(Kitco News) - Wall Street and Main Street both look for gold to build on gains next week after a Federal Open Market Committee meeting that provided a lift to the metal, based on the weekly Kitco News gold survey.
When a two-day meeting wrapped up on Wednesday, the Fed’s so-called dot-plot – which shows the expectations on interest rates by individual policymakers – suggested that officials collectively do not anticipate another rate hike in 2019. By contrast, policymakers had projected two rate hikes back in December.
Gold soared, although later in the week the yellow metal backed down from its highs. A dovish Fed tends to help precious metals two ways – by weighing down the U.S. dollar, which has an inverse relationship with gold, and by lowering the so-called “opportunity cost,” or lost income from holding metals instead of an interest-rate-bearing asset.
“The Federal Reserve cleared an obstacle for gold this week by implying they are done with rate hikes this year,” said Richard Baker, editor of the Eureka Miner Report. “The 10-year Treasury fell below 2.5% this morning in a rolling response to this decision coupled with expectations for slower growth in 2019. Inflation expectations have returned to their March high resulting in 10-year real rates fast approaching 0.5%.
“This substantially reduces the opportunity cost for holding a gold position and clears the runway for higher gold prices on future safe-haven demand.”
Seventeen market professionals took part in the Wall Street survey. Twelve participants, or 71%, described themselves as bullish for the week ahead. There were four voters, or 24%, who see sideways prices, while just one respondent, or 6%, called for a retreat.
Meanwhile, 572 respondents took part in an online Main Street poll. A total of 387 voters, or 68%, called for gold to rise. Another 127, or 22%, predicted gold would fall. The remaining 58 voters, or 10%, saw a sideways market.
Wall Street
71%
24%VS
Main Street
68%22%In the last survey, Wall Street and Main Street were both bullish on gold for the current week. As of 11:06 a.m. EDT, Comex April gold futures were trading higher by 0.5% for the week so far at $1,309.70 an ounce.
“I am bullish on gold for next week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “I think today marks a turning point where the Street has finally woken up to the growing Brexit risks out there and capital has started to move back into safe havens like gold for the short term.”
David Madden, market analyst at CMC Markets, also said that he is bullish on gold but doesn’t expect a significant upside breakout anytime soon. A dovish Fed supports higher gold prices, but the U.S. dollar will remain relatively strong as other central banks are even more dovish, he explained.
“If the Federal Reserve has downgraded its growth forecasts for the year, how worried does the ECB [European Central Bank] have to be?” Madden asked rhetorically. “You need to keep your cash in some currency, and I think the U.S. dollar will remain the attractive option. I think gold will remain in its uptrend, but rallies will be capped because of the U.S. dollar.”
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, also looks for gold to rise some more.
“Reinforcement of Federal Reserve and ECB’s backing away from monetary tightening is very supportive of gold,” Day said.
Jim Wyckoff, senior technical analyst with Kitco, said “technicals have gotten more bullish this week.”
Sean Lusk, director of commercial hedging with Walsh Trading, looks gold to climb but at a slow pace. With stocks lower so far Friday, he noted some investors are still seeking alternative assets. “The lessons of the fourth quarter are still intact,” he said, referring to a sharp drop in equities.
Meanwhile, Charlie Nedoss, senior market strategist with LaSalle Futures Group, looks for gold to ease.
“Things got a little overextended,” he said of the recent rally. “The dollar [index] is back over 96.”
Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA, looks for gold to trade in a range of $1,300 to $1,325. “I think a break above $1,325 should take the market towards $1,350,” he added.
