Gold recently experienced some volatility, with prices mixed for the week and higher on Friday. Though some market players believe this precious metal could rebound next week, they are being cautious with their optimism.
- Things in the Middle East are far from stable, a monetary policy meeting is scheduled for Tuesday, and technical charts are not entirely positive.
- Gold will take support from 1730,40 level if bullishness falls again from 65 level expect gold to go downwards 1622 levels
- 1680-1700 will act as strong support and then continue upside.
Tensions between Russia are increasing and Western countries are adding fuel to the fire through ongoing sanctions against Iran due to its nuclear program. By Friday, the most actively traded gold spot rested at $1,751.50 per ounce on the New York Comex, reflecting a one percent increase for the week. This led some to predict a near-term increase, as history shows that weekly gains sometimes extend through the beginning of the following week if momentum is sustained. Silver did not trend with the golden metal, landing down 0.9 percent at $34.525 per ounce.
The rise in gold prices on Friday was attributed to news that an Israeli military air strike killed a senior militant leader, including leaders Khaled Mansour and Tayseer Jabari in Palestine. That day, twenty-one of the 32 regular participants responded to the Kitco News Gold Survey. These included money managers, futures traders, technical chart analysts, investment banks, and bullion dealers. Eleven expected prices of the golden precious metal to increase, six expected a decline in prices, and four predicted neutral prices.
The price of the metal was not higher for the entire recent session. U.S. unemployment data was slightly more “positive” than expected. According to Nomura analysts, this figure was “solid” and the increase in jobs figures may be mentioned during the Tuesday meeting of the Federal Open Market Committee (FOMC) according to Forbes. Nonfarm payrolls increased by 227,000 and gold prices weakened during early trading. Despite the job trending figures, the Nomura analysts do not expect the FOMC to change its view that the federal unemployment rate is elevated.
Market watchers report that this means a third round of federal reserve quantitative easing may not be coming soon. Global liquidity has boosted markets, including gold. Without this additional stimulus, the price of the precious metal could have difficulty remaining at upper levels. FuturePath Trading futures analyst and broker Frank Lesh commented on the importance of action from central banks. He explained that it will be important to watch the institutions over the long-term. Just as central banks created lows when they stopped selling more than ten years ago, they will cause highs when they have finished purchasing.
Overall, the trend for the metal remains up, said Mr. Lesh. However, for the next week, the market will remain within a range unless equities rise. He noted that gold is being viewed as a “risk on” trade due to its strong correlation with equities according to Forbes. He believes that traders will purchase the metal because equities are currently stable and increasing. PFG Precious Metals Director of Business Development reported that his bullion clients are not interested in chasing rallies but are taking a more long-term approach. He believes that investors are now more sophisticated and are purchasing at the breaks, aiming for the $1,700 to $1,800 range.
Kitco News Contributor Richard Baker believes that the precious metal may test the $1,850 range this week as long as tensions in the Middle East do not escalate. He noted stronger trading of the U.S. dollar against the yen and euro, positive American jobs statistics to support his view. Mr. Baker studies commodity market correlations and believes that if gold prices decline to $1,850, Nymex crude oil may trade fell $2.24, or 3%, to settle at $72.01 a barrel on the New York Mercantile Exchange.
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