Higher Prices Expected Next Week For Gold Following This Week's Break

Friday December 16, 2011 12:10 PM

After a sharp drop in value this week, participants in Kitco News’ Gold Survey lean toward the bullish side, but that view is certainly not dominant. 

In the Kitco News Gold Survey, out of 31 participants, 22 responded this week. Of those 22 participants, 14 see prices up, while eight see prices down, and zero see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.

Those who are bullish gold primarily said it is because they are either taking a contrarian view after recent reports in the financial media calling for more weakness, or that they believe the break was too far, too fast.

Adrian Day, president, Adrian Day Asset Management, said next week would be a tough call, but he ultimately expects higher prices. “Fundamentals remain very positive for gold: easy money in the U.S. and Europe in particular; a lack of confidence in paper money and monetary authorities; central banks continuing to diversify foreign reserve holdings (some of into gold).  But the damage done this week may take a little while to get over; in truth, it is not unexpected if an asset that went way above trend (gold in July and August) corrects to under trend, so by no means is this the end of the bull market for gold,” he says.

Those who also expect higher prices said support between $1,530 an ounce, around the September low, and $1,560 an ounce is critical. If prices do rally, a few technical analysts said the upside is likely limited to $1,640.

Commentators said the action of the U.S. dollar will go a long way in determining gold’s direction. If the dollar weakens, gold will be supported. If the dollar continues to rise, gold will be weaker.

Those participants who see weaker prices said they see the dollar’s strength continuing and they believe the selling gold experienced this week isn’t finished.

Some commentators said they expect to see the September low in gold prices to be taken out, with a possible trip under $1,500 occurring. Another participant said if losses in other commodities continue, gold may be pulled lower, especially if Nymex crude oil prices falter.

Kitco Gold Survey

By Debbie Carlson of Kitco News dcarlson@kitco.com

Alexander Letourneau contributed to the survey.

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