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Uncertainty To Rule Gold Market Next Week – Analysts

(Kitco News) - Uncertainty will continue to dominate gold next week as analysts expect the market to continue to digest the weaker-than-expected nonfarm payrolls released Thursday, and react to the Greek bailout referendum Sunday.

Comex August gold futures are ending their second consecutive week in negative territory and, although a weaker-than-expected expected jobs report helped push gold off its sessions lows, prices remain near the bottom of their channel.

August gold futures settled the shortened trading week Thursday at 1,163.50 an ounce, down 1.6% from Monday’s open. Comex September silver futures managed to settle Thursday session relatively unchanged, but still closed its second straight week in negative territory. Silver prices ended the day at $15.562 an ounce, down 1.9% on the week.

Looking ahead, in the short-term, most retail investors remain bearish on the yellow metal while market professionals are still uncertain, according to the Kitco News Wall Street vs Main Street Weekly Gold Survey.

This week, 211 people participated in Kitco News’ online survey. Of those voters, 119 people, or 56%, expect to see lower gold prices next week; 62 participants, or 29%, expect to see higher prices next week. Thirty people, or 14%, are neutral on the gold market.

Out of 33 market experts contacted, 18 responded; of those, eight participants, or 44%, are bullish on gold next week. Seven experts, or 39%, are bearish, and three people, or 17%, are neutral on gold. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

With a light week for economic data ahead, markets are expected to continue to digest the June employment numbers to anticipate when the Federal Reserve will start hiking interest rates. Thursday, the U.S.  Bureau of Labor Statistics said 223,000 jobs were created in June, up from May's downwardly revised number of 254,000.

At the same time, the unemployment rate dropped to 5.3%; however, this was mostly due to a falling participation rate to 62.6% from May’s rate of 62.9%. The report also showed that wage growth stagnated last month with average earnings unchanged at $24.95 an hour.

Colin Cieszynski, senior market strategist at CMC markets, said that he would expect gold to move higher next week as the data does not support a Fed rate hike in September. He added that a weaker U.S. dollar should also help boost gold higher.

Ole Hansen, head of commodity strategy at Saxo Bank, agreed that gold could rally next week as he expects the Fed to be less hawkish following the June jobs report. He added that he also sees some technical support for the yellow metal as there appears to be little follow-through selling below $1,163 an ounce.

Other analysts don’t expect the employment data to shift the current fundamental outlook. Dahdah Bernard, precious metals strategist at Natixis, said that he is expecting gold to remain range bound in the near term.

He added that he is also not expecting gold to react to Greece’s referendum on whether or not to accept the bailout offer from its European Creditors Sunday.

He added that the European Union is in much better shape than it was a few years ago, and any fall out from a “Grexit” would be limited.

Many analyst have been disappointed that this week’s default, and the country having to institute capital controls on its currency, didn’t have any major impact on gold prices.

Sean Lusk, director commercial hedging division at Walsh Trading, said that it appears that gold has fallen out of favor with investors as it appears that the U.S. dollar and U.S. government bonds are now the safe-haven of choice.

However, Adrian Day, president of Adrian Day Asset Management, said that investors shouldn’t be so quick to dismiss gold’s lackluster performance during the crisis.

“There was some buying throughout early June in anticipation of the Greek crisis coming to a head, and when gold didn’t rally sharply on the breakdown of the talks, disappointment led to selling, particularly by the short-term traders…” he said. “In addition, the reluctance of the European leaders to let go is creating uncertainty.  The continuing limbo is testing the patience of gold investors.  Nonetheless, the sell-off is overdone and the Greek tragedy has not reached its denouement yet, so we remain bullish.”


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By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow Neils Christensen @neils_C

 

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.
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