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Weaker Prices Forecast For Gold Market – Survey Participants

Friday August 22, 2014 12:08 PM

(Kitco News) - A majority of participants in the weekly Kitco News Gold Survey expect gold prices will continue to soften as improving U.S. economic news and the Federal Reserve making broader hints about raising interest rates next year may weigh on values.

Out of 37 participants, 23 responded this week. Of those, eight see higher prices, 12 see lower prices and three see prices trading sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Last week, survey participants were evenly split for this week. As of 11:30 a.m. EDT, Comex December gold was down about $27 for the week.

Those who see weaker prices said they expect the softer tone gold developed this week to spill over into the last week of August.

Ralph Preston, principal, Heritage West Financial, said he expects prices to slip.

“From a momentum and technical point of view, the pass of least resistance is down,” he said.

Others pointed to the strength in the U.S. dollar, as the U.S. dollar index rallied above the 81.00 area, which was technical chart resistance. A firmer dollar can weigh on gold prices since gold is dollar-denominated, so the two usually move inversely.

Others see gold rebounding, especially since the market is holding 2014 trendline lows.

Colin Cieszynski, senior market strategist at CMC Markets, suggested some of the bearishness for gold is worked into prices already.

“This week’s selloff in gold combined with a higher U.S. dollar already priced in a less dovish Fed (in my opinion), with the bigger risk now moving to stock markets, which priced in a more dovish Fed. Political risk hasn’t eased very much either. On top of this, the LTROs (long-term refinancing operations) are coming next month in Europe and gold has tracked the size of the ECB (European Central Bank) balance sheet more closely over the last five years than the U.S. dollar anyway,” he said.

Related Stories:

Kitco Gold Survey

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



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