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Wall, Main Street See More Gold Gains Amid U.S. Political Turbulence

iconMay 22, 2017 10:12
Wall Street and Main Street alike look for gold to build on its upward momentum next week, according to the weekly Kitco News gold survey.

Allen Sykora  

Friday May 19, 2017 11:50

(Kitco News) - Wall Street and Main Street alike look for gold to build on its upward momentum next week, according to the weekly Kitco News gold survey.

Barring a late-day collapse Friday afternoon, gold is on the way to a solid gain for the week. The metal has been boosted by a number of news reports about alleged ties between the campaign of U.S. President Donald Trump and Russia, which resulted in the Justice Department naming a former director of the FBI as a special investigator. Gold’s biggest rise came Wednesday, when the stock market suffered its largest sell-off of the year.

Eighteen traders and analysts took part in a Wall Street survey.  Eleven voters, or 61%, see gold prices rising by next Friday. Three, or 17%, said lower, while four voters, or 22%, were either neutral or expected sideways prices.

Meanwhile, 944 readers submitted votes in an online Main Street poll. A total of 588 voters, or 63%, are bullish. Another 268, or 28%, say that gold will fall, while 88, or 9%, are neutral.

In last Friday's survey for the current week, 71% of Wall Street voters and 52% of Main Street voters were bullish. As of 11:09 a.m. EDT Friday, Comex June gold was 2% higher for the week so far to $1,252.70 per ounce.

So far in 2017 but not counting the current week, Wall Street forecasters collectively were right 11 of 18 times for a winning percentage of 61%. Main Street was 10-8 for 56%.

“The potential for more shenanigans from Washington is probably higher than lower,” said Adrian Day, chairman and chief executive officer of Adrian Day Asset Management. “And this will see gold more up.”

Ira Epstein, director of the Ira Epstein division of Linn & Associates, also said higher, citing “chaos in the U.S.” and the Brazilian presidency.

Henry To, analyst at CB Capital Partners, also looks for more gains, citing reduced expectations for tighter monetary policy amid the uncertainty.

“Ongoing downward pressure on the U.S. dollar should continue, given a rising U.S. current-account deficit and a reacceleration of European economic growth relative to that of the U.S.,” he said. “I believe the Fed will hike rates one more time on June 14 and that’d be it for the year, as U.S. economic growth cannot accelerate given the heightened domestic political uncertainty and in the absence of tax cuts and higher infrastructure spending. All of these should be supportive for gold prices over the next several months.”

Charlie Nedoss, senior market strategist with LaSalle Futures Group, commented that gold is at a “critical point,” trading between the 20- and 200-day moving averages as of mid-morning. Still, for now, he sees more upside next week.

“There is enough uncertainty around that will keep a bid here,” he says. “And the dollar is under a bit of pressure longer term.”

Meanwhile, Forexlive.com currency analyst Adam Button looks for prices to give back some of their gains next week, saying “political fears are overblown.”

Richard Baker, editor of the Eureka Miner Report, also sees a pullback.

“After a week of political turmoil in the White House that brought Comex gold to $1,265 per ounce, there is a sense that the appointment of a special counsel for the Russia investigation and the President's trip abroad will bring market stability and diminish enthusiasm for the safe-haven trade,” he said. “Commodities are now responding to positive economic news for the U.S. and Europe, and a beaten U.S. dollar returned to pre-election levels….Given this backdrop, it is likely that the yellow metal will return to the $1,240-per-ounce level next week.”

Kevin Grady, president of Phoenix Futures and Options LLC, is neutral on gold for now largely due to potential for a certain number of traders to exit bullish positions in June gold futures ahead of first-notice day at the end of the month, rather than rolling them forward.

“The only reason I’m neutral, as opposed to being bullish, is we’re in the roll period,” he says. “There are eight business days left in the roll. A lot of times what happens is we do see liquidation prior to the roll. That will be stemming any sort of rally.”

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