The metal tumbled since the seven-year high hit in early March, with most analysts attributing the decline to traders liquidating to raise cash after the carnage that occurred in other markets, with U.S. stock indices going from record highs to bear-market territory.
Now, however, “I think gold is overdue for a bounce,” said Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, offering a view expressed by other Wall Street participants as well.
Still, Day added, much will hinge on future developments. The COVID-19 virus is still spreading, while governments and central bankers are scrambling to come up with measures to limit the economic fallout.
Thirteen market professionals took part in the Wall Street survey. There were nine votes, or 69%, for higher prices next week. No respondents were bearish, although four, or 31%, were neutral or called for sideways prices.
Meanwhile, 1,163 votes were cast in an online Main Street poll. A total of 589 voters, or 51%, looked for gold to rise in the next week. Another 365, or 31%, said lower, while 209, or 18%, were neutral.
In last week’s survey for the trading week now winding down, Main Street remained bullish while Wall Street was split on whether gold would rise or fall. As of 11:14 a.m. EDT, Comex April gold was down by 1.3% for the week so far to $1,497.50 an ounce.
“I am bullish on gold for next week,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “Gold has been knocked down by the recent rush of capital into USD [U.S. dollar] cash, which has depressed other currencies. I suspect that this could peak over the next couple of weeks if it has not done so already and that the pendulum on USD could start to swing back, easing some of the pressure on gold.”
Jim Wyckoff, senior technical analyst with Kitco, looks for gold to trade higher as buyers become “more confident in many beaten-down markets” with global stock and financial markets appearing to be stabilizing.
Kevin Grady, president of Phoenix Futures and Options LLC, is also upbeat about the metal’s prospects.
“The violent move in gold this week was due to margin selling from hedge funds trying to meet their equity margin calls,” Grady said. “I expect that selling to subside as stocks try to find some footing. The government will be pumping a mass amount of liquidity into the system so as not to cause any credit disruptions. I think the increase in liquidity coupled with this low-interest environment, should give a bid to gold next week.”
Bob Haberkorn, senior commodities broker with RJO Futures, looks for the futures market to catch up with the strong demand for coins emerging in the physical market. Previously, he said, the futures sold off due to liquidity needs of traders as markets across the board went into a free fall.
“The market looks like it’s stabilizing after this liquidity crunch,” Haberkorn said. “I think you’ll see it higher next week.”
Richard Baker, editor of the Eureka Miner’s Report, said, “don’t give up on gold” just yet even though the U.S. dollar index hit its highest level in more than three years, putting pressure on commodities like gold.
“However, gold soared relative to key commodities with significant value gains against major currencies and domestic equities too – a very bullish sign,” Baker said in an email. “For example, the gold-to-oil (WTI) ratio touched an alarming 68 barrels per ounce on Wednesday, more than 10 bbl/oz above its prior February 2016 peak. The gold-to-copper ratio scored 718 pounds per ounce the same day, more than 100 lb/oz than peaks seen in the 2008-2009 financial crisis. Gold relative to the S&P 500 regained all value lost after the presidential election and more as stock indexes tumbled.
“Once selling pressure abates, gold in dollars will catch a gear higher followed by embattled silver.”
Meanwhile, Charlie Nedoss, senior market strategist with LaSalle Futures Group, looks for a sideways market. One technical-chart resistance point will be the 200-day moving average that was at $1,515.50 an ounce for April gold, as of the time he spoke.
“That’s going to be a hard nut to crack,” Nedoss said. “There is pretty decent support at $1,470.”
Ole Hansen, head of commodity strategy at Saxo Bank, said that he is neutral on gold in the near term. He commented that while liquidity issues are starting to fade, gold could still struggle to attract buying momentum as volatility remains high.
“We need to see lower volatility for gold to catch a sustained bit,” Hansen said. “Gold is holding up relatively well, but we don’t know if we will see a second wave of selling.”
John Weyer, co-director of commercial hedging with Walsh Trading, called for a mostly sideways market, noting that one headline can have a significant impact on a volatile market lately.
“We’re up today,” he said. “But we’ve seen some days with a range of $50 up and $40 down.”
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