Kitco Gold Survey: Weak U.S. Jobs Report Creates Bullish Sentiment In Marketplace

(Kitco News) - Weaker-than-expected U.S. employment data created some renewed positive sentiment among retail investors and market professionals, according to the weekly Kitco News Wall Street vs. Main Street Gold Survey.

Gold prices are preparing to end Friday’s session on a strong note; however, momentum wasn’t strong enough to push prices into positive territory for the week. As of 12 p.m. EDT, December gold futures were trading at $1,136.60 an ounce, down less than 1% on the week.

Last-minute voting in Kitco’s weekly survey Friday morning pushed the results statistical tie among retail investors. Before U.S. nonfarm payrolls data was released, there was more bearish sentiment among voters. In this week, 210 people participated in the online survey. Of those respondents, 86 people, or 41%, are bullish on gold in the short-term. At the same time, 89 people, or 42%, are bearish and 35, or 17%, are neutral on gold prices.

Sentiment also shifted among market professionals with some analysts changing their vote after the employment data showed that only 142,000 jobs were created in September, well below consensus forecasts.

A clear majority of market professionals are now bullish on the yellow metal next week. Out of 36 market experts contacted, 20 responded, of which 14, or 70%, said they expect to see higher prices next week. At the same time, two analysts, or 10%, expect to see lower prices, and four people, or 20%, are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Many analysts are bullish on gold next week as the weaker-than-expected data has drastically shifted expectations for when the Federal Reserve will raise interest rates, which is bearish for the U.S. dollar and bullish for commodity prices, specifically gold and precious metals. Many say that not only has an October rate been completely been pushed off the table but a December move is also unlikely.

Bart Melek, head of commodity trading at TD Securities, said that there even only a 52% chance the central bank will be able to move in March of 2016.

“That is still pretty low odds,” he said. “With expectations being pushed back further and further, we think ultimately gold can reach $1,190 in the medium term.”

In the near term, Melek that he thinks gold has enough momentum to test near-term resistance at $1,145 an ounce.

Sean Lusk, director of the commercial hedging division at Walsh Trading, said he is cautiously optimistic that this could be the start of a longer-term rally in the gold market but added that the 200-day moving average, at $1,179.30 an ounce, could cap any rallies.

He added that he is looking for prices to retest the August highs at $1,169 an ounce in the near term.

“We have seen these moves before where rallies have been sold. This trend can continue so we just have to wait and see what will happen,” he said.

Nick Exarhos, senior economist at CIBC World Markets, said that he could see gold prices moving higher in the near term as investors continue to digest the employment data; however, he added that the economic picture is a lot more complicated. He added that although expectations for a December rate hike are much lower, they are not completely off the table. In this environment, U.S. dollar losses will be limited, which could cap gold prices, he explained.

“Until we get some clear direction on interest rates, the Fed will always be eying a hike, which will continue to support the U.S. dollar,” he said. “Gold could catch a bid here but gains will be limited.”

Courtesy: Kitco News