(Kitco News) - Gold sentiment is mixed as most retail investors expect to see negative prices next week and most market analysts expected higher prices on short covering after the Federal Open Market Committee (FOMC) monetary policy meeting, according to the latest Kitco News Wall Street vs. Main Street Weekly Gold Survey.
Gold prices are showing modest gains Friday afternoon but it hasn’t been enough to dramatically shift sentiment as prices are preparing to end the week in negative territory. Comex February gold futures last traded at $1,075.30 an ounce, up $3.30 on the day.
Kitco’s online survey showed a dramatic shift in sentiment among retail investors as most now expect to see lower prices in the near-term. This week, 450 people participated in Kitco’s online survey. Of those respondents, 116 people, or 26%, are bullish on gold next week. At the same time, 299 people, or 66%, are bearish and 35, or 8%, are neutral on gold prices.
The previous week, 58% of retail investors were bullish on gold while only 26% were bearish and 16% were neutral.
Although sentiment among market professionals has also fallen compared to the last survey, a majority still see higher prices in the short term. Out of 36 market experts contacted, 18 responded, of which nine, or 50%, said they expect to see higher prices next week. At the same time, five analysts, or 33%, expect to see lower prices, and three people, or 17%, are neutral.
In the previous survey, 58% of analysts were bullish on prices in the short-term.Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
Ted Sloup, senior commodity broker at iiTrader, said he was positive on the market in the short-term because sentiment has been so negative lately. He explained that for the last two weeks, speculative short positions in gold futures have hit record highs. At some point, the sellers have to exhaust their positioning, he said.
“I’m not saying that prices can’t go lower because they can. I just think that I don’t want to be a short seller in these market conditions,” he said. “I would be shocked to see if we don’t get a pop in prices in the next two weeks.”
Other analysts are bullish on gold as they expect to see a relief rally next week after the Federal Reserve is expected to raise interest rates by 25 basis points. Ronald-Peter Stoeferle, fund manager at Incrementum AG and author of the In Gold We Trust report, said that markets have already priced in the rate hike, but the U.S. dollar will lose ground next week -- a positive for gold -- as the central bank maintains an extremely dovish monetary policy.
“I think we are going to see a ‘buy the rumor, sell the fact’ scenario,” he said. “The Fed will not be in a hurry to hike rates again after December and we are going to see the U.S. dollar weaken and commodities strengthen.”
However, some analysts are not convinced gold will be able to turn around in the near-term.
Richard Baker, editor of the Eureka Miner Report, said that although gold has been disappointing against the U.S. dollar, it has also been lackluster against other major periphery currencies like the Japanese yen and euro.
He added that weaker oil prices and broader commodity index will also pull gold from its orbit around $1,070 an ounce.
“The yellow metal is gaining value relative to key commodities oil, copper and silver but losing value to the euro and yen when compared to August averages,” he said. “The latter is concerning because a loss of traction with devalued currencies remains a red flag. Gold should find itself lower next week but above the $1,045.4 December 3 low.”
