(Kitco News) – Gold prices could rise next week as the recent, stronger momentum helps to propel prices higher and monetary policy continues to accommodate.
Profit-taking after gains this week capped the rally in the metal, which found some safe-haven buying after the turmoil over Greece and the back and forth regarding whether or not a referendum would be held regarding the latest bailout offer from the European Union.
On the week, December gold futures prices on the Comex division of the New York Mercantile Exchange settled at $1,756.10 an ounce, up 0.51% on the week. December silver settled at $34.084 an ounce, down 3.41% on the week.
In the Kitco News Gold Survey, out of 34 participants, 24 responded this week. Of those 24 participants, 21 see prices up, while three see prices down and none see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.
Michael Gross, broker and futures analyst with OptionSellers.com, said gold fell Friday as traders took profits following recent strength in the market. Despite the weakness Friday, he said the longer-term trend is “decidedly higher.”
“Longer-term, in the U.S. as well as in Europe, regardless of the outcome, it’s apparent that more money will be printed on both sides of the Atlantic,” Gross said.
Technical charts are looking a little overextended, he said, but that indicator is taking a back seat to the events in Europe. “It’s like trying to ride a roller coaster. Each day you wake up to a different headline,” he said.
Overall, he said, gold could try to target its next areas of resistance, which comes in around $1,775.
Richard Baker, editor of the Eureka Miner Market Report, said for the short term he sees gold targeting $1,780.
“Although Europe’s latest big plan has made their Sisyphean debt rock appear smaller, the frequency of trips up and down the crisis hill has increased given European Central Bank rate cuts and political instability in Greece. Gold, copper and oil markets have followed with Cerberean fidelity. If the macro-outlook improves for the remainder of the year, the positive price correlation of gold with these two global growth benchmarks is bullish,” he said.
He said if gold trades to $1,780, that could correlated with $3.60 a pound copper and $95 a barrel crude oil.
The referendum on the Greek bailout may be dead, but the problems in Greece are far from over – not to mention other problems with European sovereign debt. Also, with the ECB in rate-cutting mode, and the U.S. Federal Reserve remaining dovish, gold is likely to continue to see gains, said analysts at Commerzbank.
Gold found support after the ECB cut its interest rate by 25 basis points to 1.25%, a surprise event. “The opportunity costs of holding gold when interest rates are low will likewise remain low in the longer term. Gold can be expected to enjoy continued strong demand as a store of value and a safe haven amid the many U-turns we have seen during the Greek crisis,” the bank said.
They noted that this week’s rise in gold prices likely was driven by strength in the futures markets, as there have been hardly any inflows into gold exchange-traded funds in the past two days. Support for gold also comes out of Asia as physical purchases are expected to be high ahead of the Indian wedding season.
Several analysts said the $1,750 area is critical for gold. Holding above there is will help determine if the market can take out $1,800. “I expect gold is setting up for a rally to about $1,850 by year end. It probably won’t do all of that in the next week, but I expect it will be higher than $1,750 by the end of next week. I also look for a modest drift lower on the dollar that will be supportive of commodities in general. The chase for year-end performance for money managers is getting intense and will be a factor in all markets,” said Ken Morrison, founder and editor of online newsletter Morrison on the Markets.
Next week’s economic calendar doesn’t have many market-moving events, and analysts said considering headline news out of Europe still dominates, economic data have less of an impact. On Friday the most important piece of monthly economic data was released: unemployment figures.
The U.S. Labor Department said 80,000 jobs were created in October, and the unemployment rate was ratcheted down to 9.0% from 9.1%. Analysts at Nomura said although October job growth was lower that hoped, “the pattern of upward revisions to previous reports has been typical of periods of an improving job market. This is not to say the job market is “healthy.” Much more progress must be made to warrant that judgment…”
How the jobs market in the U.S. develops will be a linchpin in how platinum group metals perform, Deutsche Bank said. “We would view a more constructive environment emerging when the U.S. labor market is recovering and the unemployment rate is falling as this has typically been a necessary condition for auto sales demand to improve. In the past US oil demand has needed to turn positive before the US economy can have any chance of generating jobs,” they said.
Debbie Carlson-Kitco News November 4, 2011