(Kitco News) - Robust positive sentiment in the gold market could lead to higher prices and a test of major near-term resistance points next week, according to Kitco News’ Wall Street vs. Main Street Gold Survey.

The majority of both analyst and investors are bullish on gold prices next week as the market continues to shift expectations of the Federal Reserve’s first interest-rate hike. Growing concerns that the U.S. economy is starting to weaken, being dragged down by China and other emerging markets, and some hesitancy amidst the central bank committee members, means markets now are only pricing in only a 39% chance of a rate hike in December and a 63% chance of a move in March 2016.

The shifting expectations are helping to weaken the U.S. dollar and in turn boosting gold prices. Early in Friday’s session, December gold futures ended up hitting their highest prices since late August and are preparing to end with gains of almost 2% for the week. As of 12:40 p.m. EDT, December gold last traded at $1,158.70 an ounce.

Looking ahead, a strong majority of retail investors expect the rally in gold to continue next week. This week 301 people participated in Kitco’s online survey. Of those participants, 186, or 62%, are bullish on gold next week; 67 people, or 22%, are bearish; and 48 people, or 16% are neutral.

Positive sentiment was also strong among market professionals. Out of 35 market experts contacted, 19 responded, of which 11, or 58%, said they expect to see higher prices next week. At the same time, seven professionals, or 37%, are neutral on gold, and one person, or 5%, sees lower prices. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

James Cordier, founder of Optionsellers.com, was the lone analyst who expected to see lower prices next week. He explained that he sees gold prices trending lower in the near term as markets have priced in renewed geopolitical turmoil in the Middle East, a factor he added that was behind the latest rally in the yellow metal.

Most analysts, though, are bullish on gold as the market is seeing a technical shift. Many expect to see prices retest the August highs at $1,170 an ounce and the 200-day moving average at $1,178.20 an ounce.

“Technically, you are starting to see the market turn up and people are now buying the dips and selling the rally, but we still have some major levels to test,” said Sean Lusk, director of commercial hedging division at Walsh Trading.

He said that he remains cautiously optimistic on prices in the near term but added that a stronger equity market could take some momentum away from gold. He added that a tepid physical demand from China and India are also holding the market back. He explained that physical buying in these two key markets needs to pick up if the market is going to attract renewed investment demand.

Ted Sloup, senior market analyst at iiTrader, said that while there is still some hesitancy in the market, this new rally in gold feels a lot different from other short-lived rallies in the current downtrend.

“We aren’t seeing a lot of follow-through selling, which I think is very positive for gold,” he said.

Sloup added that if prices can break above $1,170 an ounce, the next major target for him would be $1,230, which represents resistance of a two-year trend line.

However, other analysts are solidly neutral on prices as the market remains range-bound. Darin Newsom, senior analyst at Telvent DTN, said that gold’s technical trend is positive but there aren’t any strong buying signals in the marketplace.

“We’ve seen gold go to a four-week high before and then the next day it falls $20. The market is sideways and it will stay that way until we see a fundamental change: a collapse in the U.S. dollar,” he said. “Technically, I want to be bullish but I don’t see any indication that computer programs will start buying.”

Wall Street

Bullish58%

Bearish5%

Neutral37%

VS

Main Street

Bullish62%

Bearish22%

Neutral16%

By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow Neils Christensen @neils_C

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