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Gold Survey: Survey Participants Mixed On Direction Of Gold Prices Next Week

Friday July 5, 2013 12:04 PM

(Kitco News) - Analysts and traders who take part in the weekly Kitco Gold Survey are mixed on their expectations for price direction next week.

Participation was slightly lighter than normal in this week’s survey as traders took off on the Friday after the U.S. Fourth of July holiday on Thursday, turning it into a four-day weekend. Eighteen participants took part in this week’s survey, with seven seeing prices up, seven seeing prices down and four looking for sideways consolidation.

Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Many of those looking for further weakness cited continuing expectations for tapering of the Federal Reserve’s bond-buying program known as quantitative easing, along with further selling and/or liquidation by funds.

“I expect the funds to make one last effort to drive down the paper gold price and liberate some cash from ETFs (exchange-traded funds) for equity bubble investment,” said Bill Goldman of 3GF Corp. “The commercials will probably absorb some of those sales on their way to slowly taking a net-long position on their contracts.”

Ultimately, however, he suggested the Fed may only trim bond purchases by a “sliver.” Treasury yields have been rising. Eventually, higher interest rates and falling exports may mean “the Fed will revert to more QE because monetizing debt is all they can do unless they join the hard money chorus of ‘austerity,’ which is fraught with political consequences.”

Those looking for sideways to higher trade suggest the market has already factored in much of expected FOMC tapering and may be overextended to the downside, at least in the short term.

“I look for a wide range but think…we continue to consolidate,” said Darin Newsom, DTN senior analyst. “Last week, we had the August (Comex gold) contract in an oversold situation. This rally in the U.S. dollar index could run out of gas and come to an end. That could provide some support to gold. I think last week’s low will hold, but we could certainly drift down toward that low.”

Kitco Gold Survey

(Editor’s note: Neils Christensen contributed to this survey.)

By Allen Sykora of Kitco News; asykora@kitco.com

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