There is an old market adage that says a period of sideways consolidation is the sign of a market not sure which way to head next.
That’s certainly the case for gold in the weekly Kitco News survey, with no voting bloc in the Wall Street poll garnering more than 40% of the vote and the neutral votes tied for first place for the second week in a row.
Comex June gold has been in a relatively narrow trading band of roughly $1,267 to $1,293 an ounce since an April 16 sell-off. As of late Friday morning, the metal had been confined to the $1,280s for two days in a row.
Gold has drawn some support from recent weakness in equities amid escalating trade tensions between the U.S. and China. However, some traders say any safe-haven gold buying has been modest considering the scope of some of the downdrafts in stocks.
“Gold is looking a bit better technically [after] having moved up a bit, but truth be told, considering the risk and volatility, gold really hasn’t moved very far and inflation remains subdued,” said Colin Cieszynski, chief market strategist at SIA Wealth Management, one of the many neutral votes. “It seems that the most I can say for gold is that increased U.S.-China trade tensions have stopped gold’s decline for now, but it’s still difficult to see what would enable gold to really move ahead in the near term.”
In the last survey, Main Street and Wall Street were both split between bearish and bullish. Around 11:30 a.m. EDT, Comex June gold futures were trading up 0.6% for the week so far at $1,288.40 an ounce.
David Madden, market analyst at CMC Markets, is among those who are neutral on gold in the near term. He commented that in the event of a trade war, the U.S. remains a beacon of strength in the global economy, and that will cap gold’s potential.
“Even if the Fed does turn dovish, it would only be a matter of time before other central banks turn even more dovish and that continues to support the U.S. dollar,” he said. “When gold can’t surge higher when equities drop 400 points, that kind of tells you that the market doesn’t want to go higher.”
Bill Baruch, president of Blue Line Futures, looks for gold to spin its wheels, commenting that seasonal factors are not supportive right now, and the metal may have to get through the summer before prices start moving higher. He added that stock-market weakness hasn’t supported gold prices because the correction hasn’t been sharp enough.
“The S&P 500 is only 3% down from its all-time highs,” Baruch said. “There still isn’t a lot of fear out there.”
Kevin Grady, president of Phoenix Futures and Options, also said he remains neutral at current levels.
“We continue to hold the 200-day moving average, which comes in today at $1,268.20,” Grady said. “Gold is struggling to rally even with an increase in inflammatory geopolitical news (North Korea, tariffs, Venezuela, U.S. political situation). A settlement above $1,305 will force shorts to cover and should bring in fresh longs.”
Jim Wyckoff, senior technical analyst with Kitco, said he looks for gold to be steady, commenting that a “price downtrend still in place on the daily chart, but bulls have stabilized prices this week.”
The bullish camp had just as many Wall Street voters as the neutral.
“I think market will be swinging back and forth but I am leaning to higher next week,” said Peter Hug, global trading director with Kitco.
Afshin Nabavi, head of trading at trading house MKS, said gold feels like it may be range-bound between $1,270 and $1,290. However, “I personally prefer to trade it from the long [bullish] side,” considering current geopolitical tensions, Nabavi said.
“Despite gold’s dismal performance this week, I believe it will eventually break above $1,292 to challenge the April high,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Adrian Day, chairman and chief executive officer of Adrian Day Asset Management, said gold may also benefit from House of Representative investigations of U.S. President Donald Trump.
“The stepped-up trade war is hurting the dollar, to the benefit of gold,” Day said. “But the latest move -- and comments by President Trump that there is now no rush to finish negotiations -- is likely a negotiating tactic but also, perversely, indicates a deal may be close. Not going to go away, however, is the House Democratic war on President Trump, and as the battle heats up, with move talk of impeachment and imprisonment, this will affect the dollar and be positive for gold.
“This all [is occurring] against a monetary and interest rate background that is very positive for gold.”
Meanwhile, John Weyer, director of commercial hedging with Walsh Trading, is among those who expect gold to fall, particularly since the metal was not able to benefit much this week with all the fretting over a potential trade war between the U.S. and China.
“If this stuff couldn’t get it [gold] moving, I’m going to say down this week,” he said. Further, if there is a trade deal, “it will be ‘risk on,’ and that will knock gold down a little bit.”
Reference: Kitco
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