Weaker Prices Expected For Gold Next Week – Kitco News Survey

Friday July 29, 2011 12:28 PM

Participants in the weekly Kitco News Gold Survey are almost equally torn about the direction of next week’s gold trade as the talks about raising the U.S. debt ceiling are dragging on longer than what most people expected.

That said, the bears slightly outweigh the bulls, but there are a fair number of participants who said they are on the sidelines until a decision has been made in Washington.

In the Kitco News Gold Survey, out of 34 participants, 24 responded this week. Of those 24 participants, eight see prices up, while 10 see prices down, five are neutral and one sees prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.

Many of the participants who see gold prices lower said an eventual resolution of the debt ceiling talks will take the support the yellow metal has seen in the past few weeks and lead to a correction. Further, others said gold has been acting “top-heavy” as it pushed above $1,600.

Those who see higher prices said Friday’s move to new all-time highs was a bullish sign, while others said once the smoke clears regarding the wrangling over the debt ceiling, people will buy gold because the economic situation in the U.S. and Europe remains fragile.

The highly unusual trading atmosphere caused by the gridlock in the U.S. Congress has made a few market participants wary of being in the market. They said the lack of a resolution is causing high volatility and they expect a steep reaction by gold, depending on what eventually happens. A short-term solution where the debt ceiling is lifted only slightly could cause gold to race higher, while a longer-term solution which lasts beyond the 2012 elections could cause gold to fall sharply. Rather than making a wrong decision, they are seeking safety on the sidelines in the near-term.

Kitco Gold Survey

By Debbie Carlson of Kitco News dcarlson@kitco.com

Alexander Letourneau contributed to the survey.

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