(Kitco News) – Despite a small hiccup Friday, following a stronger-than-expected December nonfarm payrolls report, the gold market has started the week and the new year on solid footing; both investors and retail investors expect the rally to continue in the short term, according to the latest Kitco News Wall Street vs. Main Street Weekly Gold Survey.
Comex February gold futures are preparing to end the week with gains of almost 4%, the best weekly performance since mid-August.
Investor sentiment, which was fairly low at the end of the year, appears to be shifting, becoming more positive. This week, 464 people participated in Kitco’s online survey. Of those, 304 participants, or 66%, said they are bullish on prices next week; at the same time, 117 people, or 25% are bearish; and 43 people, or 9% are neutral.
Although not quite as optimistic as retail investors, most market professionals also expect prices to move higher in the near term. Out of 34 market experts contacted, 18 responded, of which 10, or 56%, said they expect to see higher prices next week; four professionals, or 22%, said they see lower prices; and four analysts are neutral on gold. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
Looking ahead, most analysts remain bullish on gold as they expect to see more volatility in equity markets as uncertainty continues to surround the Chinese economy.
“When you saw equities sell off, gold caught a big and I think that will continue next week,” Ted Sloup, senior strategist at iiTrader. “I think this rally has at least another leg up.”
Although markets may calm down a little bit next week, Adam Button, currency strategist at Forexlive.com, said that he still sees strong demand for gold as a safe-haven asset.
“The pain in broader markets is likely to subside but that doesn’t mean demand for a safe harbor will. January seasonals remain a tailwind for gold and dips should be bought until month end,” he said.
There are also expectations that gold could see some consolidation in the short term after a week of massive gains, and even analysts who expect to see lower prices next week still remain bullish on the yellow metal.
Adrian Day, president of Adrian Day Asset Management, said any stability in equities could create some selling pressure for gold; however, he adds that any weakness could be seen as a buying opportunity.
“The odds favor a strong rally over the next six to eight weeks or so—a seasonally strong period, traditionally—given the high number of shorts and number of investors waiting on the sidelines,” he said. “We certainly wouldn’t try to play the correction by selling.”
Ken Morrison, editor of the newsletter Morrision on The Markets, said that he expects to see some “back-and-fill” in gold next week.
“Tt’s unlikely the market will face as many uncertainties in the week ahead as it did the past four days. A pullback toward $1,085 wouldn’t surprise me near-term but I’ll stick with the higher Q1 target longer term,” he said.
By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow Neils Christensen @neils_C
