Weaker Gold Prices Expected For Next Week – Kitco News Gold Survey

Friday July 22, 2011 12:39 PM

Participants in Kitco News’ Gold Survey are torn on the outlook for gold next week, but the edge is for weaker prices.

In the Kitco News Gold Survey, out of 34 participants, 19 responded this week. Of those 19 participants, eight see prices up, while 11 see prices down and none see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.

Many said gold’s short-term direction will be determined by the news flow as the market seems to rise and fall based on the latest headline regarding the talks to raise the U.S. debt ceiling. As of Noon EDT Friday there was no decision to raise the ceiling. The U.S. Treasury Department says Aug. 2 is the deadline – after that it cannot pay all of its domestic obligations.

Survey participants believe the debt ceiling impasse will be resolved, but they are split on how they believe the gold market will react. Most believe gold will retreat if a deal is reached.

Adrian Day, president of Adrian Day Asset Management, exemplified the reasons why some see lower prices next week. “A temporary ‘solution’ to the debt problems in both Europe and the US will ease financial tensions temporarily, perhaps lead to a mini-recovery in the dollar, and a short-term decline in gold.  Once the market shifts attention to how neither solution is any more than a patch, gold will rally again,” he said.

Those who expect higher prices next week cited gold’s rally back above $1,600 an ounce on Friday as another reason. The strong volume on rallies and high open interest have turned at least one bear to the bull column, but only for now. He said, however, at the slightest pullback he will sell gold.

Still, a few traditional participants were gun shy about calling a direction for next week, wanting to see how prices settled Friday and keeping in mind options expiration and first notice day for futures would keep the market volatile.

Support for gold next week, looking at the August or October Comex futures  contract, is around $1,580, with rallies possible to $1,640.

By Debbie Carlson of Kitco News dcarlson@kitco.com

Cecylia Tulikowski-Denison and Alexander Letourneau contributed to the survey.