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(Kitco News) - Gold prices could continue to hold just under $1,800 an ounce as the market does not have many catalysts to push it through that area, and action could be similar to this week’s trend, market watchers said.

Prices were down on the day and the week. The most-active December gold contract on the Comex division of the Nymex settled at $1,759.70 an ounce, down 1.19% on the week. December silver settled at $33.669 an ounce, down 2.61% on the week. 

In the Kitco News Gold Survey, out of 33 participants, 21 responded this week. Of those 21 participants, 10 see prices up, while nine see prices down, and two are neutral or see prices moving sideways. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.

Prices drifted lower on Friday’s in a fairly light volume session, with selling ahead of the weekend dominant. Gold “clearly lacks the necessary impetus to make further gains just now, the debt crisis in the eurozone having not escalated any further and the supply risks in South Africa already being largely priced in,” said analysts at Commerzbank.

They also noted after scoring some strong inflows recently, activity in the exchange-traded funds as slowed, with a “wait and see attitude” becoming more evident among ETF buyers, the bank said. “There is thus a growing risk of short-term oriented financial investors starting to take profits, which would put prices under pressure,” the bank said.

However, Commerzbank said they don’t see significant losses likely for gold because of the global central banks’ ultra-loose monetary policy underpins values.

Bob Haberkon, senior commodities broker, RJO Futures, said he’s neutral on gold next week, expecting it to hold in the current range between $1,760 and $1,780. “I think we’ll see what we saw this week, which is just some more sloshing around. I’m going to keep an eye on what comes out of Europe,” he said.

The next few weeks might be quiet ones overall, he said, as the markets bide time ahead of the U.S. presidential elections in early November. “After the elections the market will focus on the fiscal cliff and debt ceiling and that could be a really good time for metals,” he said.

Edel Tully, precious metals strategist at UBS, said while speculative buying and ETF inflows have supported gold to current levels, she is watching physical demand, which generally has been lagging with gold prices near records in most emerging market currencies.

“The future path of (emerging market) currencies versus the dollar will therefore be an important factor for returning gold demand,” she said.

She noted the recent strengthening of the Indian rupee has helped to revive physical buying there.  

“This currency strength is occurring at the right time for gold, with the wedding season intensifying from late October and followed by Diwali from Nov. 13. So long as the rupee doesn't weaken materially, gold demand should pick up further in the coming weeks, and this will be further helped by low inventory,” she said, although it’s not likely to make up for the poor sales earlier in the year. 

Tully said gold prices can appreciate further, but she does offer some factors that could be stumbling blocks this quarter for the yellow metal, including a break in equity prices, weakness in the euro, the U.S. presidential election, improved U.S. economic data and a resolution to the fiscal cliff.

Looking toward next week, market watchers said Chinese data will help to set the tone early. Over the weekend September trade data will be released, along with the consumer and producer price indexes. Analysts at Brown Brothers Harriman said the worries about inflation in China should be easing.

“Price pressures should not be a concern now, not with deflation seen at the PPI level and disinflation at the CPI level…. It’s worth noting that PBOC (People’s Bank of China) has been letting the yuan spot appreciate recently, and is up 0.3% so far in the fourth quarter.

In the U.S., next week brings retail sales data and Nomura analysts said they expect the figures to beat the consensus estimate, which is for a rise of 1.1%.

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By Debbie Carlson of Kitco News dcarlson@kitco.com

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