Gold is not ending the last week on a strong note and there is not much conviction among Wall Street analysts and Main Street investors that the selling pressure will end this week, according to the latest Kitco News Weekly Gold Survey.
The gold market was hit with strong technical selling pressure as investor risk sentiment improved, which has pushed prices down 3% last week, its worst performance in 2.5 years.
Darin Newsom, president of Darin Newsom Analysis, said that although gold has made a big move to the downside, the market doesn't appear oversold. He added that his next big support level is around $1,407 an ounce.
"Gold is doing exactly what the chart says it should be doing," he said.
Last week, 13 market professionals took part in the Wall Street survey. Four analysts or 31% said they see higher prices this week. Eight analysts, or 61%, predicted gold would fall. One analyst, or 8%, saw a sideways market or else were neutral.
Meanwhile, 991 respondents took part in an online Main Street poll. A total of 482 voters, or 49%, called for gold to rise. Another 331, or 33%, predicted gold would fall. The remaining 177 voters, or 18%, saw a sideways market.
Although most retail investors in the survey are still bullish on gold, this is the first time since May the percentage has fallen below 50%. Participation in the online survey rose to its highest level since late September.
In the last survey, Main Street and Wall Street proved to be incorrect as they both called for higher prices for last week. As of 12:07 p.m. EST, December gold futures last traded at $1,464.60 an ounce.
Wall Streets' and Main Street's record is tied at 21-19 year to date, meaning respondents have been right 52% of the time.
Looking ahead, Charlie Nedoss, senior market strategist with LaSalle Futures Group, said that technical selling pressure has created significant technical damage to gold bullish momentum.
He added that he is now watching to see if gold tests support at $1,405 an ounce, which represents the market's 200-day moving average.
"With the stock market at record highs it will be difficult for gold to rally," he said. "I think we need to see further technical washout before we get buyers coming back."
Kevin Grady, president of Phoenix Futures and Options LLC, said that he also sees lower prices in the near-term and recommends selling rallies to $1,480 an ounce.
Along with record valuations in equity markets, technical selling pressure, and improving investor sentiment, Christopher Vecchio, senior currency strategist at DailyFx.com, said that rising bond yields also don't support higher gold prices.
He added that gold's five-day negative correlation with 10-year bond yields is currently at -.99. He added that it’s not surprising to see gold prices near a three-month low as the 10-year bond yield pushes closer to 2%.
"Bond yields still have room to move higher so gold will continue to struggle," he said. "Until the 10-year reserves course you really can't be bullish on gold."
In the current environment, Vecchio, said that gold prices could push to his next support target between $1,430 and $1,420 an ounce.
Although gold still has strong long-term fundamental support, Vecchio, said that investors can't ignore the market's short-term bearish momentum.
Despite all the negative news in the gold space, some investors still aren't ready to give up the on the yellow metal. Some analyst say that markets are a little too optimistic especially when it comes to predicting an end to the ongoing trade war between China and the U.S.
On Friday, President Donald Trump threw uncertainty back into the marketplace after he pushed back on the idea that the government would ease some of its tariffs on imported Chinese goods.
Afshin Nabavi, head of trading with MKS (Switzerland) SA, said, in a telephone interview with Kitco News that although gold has had a rough week, it is difficult to be outright bearish on the precious metal given all the uncertainty in the marketplace.
"Nothing has been resolved and until it is, I don't think you want to be going home for the weekend short,” he said. "Although gold is down, I would rather play the market from the long side."
Richard Baker, editor of the Eureka Miner Report, said that he also sees higher gold prices this week as investor optimism is a little over done.
He added that confidence in an imminent trade deal is not reflected in either the copper market or the Chinese yuan.
"If the metals market believes a deal is just around the corner, the red metal should soar above the $6,000/tonne ($2.72/lb) level. Although the Chinese yuan strengthened below the key 7 USDCNY level last week, it took a leap higher in the end of trading," he said. "Both of these events show some skepticism that a deal is imminent. Although U.S. equities are holding up, my bet is that we will witness market consolidation this week and that gold will recover lost ground."
Source: Kitco News