(Kitco News) - Analysts look for the momentum to shift in gold’s favor next week, particularly now that the metal gained some technical traction this week by bouncing from a chart area that is now being viewed as nearby support.
They tended to list their short-term views largely on the basis of chart analysis, since positive news on the U.S. economy lately has been construed as negative for gold by reducing the probability of further monetary easing in the Federal Reserve. Nevertheless, some said, there is always the potential for a headline to suddenly break and prompt a new safety flight into gold, such as any escalation of geopolitical tensions in the Middle East.
In the Kitco News Gold Survey, out of 37 participants, 24 responded this week. Of those, 11 see prices up, while eight see prices down and five see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
A bounce on Friday enabled gold prices to post a rise for the past week. The most-active April gold contract on the Comex division of the New York Mercantile Exchange closed Friday at $1,662.40 an ounce, up $6.60 since last Friday. May silver settled at $32.272 an ounce, down 33.2 cents for the week.
Traders will continue to monitor U.S. economic data for clues on what to expect for monetary policy from the Federal Reserve. The U.S. economic calendar next week includes consumer confidence on Tuesday, durable-goods orders Wednesday, initial jobless claims and gross domestic product Thursday, then personal income and spending, the Chicago Purchasing Managers Index and consumer sentiment on Friday.
Stronger reports, on balance, coupled with commentary from Fed policy-makers have diminished expectations for a third round of quantitative easing in the U.S., which in turn played a major role in gold’s declines so far this month. So should the data suddenly start to soften again, traders could start wondering if quantitative easing is still possible after all.
Further, some say the recent selling pressure may be due to abate.
One hedge-fund manager characterized gold as “very oversold” after a decline of 9% for the month as of the low from Thursday. He suggested the $1,627.50 bottom from the Thursday session should now act as chart support, particularly given the nearly $40 bounce from there to Friday’s session high of $1,666.30.
One hedge-fund manager characterized gold as “very oversold” after a decline of 9% for the month as of the low from Thursday. He suggested the $1,627.50 bottom from the Thursday session should now act as chart support, particularly given the nearly $40 bounce from there to Friday’s session high of $1,666.30.
“I’m a little bit on the positive side for next week,” said Mike Zarembski, senior commodities analyst with optionsXpress. “I look for a potential test of the $1,700 range if we get a little bit of momentum to end the week today. I would say it would be more technical in nature. We’ll have to see how the fundamentals develop.”
Bob Haberkorn, senior commodities broker with RJO Futures, also looks for gold to rise on the basis of technicals but added that it may well gain fundamental strength as well.
“The way it bounced after yesterday’s low signals strength,” he said. In particular, new interest in the metal can be expected if it keeps advancing toward $1,690, he continued. Some traders may be afraid to “test the waters” yet after the recent decline, but may become more confident about the upside if gold approaches $1,700, he explained.
Meanwhile, there is potential for gold to draw a safe-haven bid if Middle East geopolitical tensions heat up—particularly involving Iran and its nuclear program—and any flare-up in sovereign-debt concerns in Europe and the U.S.
“There are too many things going on in the world right now that would warrant upside gold moves,” Haberkorn said, suggesting $2,000 is still possible this year. “There are too many shoes that could drop right now.”
Meanwhile, Ralph Preston, senior market analyst with Heritage West Financial, expects more chart-based weakness in the near term.
“I consider myself a long-term bull in the gold market but I am short-term bearish,” he said.
He watches Middle East events “like farmers follow the weather in the Midwest,” and he considers geopolitical concerns in the region to be a factor that could suddenly propel gold higher. He also is in the camp that still expects some type of quantitative easing from the Federal Reserve.
“But in the short term, I have to let the technicals guide my tactical decisions,” he said. “With prices being capped under $1,700 and a tight trading range for the last week, that tells me that the sell-off after Bernanke’s speech about two and one-half weeks ago shifted the momentum from a technical perspective for now. With prices capped below $1,700, I would look for a short-term move back below $1,600. If we take out this week’s low, I would look for a move down to $1,575 to $1,580.”
Technically, gold remains below most of its most closely followed moving averages.
“The area from $1,685 to $1,689 will be a real key area to get above,” said Charles Nedoss, senior market strategist with Olympus Futures. Shortly ahead of the pit close, the 200-day average for April gold stood at $1,685.10 and the 20-day average at $1,689.80. “In the next week, those are big numbers,” Nedoss said.
Source; http://www.kitco.com/reports/KitcoNews20120323AS.html
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