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Gold Survey: Survey Participants Expect Higher Gold Prices Next Week

Friday August 16, 2013 12:05 PM

(Kitco News) - The strong gains in gold prices this week could spill over to next week, a majority of participants in the Kitco News weekly survey said.

In the Kitco News Gold Survey, out of 36 participants, 25 responded this week. Of those 25 participants, 21 see prices up, while two see prices down and two see prices moving sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.

Last week, more than half of the market participants were bullish. As of noon EDT Friday, prices on the week were up about $55 on the week. As of Aug. 2, survey participants have been correct three of the past five weeks.

The strength of gold’s move has impressed the survey participants who see higher prices.

“Gold has bottomed, of that there can be little doubt,” said Adrian Day, chairman and chief executive officer, Adrian Day Asset Management. “The technicals have been very strong since the low, with only one- or two-day corrections, and a few ‘inside reversals.’ We have also seen on a few days—(Friday) morning was an example — where gold was down to begin, and the broad stock market was also down, yet the gold stocks were up; then gold turned. This is very bullish behavior.

“The market realizes that the Fed is not going to tighten any time soon. Reducing the rate of monthly bond buying is still adding to the Fed’s balance sheet. We are a long way from reducing the Fed’s balance sheet, let alone that long-forgotten ‘exit.’ This is bullish for gold, particularly as the market had grossly overreacted to fears of tapering,” he said.

A few other survey participants noted the bloodshed in Egypt surrounding clashes between groups supporting the ousted president and the Egyptian military may have sparked some buying interest.

Participants who see weaker prices for next week said they believe the gold rally has run out of steam in the short-term.

Ken Morrison, founder and editor of online newsletter, Morrison on the Market, said gold’s move through technical chart resistance at $1,325 an ounce “put it on much more solid technical footing.”

However, he’s concerned by the lack of change in open interest throughout the week. He noted that futures open interest on Aug. 9 was 394,000 contracts and as of Thursday's close, with prices $50 higher a week later, open interest is only up 3,000 contracts.

“We have to conclude, based on the combined price and OI changes, the rally may have been led by short covering (as it was in the week ending Aug. 6) and longs seemed to welcome the opportunity to reduce their holdings. We expect the coming week to be a back-and-fill period for gold when a retest of the support at $1,325 is likely,” Morrison said.

Those who are neutral on prices or see the market holding in a range said gold is heading to stiff technical chart resistance that may cap gains.

“I see prices little changed,” said Ralph Preston, principal at Heritage West Financial, who added that $1,380 “represents a major roadblock of accumulated weekly resistance. So, I would be surprised if the gold market breached that level on its first challenge/run. If it does manage to do so next week, I reckon it would be a dramatic move higher – but I doubt it will.”

Kitco Gold Survey

Allen Sykora contributed to this survey.

By Debbie Carlson of Kitco News; dcarlson@kitco.com

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