(Kitco News) - Wall Street changed its near-term outlook on gold prices and now looks for the metal to continue to decline on an expectation for more U.S. rate hikes, although Main Street still leans bullish, according to the weekly Kitco News gold survey.
The Federal Open Market Committee wrapped up a meeting Thursday in which policymakers issued a statement saying economic activity remains “strong” and suggested “further gradual increases” in interest rates. This tends to underpin the dollar, and gold more often than not moves in the opposite direction from the U.S. currency.
“It’s not a coincidence that gold is down sharply the day after the Federal Reserve said it will continue to raise interest rates,” said David Madden, market analyst at CMC Markets.
Twenty market professionals took part in the Wall Street survey. Twelve respondents, or 60%, predicted lower prices by next Friday. There were four votes each, or 20%, for higher and sideways.
Meanwhile, 370 people responded to an online Main Street poll. A total of 178 respondents, or 48%, called for gold to rise. Another 109, or 29%, predicted gold would fall. The remaining 83 voters, or 22%, see a sideways market.
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48%29%For the trading week now winding down, 53% of Wall Street and 57% of Main Street voters were bullish. As of 11 a.m. EDT, Comex December gold was 1.6% lower for the week so far at $1,213 an ounce.
“I am bearish for next week,” said Kevin Grady, president of Phoenix Futures and Options. “Gold is having a hard time holding onto its gains at these levels. We are not seeing many new longs entering the market at this price point, so I think we should test the 50 DMA [50-day moving average), which is $1,213.60. A breach of that level will attract more selling.”
Bob Haberkorn, senior commodities broker with RJO Futures, pointed out that gold is on the defensive so far Friday after the FOMC remained hawkish in its post-meeting statement Thursday.
“I see that continuing into next week,” he said, adding that a break below $1,200 could occur.
Phil Flynn, senior market analyst with at Price Futures Group, also sees gold-price weakness mainly due to higher rates.
“It seems like gold’s main concern is rising interest rates and the strong dollar,” Flynn said. “So it looks like there will be more technical weakness that will continue into next week.”
Further, he added, the slowdown in China’s economy will pressure the country’s currency and underpin the dollar, thereby meaning a “difficult time” for gold.
Charlie Nedoss, senior market strategist with LaSalle Futures Group, anticipates a possible test of $1,200 an ounce on the downside, with the potential to trigger sell stops. These are pre-placed orders hit when certain chart points are hit. He points out that the dollar is showing technical strength, topping the 20-day moving average again, as it feeds of off FOMC statements.
“The stars just aren’t lining up for gold right now as energy prices fall and the Fed continues to raise interest rates,” said Colin Cieszynski, chief market strategist, SIA Wealth Management. “Gold is losing momentum, and it just looks like the price wants to roll over.”
Richard Baker, editor of the Eureka Miner Report, also sees more weakness.
“The likelihood that the Federal Reserve will raise rates in December is now high,” Baker said. “The yellow metal's recent return to safe-haven mode may have run its course following the divided government outcome of the midterm elections. Gold is also feeling the gravity of falling commodities, especially oil and to a lesser extent copper.”
Meanwhile, Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, is among those who see prices rising.
“As Democrats make clear they intend to investigate ‘all things Trump,’ the dollar will slip and gold inch up,” he said.
George Gero, managing director with RBC Wealth Management, suggested the Friday weakness and new shorts, or bearish trades, “could give way [in the] next two weeks to rally.” Increased shorts mean a potential for short covering as traders buy to exit those traders.
Jim Wyckoff, senior technical analyst with Kitco, sees gold steady but choppy in the week ahead. “Bulls have lost some near-term technical strength this week,” Wyckoff added.
