Editor's note: Catch the Latest Happenings with Kitco Video News!

Debbie Carlson

METALS OUTLOOK: Strong Close Portends Higher Prices For Gold Next Week

By Debbie Carlson of Kitco News
Friday August 23, 2013 2:15 PM

(Kitco News) - Gold price strength in Friday’s session could spill over into next week as the market’s technical charts point to further gains.

Gold prices ended the week up. December gold futures rose Friday, settling at $1,395.8 an ounce on the Comex division of the New York Mercantile Exchange, up 1.8% on the week. September silver rose Friday, settling at $23.738 an ounce, also up 1.8% on the week.

In the Kitco News Gold Survey, out of 36 participants, 23 responded this week. Of those 23 participants, 15 see prices up, while seven see prices down and one sees prices moving sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.

Gold price shot higher on Friday, breaking out of resistance at the $1,377-80 area after a lower-than-expected July new home sales report. There are concerns that rising long-term interest rates may slow home sales growth.

Traders said buy stops, which are preplaced buy orders, were uncovered when gold rose broke through technical-chart resistance, propelling prices up.

“Technically this market is looking good. Silver also helped with the rise up,” said Charles Nedoss, senior market strategist with Kingsview Financial. “A close over $1,385 could mean a higher start next week.”

The firmer close could spill over into next week, although volume could be light. Next week is the last full week of August and for many, the last unofficial week of summer.

“September will bring a lot more things to focus on, like another jobs report and the Fed meeting,” said Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA.

There will be plenty of debate over the status of the Federal Reserve’s bond-buying program, known as quantitative easing. Views are split on what the Fed might do in September, either taper the amount of bonds it purchases or continue at the $85 billion monthly pace shift.

“The speculation about Fed policy and when tapering will begin continues to be the main influence for the markets. The data on new home sales was the catalyst for (Friday’s) gold move as it was trading even with last week’s close when released. This market looks higher next week and I expect to reach resistance levels of $1,426, $1,444, and $1,468, but I know that economic data cuts both ways and the right --or wrong -- news could end this rally,” said Frank Lesh, broker and futures analyst with FuturePath Trading.

Those who see the Fed trimming its bond purchases as soon as September cite improving Chinese and European economic data, along with generally stable U.S. economic data. If the Fed acts in September, then gold could come under pressure, said some analysts.

Bob Haberkorn, senior commodities broker, RJO Futures, said he’s not in the September tapering camp. Just the thought of the Fed moving in September has already taken stock indexes off their highs and the U.S. 10-year Treasury note yield to its highest level in two years, he noted.

Actual movement by the Fed would add further weight to equities and send interest rates higher, he said, adding that this would be bearish for gold initially. However, he said he believes that the sell-off would be short-lived as buying would come in via a flight-to-safety move. “I just don’t think the Fed can do this (remove stimulus) in an orderly fashion,” he explained.

Also for next week, traders will watch home sales to see if there is any new evidence that rising long-term interest rates in the U.S. are affecting housing prices when the Case-Shiller 20-city home price index is released. This will be watched especially closely after Friday’s surprisingly weak new home sales.

Traders are looking at two consumer sentiment gauges, the Conference Board’s consumer confidence index and the University of Michigan’s consumer sentiment data. Analysts said while retail gasoline prices were lower on average in August, the recent slide in the stock market could offset any comfort consumers felt from slightly cheaper gasoline.

Follow me on Twitter! If you want to keep up with metals news and features, then follow me on Twitter. It's free, too. My account is @dcarlsonkitco

By Debbie Carlson dcarlson@kitco.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
kitco news

Precious Metal Charts

Click to see this Precious Metal chart
  1. 24h
  2. 30D
  3. 60D
  4. 6M
  5. 1Y

Interactive Chart