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(Kitco News) - With the U.S. election over, gold prices could rise next week, gaining momentum from a strong performance this week, market watchers said.

Prices were up on the day and the week. The most-active December gold contract on the Comex division of the Nymex settled at $1,730.90, up 3.3% on the week. December silver settled at $32.599 an ounce, up 5.6% on the week. 

In the Kitco News Gold Survey, out of 33 participants, 26 responded this week. Of those 26 participants, 21 see prices up, while two see prices down, and three are neutral or see prices moving sideways. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.

< After this week’s rebound following U.S. President Barack Obama’s re-election, several market watchers said they expect gold prices to rally. This was the sentiment going into the election, too, that an Obama victory would mean higher gold prices.

“Gold is the only clear winner from the U.S. election. Obama’s victory removes the concern that (Federal Reserve Chairman Ben) Bernanke might be removed, ensuring that accommodative monetary policy will continue,” said Adrian Day, chairman and chief executive officer, Adrian Day Asset Management.

He said given that the U.S. Congress remains as it was ahead of the election, with the Democrats controlling the Senate and the Republicans the House of Representatives, the split chamber vote could be ugly over some key issues coming up, including the pending “fiscal cliff.” The fiscal cliff could occur when mandated spending cuts and the expiration of President George W. Bush’s tax cuts will occur, unless Congress acts to prevent it. Economists have warned of a recession if it happens.

“If we recall the events of summer 2011 over the raising of the debt ceiling, we remember that gold soared; already Fitch has warned of a rating downgrade. So this is all good for gold, however, bad for the country and the economy,” Day said.

Ralph Preston, principal at Heritage West Financial, said considering gold held support at the technical chart level of $1,670, which was also around the 50-day moving average, he sees higher prices. “I’m looking for a technical move up to $1,780 next week. A close back under $1,690 nullifies my bullish perspective,” Preston said.

Next week, Europe will remain in the spotlight for markets and could provide jitters. Although Greece passed another round of austerity measures on Wednesday, as required by institutional lenders to receive more aid, a Bloomberg report from Friday said finance ministers aren’t likely to sign off on fresh loans when they meet Monday. Citing anonymous sources, the European finance ministers want to spend more time looking at the new Greek legislation. However, the story said that there won’t be an “accidental default” for Greece when 5 billion euros of bills mature on Nov. 16.

Daniel Pavilonis, senior commodities brokers with RJO Futures, said he expects gold to rise next week and test the $1,750 level to start. He said the concerns over Europe and the fiscal cliff are “starting to get baked into the cake.”

However, he said the situation with Greece could get worse, especially if European leaders were waiting until after the U.S. election to take a harder line on Greece. How that would affect the euro and thus the dollar is unknown. Sharp currency moves could impact gold prices.

U.S. economic data releases for next week include retail sales, the producer price index and the consumer price index. Lately, data that tracks consumer activity has come out higher than expected. The latest example was Friday’s University of Michigan/Thomson Reuters consumer-sentiment index, which rose to 84.9 in November. This was the highest reading since July 2007 and up from a final October reading of 82.6.

Inflation data has been largely flat and that trend is expected to continue with next week’s reports.

Pavilonis said he is getting worried about the reports of layoffs at U.S. companies. This week, airplane manufacturer Boeing announced layoffs and discount-coupon company Groupon axed a small number of employees. That could start to shake markets if it continues.

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By Debbie Carlson of Kitco News dcarlson@kitco.com

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