Gold Optimism Growing As Main Street, Wall Street Majority See Higher Prices Next Week

By  Paul Ploumis 24 Aug 2015 Last updated at 05:55:56 GMT

A good majority among retail investors and market professionals believe that gold prices may see further gains during next week.

(Kitco News) - A late-week rally in gold is helping drive optimism in the marketplace as a strong majority among retail investors and market professionals expect to see higher prices next week, according to the weekly Kitco News Wall Street vs Main Street Gold Survey.

Gold prices are preparing to close its second consecutive week in positive territory, showing gains of more than 5% after the market hit a six-week high in overnight activity Friday.

This week, 304 people participated in Kitco’s weekly online gold survey; among the participants, 193 people, or 63% are bullish on gold next week; 74 voters, or 24%, are bearish on the yellow metal, while 37 people, or 12%, are neutral. Last week’s survey showed that 58% of online voters were bullish on the yellow metal.

The results of Kitco’s market professional survey, was relatively similar to Main Street as a strong majority expect this rally to continue next week. Out of 35 market experts contacted, 18 responded, of which 11, or 61%, said they expect to see higher prices next week. At the same time, four professionals, or 22%, said they see lower prices, and three people, or 17%, are neutral on gold. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

According to analysts, dovish minutes from the July Federal Open Market Committee (FOMC) meeting have helped support gold prices as markets have pushed back expectations of the Federal Reserve’s first rate hike. Shifting interest rate expectation, a weaker U.S. dollar and equity markets are expected to continue to drive gold prices higher.

“It is clear from the Federal Reserve’s latest meeting minutes that there is a reluctance to raise rates; the market is beginning to see through the smoke the Fed is blowing about raising rates,” said Adrian Day, president of Adrian Day Asset Management. “One tiny rate increase at the end of the year is not going to wreck the gold market.”

Henry To, market analyst at CB Capital Partners, said that he is positive on gold next week as growing inflation expectations in  Asia start to grow. He added that there is a lot of pent-up demand for physical gold in China and India that is expected to be unleashed later this year.

“A significant amount of potential gold demand that did not emerge last quarter is now being pushed to Q3 and Q4 of this year,” he said.

At the same time, the strong rally in gold have some analysts concerned that markets could see some profit taking, which could ultimately drive down prices next week.

“We overshot my target of $1,056 but now it seems like we have run out shorts to cover,” said Ole Hansen, head of commodity strategy at Saxo Bank. “On that basis, gold now need real demand to continue the move higher. This might take some time considering the overall negative view on gold up until recently.”

Courtesy: Kitco News