(Kitco News) - Optimism in the gold market -- among retail investors and market professionals -- remains strong as prices have managed to bounce off of fresh five and-a-half year lows earlier in the week, the latest Kitco News Wall Street vs Main Street weekly gold survey found.
Gold prices are preparing to end Friday’s session on a strong note up 2% on the day, despite a relatively in-line November jobs report that all but confirmed the Federal Reserve will raise rates after its monetary policy meeting Dec. 16. Friday’s rally is also helping gold futures end the week in solidly positive territory.
The results of Kitco’s weekly survey show that most investors and analysts believe that the last bounce is the start of a bigger momentum move as the U.S. dollar shows signs of topping out.
This week, 417 people participated in Kitco’s online survey. Of those respondents, 240 people, or 58%, are bullish on gold in the short-term. At the same time, 144 people, or 35%, are bearish and 33, or 8%, are neutral on gold prices.
Sentiment among market professionals is slightly higher; out of 36 market experts contacted, 19 responded, of which 11, or 58%, said they expect to see higher prices next week. At the same time, five analysts, or 26%, expect to see lower prices, and three people, or 16%, are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
Many analysts are bullish on gold next week, as more investors cover their short-positions as there are signs that the U.S. dollar has topped out. Some analysts not that Thursday’s euro rally of nearly 3% against the U.S. dollar was just the start of a bigger move. A weaker U.S. dollar would be positive for the gold market.
“With the European Central Bank reluctance to ease monetary policy further, I am looking for the euro to continue to strengthen into the December 16 FOMC meeting. As a result, this will put upward pressure on gold prices, at least in the short-run,” said Henry To.
Adam Button, currency analyst at Forexlive.com said that he is bullish on gold as expectations of a Fed rate hike can’t really move any higher. He explained that all the bad news is priced into the gold market and all the good news is priced into the U.S. dollar.
“Looking at the chart, the gold market is definitely damaged but it finally has a reason to rally,” he said. “I just think the U.S. dollar will take a break for the next little while.”
Other analysts are a little bit skeptical of the latest market push. Sean Lusk, director of the commercial hedging division at Walsh Trading, said that he is neutral on prices in the near-term and would like to see the market move above $1,100 or $1,120 to signal a momentum shift in the market.
“So many times we have seen these one or two day rallies lead to new shorting positions,” he said. “I think this latest move is all on short covering, we aren’t seeing a lot of new buying coming in.”
Mike Dragosits senior commodity strategist at TD Securities, a short-term bear, said that next week he expects the market will forget about the European Central Bank meeting and refocus on the impending rate hike. He explained that after some profit-taking traders and investors could reenter their long U.S. dollar positions and short gold.
“Next week the market should get back to trading its longer-term theme, which is rising U.S. rate hikes,” he said.
