Main St., Wall. St. See Gold-Price Slide Continuing
(Kitco News)- Sentimentin the precious metals market is clearly bearish in the near-term as WallStreet and Main Street both look for gold to slide further in the next week,based on the Kitco News weekly survey.
Infact, this is the first week that Wall Street and Main Street both have beenbearish at the same time since March 9.
Fifteenmarket 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 forgold 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 406respondents, 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 asideways market.
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Forthe trading week now winding down, 59% of Wall Street was bullish, while thelargest 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.
“Ithink the bias remains lower,” said Peter Hug, global trading director of KitcoMetals.
SeanLusk, director of commercial hedging with Walsh Trading, figures gold couldtest a trendline around $1,238 to $1,240. Some buying in the form ofprofit-taking by bearish traders enabled a modest bounce early Friday.Otherwise, recent U.S. dollar strength has eroded any safe-haven buying thatotherwise may have occurred, he added.
“Ithink there will be a little more downside, then up,” Lusk said, noting aseasonal bounce in gold is still “down the road” a ways.
AdamButton, managing director of ForexLive, also called for gold to be lower.
“Goldis badly struggling and technically weak,” Button said. “There’s no near-termcatalyst for a turnaround.”
RalphPreston, principal with Heritage West Financial, also anticipates further goldweakness. Preston said he anticipates the U.S. dollar will remain underpinned,thus “tilting the entire commodity complex (except crude oil because of actualsupply shortages) to the downside.”
RichardBaker, editor of the Eureka Miner Report, sees gold slipping to around $1,245,in particular citing the rapid depreciation of China’s currency.
“Inthe currency markets, the rapid depreciation of the Chinese yuan is striking,”Baker said. “Even more stunning is the tight correlation with the gold pricegoing back to the U.S.-China trade tensions, which began to escalate in lateMarch. As the yuan weakens, so does gold. Interestingly, gold's relation to theyuan is stronger than the correlation to the U.S. dollar index.
“Ifthis correlation holds, further weakening of the Chinese currency does not bodewell for a gold recovery from the present $1,250 level.”
Meanwhile,Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA, is one ofthose calling for gold to fare better at the start of a new quarter.
“Theeuro is edging higher and the dollar is losing a little value,” he said earlyFriday. Nabavi also cited news reports that U.S. President Donald Trump maywithdraw the country from the World Trade Organization. “If it’s true, itshould be bad for the dollar and helpful for the metals,” Nabavi added.
AdrianDay, chairman and chief executive officer of Adrian Day Asset Management, looksfor gold to be mostly unchanged in the next week.
“Inthe short term, gold is reacting mostly to the dollar, and though the dollarhas enjoyed a very strong run in the last few months, it would be difficult tothink this will change next week,” Day said. “We are also in a seasonally weakperiod for gold. But the fundamentals are strong; in particular, inflation isslowly firming while the Fed Reserve and other central banks are in no positionto raise rates aggressively; they are likely to find themselves lagging andthat is positive for gold.”
KevinGrady, president of Phoenix Futures and Options LLC, is neutral in the shortterm. Gold has fallen sharply due to a stronger dollar and rising interestrates, and Grady also said he does not see a reason for the metal to stage arecovery 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, Gradysaid.
Still,“I think any rally will be sold,” Grady said.
By Allen SykoraFor Kitco News
Follow @AllenSykora
asykora@kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.