By Paul Ploumis (ScrapMonster Author)

May 09, 2016 12:53:02 AM

(Kitco News) - Gold prices managed to trade above $1,300 earlier in the week, but have since come down. However, overall sentiment remains bullish among investors and market professionals, according to the results of this week’s Kitco News Wall St. vs. Main St. Gold Survey.

After trading at 15-month highs during the first two trading days of the week, gold futures have stubbornly been trading below the $1,306 high hit Monday. After closing lower for three consecutive days, June gold futures were last up $20.70 at $1,293 an ounce. The major contributing factor to gold’s reversal Friday was the release of a weaker-than-forecast nonfarm payrolls report, which showed dismal employment data out of the U.S. in April.

Despite the swings in gold, retail investors are sticking with it over the short term. This week, 660 people participated in Kitco’s online gold survey. Of those, 418 voters, or 63%, said they expect to see higher prices next week; at the same time, 159 people, or 24%, said they expect to see lower prices next week; and 83 people, or 13%, are neutral on the market.

Out of 35 market professionals contacted, 16 responded, of which nine, or 56%, said they are bullish on gold. Meanwhile, five experts, or 31%, said they are bearish and two (13%) were neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Although a few analysts call for a pullback in gold prices, they expect any downside to be limited. Some analysts turned even more bullish after the weak jobs data released Friday morning.

“I’m expecting next week to be a pivotal time for gold with a strong possibility the metal’s price will break through resistance around $1,300 an ounce to establish a new trading range between $1,300 and $1,350,” Jeffrey Nichols, senior economic advisor for Rosland Capital, told Kitco News.

“As it sinks in that the economy is weaker and the Fed unlikely to notch up short-term rates anytime soon — and perhaps not at all this year — gold will increasingly find support and the technical picture become more supportive, particularly with upward momentum continuing to define the market,” he explained.

Although bullish over the longer term, asset manager Adrian Day said gold is “overdue” for a pullback. “I suspect the pullback will be shallower than that of the last few years, given investors on the sidelines waiting for lower prices to buy.”

Mark Leibovit, editor of the VR Gold Letter, agreed with Day in that he sees a retracement ahead in this “overbought” gold market. “After a pullback into late May or June, I think we could set a bottom for another advance,” he said. “Gold’s ideal pullback would be back to $1,180-1,200.”

The consensus for the analysts who were more bearish on gold seems to be the fact that they expect the U.S. dollar’s downtrend to reverse, which should pressure the yellow metal next week.

“The euro currency is now in a corrective move lower, which implies in the short term a stronger U.S. dollar,” explained Ira Epstein, director of the Ira Epstein division of Linn & Associates.  “As the dollar moves up, gold should come under selling pressure.”

However, CB Capital Partners’ Henry To noted that despite weakness in the euro – and, in turn strength for the dollar – gold should remain supported by investor interest in Europe. “[A]ny weakness in gold prices should be short-lived as the Europeans buy more gold to hedge their currency risks or to utilize as a store of value,” he said.

Ken Morrison, editor of the online newsletter Morrison on the Markets, said he is neutral because he can find as many reasons to be bullish as bearish.

“The chart pattern is a bullish flag pattern favoring the next leg higher but a big negative concern for me is the ratio of speculative longs vs. speculative short-sellers,” he said. “Historically this imbalance can exaggerate downside corrections.”

Courtesy: Kitco News