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Survey Participants Look For Lower Gold Prices Next Week

Friday November 28, 2014 12:18 PM

(Kitco News) - Most participants in Kitco News’ weekly gold survey said they look for softer prices next week since a Swiss gold referendum is expected to fail and the dollar has been strong while crude oil has been soft.

In the Kitco News Gold Survey, out of 36 participants, 19 responded this week -- fewer than usual during the U.S. Thanksgiving week. Five see prices up, while 11 see prices down and three see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

Last week, survey participants looked for prices to rise this week. Shortly before noon EST, Comex gold for February delivery was down $18.60 for the week. Prices were roughly flat as of Wednesday prior to the break for the U.S. Thanksgiving weekend.

Choosing gold’s direction next week might be even trickier than usual since one of the major events that could dictate price action – the referendum in Switzerland on central-bank gold holdings – occurs Sunday before traders even get to their desks next week. Polls suggest the measure, which would mean increased Swiss National Bank gold purchases if it passes, will fail. As a result, traders have said a “no” vote is slightly bearish to neutral since this outcome is expected, although a “yes” vote would boost prices.

Adrian Day, president and chief executive officer of Adrian Day Asset Management, looks for gold to be “more likely up than down.”

He further explained: “The biggest determinant for next week may well be the Swiss referendum, and of course we don’t know the result of that yet. If the vote is positive, gold could be very strong, whereas a negative vote – other than an unexpectedly low ‘yes’ vote – would not be very negative since the market is not expecting a strong yes vote. So it’s an asymmetrical bet in my view.”

Colin Cieszynski, senior market strategist at CMC Markets, looks for gold to ease next week.

“I suspect the ‘no’ side will win the Swiss referendum on Sunday and as we saw with the oil collapse after the OPEC meeting, gold could be vulnerable on a ‘no’ vote,” he said. “Also, the crude oil crash means lower inflation pressures for the foreseeable future, reducing demand for gold as in inflation hedge. Finally, I think the ECB (European Central Bank) is going to do nothing at its meeting next week and punt any decision on more stimulus off to 2015, removing another pillar of support from gold. It’s possible gold could retest the November lows in the $1,130-$1,150 zone sometime in early December with a perfect storm starting to swirl around gold.”

Added Peter Hug, global trading director with Kitco Metals: “On the caveat that the Swiss do not vote yes, I believe the market will be down next week. I believe the US$ (U.S. dollar) trend again re-asserts.”

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Mark Leibovit, editor of VR Gold Letter, described himself as “bullish, especially if the Swiss gold referendum gets passed.”

He later added: “If it obtains a majority ‘yes’ vote, it becomes law despite the objections of bankers and politicians. This would deliver both a demand shock and a supply shock. The gold market and central banks are whistling past this graveyard. They may be in for a shock when the votes are counted.”

Kitco Gold Survey

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



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