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(Kitco News) - Gold prices ended lower for the second week in a row and market participants said this weaker trend could continue into next week.

Prices were down on the day and the week. The most-active December gold contract on the Comex division of the Nymex settled at $1,724 an ounce, down 2% on the week. December silver settled at $32.097 an ounce, down 4.7% on the week. 

In the Kitco News Gold Survey, out of 33 participants, 24 responded this week. Of those 24 participants, six see prices up, while 13 see prices down, and five are neutral or see prices moving sideways. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.

Gold prices fell this week as some market participants became disenchanted by the yellow metal’s inability to take out the $1,800 level. In recent weeks the metal saw a lot of buying interest in anticipation and confirmation of a third round of quantitative easing, but there wasn’t enough momentum to push it through the psychological ceiling of $1,800. Coupled with improved U.S. economic data, some market participants began to question future U.S. quantitative easing expectations, analysts said.

Further, several industry watchers said with three weeks to go before the U.S. presidential election there’s a bit of hesitancy to put on positions until afterward.

Frank Lesh, futures broker at FuturePath Trading explained gold’s recent downward move.

“Gold is still suffering from long liquidation as traders lock in profits from the $200 move we have had since August. The dollar has found support and is turning higher with the euro hitting resistance and now turning lower,” Lesh said.

Friday’s close under $1,729 made it the lowest close in a month and Lesh said because of it, he forecasts gold testing how strong of support there is at $1,700.

“The fact that we could not exceed last week’s high of $1,759 … is also negative. Comex gold stocks are the highest since March. A large shift in sentiment for gold is the loss in perception of safety,” Lesh said.

Charles Nedoss, senior market strategist with Kingsview Financial, said going into next week he’s watching the $1,720 area for December Comex gold, which near the 50-day moving average. If that area is taken out, support is at $1,700. “Beyond that things could get ugly, with gold possibly falling to the $1,668 area, which is the 200-day moving average,” he said.

For at least the beginning of the week he said he expects prices to continue to fall.

Looking toward next week, there are a few events that could influence gold.

Over the weekend two Spanish regions, Galicia and the Basque country, are set to hold elections. Brown Brothers Harriman said these elections are “seen as a hurdle the (Spanish) government wanted to pass before formally requesting aid.”

Depending on how the elections turn out could influence what the country does in terms of asking a bailout, BBH said.  

Andrew Busch, global currency and public policy strategist at BMO, said the key events to watch will be the results of the Chinese PMI, set for release Tuesday, and European Central Bank President Mario Draghi’s speech to the German parliament on Wednesday.

The Chinese data will give a better understanding of the current Chinese economy, he said, adding that the PMI number will have to be above 49 to generate “risk-on trading activity.  The bigger risk is if it comes in lower as it will (call) into question the veracity of the data previously released,” he said.

Draghi’s speech will review the ECB’s recent outright monetary transaction plan and what it means for European sovereigns. “Given his audience, the risk is that he will sound more hawkish to assuage the German politicians…. Tough talk from Draghi coupled with weaker than expected PMI data will hurt the euro,” Busch said. 

That in turn could pressure gold prices.

Also next week is a two-day meeting of the Federal Open Market Committee, which concludes Wednesday. Nomura analysts said considering that QE3 was announced in the September meeting, they now expect the FOMC “to enter a holding pattern while watching for signs of a ‘substantial’ improvement in the labor market…. With the FOMC in wait-and-see mode, the ongoing discussion among participants around crafting a consensus forecast is likely to intensify, while other discussion may focus on what to do when Operation Twist ends in December.”

On Friday the advance third-quarter gross domestic product data is slated for release. Analysts will look to see how much impact higher consumer spending, including on gadgets like Apple’s iPhone 5, will contribute to GDP growth. MarketWatch estimates GDP growth at 1.6%.

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By Debbie Carlson of Kitco News dcarlson@kitco.com

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