the last few months, it would be difficult to think this will change next week,” Day said. “We are also in a seasonally weak period for gold. But the fundamentals are strong; in particular, inflation is slowly firming while the Fed Reserve and other central banks are in no position to raise rates aggressively; they are likely to find themselves lagging and that is positive for gold.”
Kevin Grady, president of Phoenix Futures and Options LLC, is neutral in the short term. Gold has fallen sharply due to a stronger dollar and rising interest rates, and Grady also said he does not see a reason for the metal to stage a recovery just yet. There are a lot of short, or bearish, traders in the market, thus any news-driven uncertainty could trigger a short-covering rally, Grady said.
Still, “I think any rally will be sold,” Grady said.
