Wall Street Turns Bearish, Eying Technical Damage To Gold Market
nchristensen@kitco.com
(Kitco News) - While
there is still some bullish sentiment for gold among Main Street
investors, analysts have turned slightly bearish on the yellow metal,
with many highlighting the recent technical chart damage done to the
market.
This
week, 19 traders and analysts took part in a Wall Street survey. Seven
voters, or 37%, see gold prices rising by next Friday. Nine, or 47%,
see lower prices, while three voters, or 16%, are either neutral or
expect sideways trading.
Meanwhile, 1,570 Kitco readers submitted
votes in an online Main Street poll. A total of 756 voters, or 48%, are
bullish. Another 639, or 41%, say that gold will fall, while 175, or
11%, are neutral.
In last Friday's survey for the current week,
voters looked for the metal to climb this week, although each camp was
less than a majority. Forty-three percent of Wall Street voters and 48%
of Main Street voters predicted gold would rise this week. Based on
where gold was trading late in the morning, neither camp was right. As
of 11a.m. EDT Friday, Comex June gold was down 3% for the week, last
trading at $1,229.10 an ounce.
So far in 2017 but not counting the
current week, Wall Street forecasters collectively were right 11 of 16
times for a winning percentage of 69%. Main Street was 9-7 for 56%.
Not
only is gold seeing its worst weekly loss since the week of the
November U.S. election, sentiment on Wall Street has turned bearish as
prices have broken below the 50-day and 200-day moving averages.
With
gold trading below key support levels, the technical chart damage
provides more downside risk for the market, according to some analysts.
“I
think we could see some further technical weakness to $1,210 and then
$1,200,” said Sean Lusk, director of commercial hedging with Walsh
Trading.
Lusk added that commodities generally suffer as
investors continue to see value in equities in a low risk sentiment
environment. Gold will continue to suffer as long as the Volatility
Index ($VIX) remains at historic lows, he said.
Colin Cieszynski,
senior market analyst at CMC Markets Canada, said he is also negative
on gold as he expects to see bearish momentum pick up.
“Too much
technical damage has been done this week for gold to bounce back
quickly. Gold is not oversold, so follow-through could send it down
toward $1,220 or even $1,200 in the coming days,” he said. “On top of
this, a lot of near-term political risks have faded while crashing
energy and base metals prices reduce the need for an inflation hedge. At
this point, the only thing that could move gold back up is a surprise
in the French election.”
While markets have seen little reaction
to April’s employment data, the report has helped solidify expectations
that the Federal Reserve will raise interest rate hikes in June. CME
30-Day Fed Fund futures are pricing in an 83% chance of a rate hike
next month.
According to Ken Morrison, editor of Morrison on the Markets, these expectations will continue to weigh on gold.
However, on the bullish side, analysts said the market has moved down to quickly and it may be due for a modest correction.
“Gold
is finding some initial support above $1,225 and I think if these
levels hold then we could see a bit of a bounce next week before we
head lower,” said Darin Newsom, senior analyst at Telvent DTN.
there is still some bullish sentiment for gold among Main Street
investors, analysts have turned slightly bearish on the yellow metal,
with many highlighting the recent technical chart damage done to the
market.
week, 19 traders and analysts took part in a Wall Street survey. Seven
voters, or 37%, see gold prices rising by next Friday. Nine, or 47%,
see lower prices, while three voters, or 16%, are either neutral or
expect sideways trading.
Meanwhile, 1,570 Kitco readers submitted
votes in an online Main Street poll. A total of 756 voters, or 48%, are
bullish. Another 639, or 41%, say that gold will fall, while 175, or
11%, are neutral.
In last Friday's survey for the current week,
voters looked for the metal to climb this week, although each camp was
less than a majority. Forty-three percent of Wall Street voters and 48%
of Main Street voters predicted gold would rise this week. Based on
where gold was trading late in the morning, neither camp was right. As
of 11a.m. EDT Friday, Comex June gold was down 3% for the week, last
trading at $1,229.10 an ounce.
So far in 2017 but not counting the
current week, Wall Street forecasters collectively were right 11 of 16
times for a winning percentage of 69%. Main Street was 9-7 for 56%.
Not
only is gold seeing its worst weekly loss since the week of the
November U.S. election, sentiment on Wall Street has turned bearish as
prices have broken below the 50-day and 200-day moving averages.
With
gold trading below key support levels, the technical chart damage
provides more downside risk for the market, according to some analysts.
“I
think we could see some further technical weakness to $1,210 and then
$1,200,” said Sean Lusk, director of commercial hedging with Walsh
Trading.
Lusk added that commodities generally suffer as
investors continue to see value in equities in a low risk sentiment
environment. Gold will continue to suffer as long as the Volatility
Index ($VIX) remains at historic lows, he said.
Colin Cieszynski,
senior market analyst at CMC Markets Canada, said he is also negative
on gold as he expects to see bearish momentum pick up.
“Too much
technical damage has been done this week for gold to bounce back
quickly. Gold is not oversold, so follow-through could send it down
toward $1,220 or even $1,200 in the coming days,” he said. “On top of
this, a lot of near-term political risks have faded while crashing
energy and base metals prices reduce the need for an inflation hedge. At
this point, the only thing that could move gold back up is a surprise
in the French election.”
While markets have seen little reaction
to April’s employment data, the report has helped solidify expectations
that the Federal Reserve will raise interest rate hikes in June. CME
30-Day Fed Fund futures are pricing in an 83% chance of a rate hike
next month.
According to Ken Morrison, editor of Morrison on the Markets, these expectations will continue to weigh on gold.
However, on the bullish side, analysts said the market has moved down to quickly and it may be due for a modest correction.
“Gold
is finding some initial support above $1,225 and I think if these
levels hold then we could see a bit of a bounce next week before we
head lower,” said Darin Newsom, senior analyst at Telvent DTN.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc.
The author has made every effort to ensure accuracy of information
provided; however, neither Kitco Metals Inc. nor the author can
guarantee such accuracy. This article is strictly for informational
purposes only. It is not a solicitation to make any exchange in precious
metal products, commodities, securities or other financial
instruments. Kitco Metals Inc. and the author of this article do not
accept culpability for losses and/ or damages arising from the use of
this publication.
The author has made every effort to ensure accuracy of information
provided; however, neither Kitco Metals Inc. nor the author can
guarantee such accuracy. This article is strictly for informational
purposes only. It is not a solicitation to make any exchange in precious
metal products, commodities, securities or other financial
instruments. Kitco Metals Inc. and the author of this article do not
accept culpability for losses and/ or damages arising from the use of
this publication.
Bulls or Bears? Wall Street vs. Main Street puts together leading analysts and regular metals investors to find out where they think gold is headed next week. Picked up and quoted by other leading news organizations, this feature has become a cornerstone for the industry and an indicative benchmark.
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