(Kitco News) - Gold appears to have put in a near-term bottom with this week’s bounce and that could allow the yellow metal to rise again next week.

The rally helped to halt a decline the market experienced for January and early February, market watchers said.

“It looks like we did put a bottom in gold. January and February are not hot times for gold. Last year, we had a much more severe setback,” said Sterling Smith, commodity trading adviser and market analyst with Country Hedging.

April gold prices on the Comex division of the New York Mercantile Exchange settled at $1,349 an ounce, down $4 on the day, but up 0.5% on the week. March silver settled at $29.059 an ounce, up 4.1% on the week.

Shawn Hackett, president of Hackett Financial Advisors, said it was important for gold to hold the 150-day moving average. Gold prices fell to $1,307.70, as measured on a daily continuation chart, just above $1,305.50, which is where the average was that day. “It’s remarkable the way it held,” he said.

This technical-chart point has proven in the past be to be important for gold.

“In late July, it tested it and we had a huge rally. In February it held it and in March we had a big rally. The last time we were below, it was the big crash,” Hackett said, noting in July 2008 gold broke the 150-day moving average for the first time in a long time and not long afterward fell 35%.

The last time gold prices were under this average was in January 2009. “Until that breaks, the bull is still on,” he said.

Hackett added that the unrest in Egypt has given gold new life.

“As long as the Middle East remains unsettled, gold’s interim lows are in place. Gold was going down and was starting to do some serious technical damage, but now there’s a new reason to buy gold. The Middle East is bullish for gold and Uncle Ben (Bernanke) is still having a lot of fun,” Hackett said, referring to the Federal Reserve’s second quantitative easing program.

Smith said the market will watch if there is any contagion regarding the political unrest in Egypt, but suggested the bullish case for gold could be limited if the strife does not spread to any other countries. “The Egyptian political situation makes people nervous, but revolutions are not good economically. It takes away a bit of the inflation argument. I don’t see Egypt by itself (as bullish) but if we see it spreading… that situation could be quite bullish for gold. The markets would be nervous about crude oil flow, or God forbid, terrorism,” he said.

Smith said next week’s U.S. economic calendar is light, so any market-moving events would likely have to come from overseas. He did note that China will continue to be closed for its New Year celebrations, so without Chinese buying, that could put a drag on gold prices.

He said for next week, resistance for April gold comes in at $1,370. Barclays Capital technicians said a break above resistance in the $1,400 area “would confirm our bullish view and prompt a re-test of the $1,432 all-time high. Our greater targets remain in the $1,460-$1,485 area,” they said.

Smith said the $1,400 area is feasible in the first quarter, but between the Chinese New Year and the Presidents’ Day holiday in mid-February in the U.S., it might be difficult to reach that area so quickly.

Silver is beginning to benefit from the all-time highs reached in the copper market, Smith said, and the technical chart patterns should support the gray metal. “Silver should have a solid week. There’s resistance at $29.81 to $30. If we break that then we could test $31,” he said.

Barclays said its also looks for silver to break above $30 and resume gains through the recent high of $31.26.


By Debbie Carlson of Kitco News dcarlson@kitco.com

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