By Allen Sykora of Kitco News
Friday May 20, 2016 12:00
(Kitco News) - Retail investors and market professionals continued to hold opposing views on the direction of gold over the next week, according to the Kitco News Wall Street vs. Main Street weekly gold survey.
This week, Kitco’s online and Twitter surveys received a combined 783 votes. A total of 438 respondents, or 56%, said they were bullish on the week ahead, while 230, or 29%, were bearish. The neutral votes totaled 115, or 15%.
Meanwhile, 22 analysts and traders took part in a survey for market professionals. Those looking for further weakness made up the largest chunk of voters, 10, or 45%. Seven, or 32%, look for prices to bounce, while five, or 23%, are neutral.
Retail investors were bullish last week while the largest block of market professionals – exactly half of the participants – were bearish. Just after 11 a.m. EDT, Comex June gold was down for the week by $18.60 to $1,254.10 an ounce, pressured in large part after minutes of the April meeting of the Federal Open Market Committee left traders thinking there was a greater chance of a U.S. rate hike than previously thought.
Colin Cieszynski, chief market analyst in Canada for CMC Markets, looks for Fed expectations to weigh on gold some more next week.
“Although USD (the U.S. dollar) has priced in two rate hikes, I don't think gold -- or bonds for that matter -- has finished factoring in a more hawkish Fed yet and it could take a few more days,” he said. “I think gold could potentially retest $1,228 Fibonacci support before resuming its broader uptrend.”
Henry To, analyst at CB Capital Partners, also looks for another pullback, with speculators still heavily net long after they came into the year bearish.
“Then they got whipsawed beginning in February up until this month,” he said. “Now they've gotten too bullish too quickly. It looks like they will get whipsawed again but this time on the downside.”
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, continued to call for a pullback heading into a seasonally weak period, with the Fed minutes perhaps providing the impetus, but also said he remains fundamentally bullish longer term.
“Any lack of action by the Fed, or a tiny rate increase wrapped in weasel words about the future possibility of rate increases, will see gold move up, just as is it did after the December rate increase,” Day said. “There is a lot of money on the sidelines waiting to get into the market after a pullback, so I doubt it will be a significant correction.”
Others say gold may bounce again as the market becomes accustomed to the idea of a potential summer rate hike in the U.S.
“The Fed obviously hurt the momentum in gold,” said Phil Flynn, senior market analyst with Price Futures Group. “The mood is negative. But I think it appears the market is already trying to put the (potential) rate increase in perspective. I think because the physical demand for gold continues to be strong, there is a good chance we’re going to be rebound next week.”
Sean Lusk, director of commercial hedging with Walsh Trading, looks for any pullbacks to become buying opportunities.
“We still have other nations going to negative rates and staying there. We still have a lot of headwinds for the global economy,” Lusk said. “I think with as we get closer to this Brexit decision (on whether the U.K. leaves the European Union), I don’t think anybody is going to want to be heavily short the gold market here.”
Kevin Grady, president of Phoenix Futures and Options LLC, looks for investment demand to hold up, especially from parts of the world where central banks have initiated negative interest rates.
“There is a lot of ETF (exchange-traded-fund) buying coming into the market,” he said. “I think a lot of buyers coming in are in the area of negative interest rates. I think there is a lot of European buying in the market here. I think overall that picture hasn’t changed, so I’m slightly bullish on the market.”
Ken Morrison, editor of the newsletter Morrison on the Markets, looks for consolidation.
“My two concerns about gold came to fruition this week -- namely the strength of the dollar combined with the fact 90% of the non-commercial position was long -- would be the factors that would lead gold to retest $1,250 support,” he said. “Given that it met my target, I'm neutral on gold in the near term as I believe the dollar will also stabilize, consolidating gains near the current level.”