(Kitco News) - Participants in the weekly Kitco News gold survey are shaking off Friday’s slump after strong U.S. jobs data, looking for the metal to bounce next week.
They cited continuing expectations for U.S. rate cuts at some point in time, despite the jobs report, as well as gold’s technical-chart momentum prior to Friday’s pullback.
The monthly jobs report released on Friday showed that U.S. nonfarm payrolls rose by a larger-than-forecast 224,000 during June. The unemployment rate edged marginally higher to 3.7 percent, while wages rose 3.1% from the same month a year ago.
Sixteen market professionals took part in the Wall Street survey. A total of eight voters, or 50%, called for gold to rise. Nevertheless, a higher percentage of voters were bearish than in the last several surveys. There were four votes each, or 25%, for both lower and sideways/neutral.
Meanwhile, 721 respondents took part in an online Main Street poll. A total of 470 voters, or 65%, called for gold to rise. Another 144, or 20%, predicted gold would fall. The remaining 107 voters, or 15%, saw a sideways market.
Wall Street
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65%20%In the last survey, Main Street and Wall Street voters alike were bullish. They had been right before Friday and the jobs report. As of 11:09 a.m. EDT, Comex August gold futures were trading $17.20 lower for the week so far at $1,396.50 an ounce.
Previously, Wall Street and Main Street were on a roll after both starting the year so-so in the prognostication department. Participants in both polls were bullish in the last seven surveys. They were right five times, and the outcome of the last survey is not known yet since Comex gold has not closed for the week. For the only other survey since late May in which Wall Street and Main Street didn’t forecast correctly (June 7), gold dipped by a mere $2.10 during the ensuing week.
Wall Street now has a 14-11 winning record for the year, meaning respondents have been right 56% of the time. Main Street is 13-12 for 52%.
“We expect the uptrend in gold [prior to Friday] to continue,” said Phil Flynn, senior market analyst with at Price Futures Group. “A shaky global economy with weak data along with trade war fears should keep gold in its upward trend. Looking ahead, we see more chances of global economic stimulus, thereby weakening currencies and making gold more attractive vehicle to preserve value.”
Flynn said he doubts the jobs data will change the collective minds of the Federal Reserve policymakers, thus still looks for a rate cut.
“Because of the strong jobs report, some people believe the Fed may be less likely to cut,” Flynn said, commenting that this view is behind Friday’s decline in gold prices. “I don’t think the jobs report changes their concerns about a [potential] slowing economy and the trade war.”
Jim Wyckoff, senior technical analyst with Kitco, looks for gold to be steady to higher next week. “Charts still favor bulls,” he said.
Sean Lusk, director of commercial hedging with Walsh Trading, is among those who look for gold to ease after the strong jobs report.
“I think you will eventually head lower here,” Lusk said. “It [the jobs report] maybe will cause some uncertainty regarding [previously expected cuts in U.S. interest] rates. You are coming into the strong demand period, but that may not matter yet.”
Charlie Nedoss, senior market strategist with LaSalle Futures Group, also figures gold could dip some more, putting the next key downside level at the 20-day moving average around $1,383.60. He cited a strong U.S. dollar after the jobs report.
The gold market also roughly formed a double top, he added. The August futures peaked at $1,442.90 an ounce on June 25, then nearly matched that again at $1,441 on Wednesday.
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, looks for gold to be roughly unchanged next week, although he is bullish further out.
“If certain factors driving gold higher are reversed -- if for example, indications grow that the Fed won't raise rates next month -- gold could consolidate, which would be overdue,” Day said.
Afshin Nabavi, head of trading with MKS, said “it’s a bit hard to tell” what to expect from a suddenly choppy gold market, commenting that the market is in a short-term range of $1,380 to $1,440 an ounce.
“[Fed Chair Jerome] Powell testifies in front of Congress next week, where we may get a better clue on the thinking going into the July [Fed] meeting,” Nabavi said.
