Gold Survey: Market Participants See Weaker Gold Prices Next Week

Friday September 13, 2013 12:10 PM

(Kitco News) - The gold market is expected to fall next week, with participants in the Kitco News Gold Survey basing their views on what action they think the Federal Reserve will take next week with its quantitative easing program.

In the Kitco News Gold Survey, out of 36 participants, 21 responded this week. Of those 21 participants, 10 see prices up, while 11 see prices down and one is 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 down about $72 on the week. As of Aug. 30, survey participants have been correct three of the past five weeks.

Many of the survey participants who expect higher prices said they’re taking a contrarian view of what may occur next week at the two-day Federal Open Market Committee meeting, which concludes Wednesday. The consensus is that the Fed will cut at least a token amount, anywhere from $10 billion monthly on the low end to $20 billion on the high end. Currently the Fed is buying $85 billion a month in U.S. Treasury and mortgage-backed securities.

Survey participants with contrarian viewpoints, or who think the Fed might not taper as much as expected, said gold could see a knee-jerk reaction higher as the sell-off going into the meeting has been swift.

“I’m going to out on a limb here and say higher next week,” said Charles Nedoss, senior market strategist with Kingsview Financial.

Nedoss said even if the Fed tapers as expected, there’s a chance gold could bounce up on a “buy the rumor, sell the fact” trade on the idea that so many market participants have sold gold ahead of the meeting.

Plus, Nedoss said, as did other survey members, that the negotiations on ridding Syria of its chemical weapons are not a done deal. “There is still some event risk tied with that,” he said.

Those who see weaker prices said they expect gold to continue its weaker trend as they foresee the Fed starting to unwind its stimulus program. Some also say with more bullion banks and other forecasters calling for lower gold prices – some as low as $1,000 – sentiment in gold is bearish.

Richard Baker, editor of the Eureka Miner Report, said he expects gold prices to fall next week, and he’s targeting $1,295. This week’s weakness came as traders removed risk premium related to Syria and on the tapering expectations, he said.

“Gold is also threatening to test its July low relative to S&P 500. Importantly, the yellow metal physical demand from Asia has also disappointed during a season that is typically very strong…. Even though the taper may be mild or delayed, QE3 is likely to continue for some months to come and will further erode gold’s value to key commodities,” he said.

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

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