09 December 2011, 02:42 p.m.
By Allen Sykora
Of Kitco News
http://www.kitco.com/
(Kitco News) - Gold
futures are roughly in the middle of their trading range from recent
months, and as the consolidation continues, analysts are mixed on which
way they think the metal is likely to chop in next week’s trading.
Eighteen of 34 participants responded in the latest weekly Kitco News gold survey.
Of those, seven see prices up, while nine see prices down and two see
prices sideways or unchanged. Market participants include bullion
dealers, investment banks, futures traders and technical-chart
analysts.
February gold futures settled at $1,716.80 an ounce Friday on
the Comex division of the New York Mercantile Exchange, down $34.50 for
the week. March silver finished at $32.253 an ounce, a loss of 43.3
cents since last Friday.
Since early September, the gold contract has been in a range of
$1,925.10 to $1,543.30. The market has consolidated in an increasingly
tighter wedge formation since, meandering between $1,806.60 and
$1,670.50 since the start of November and holding within a
$1,704.9-$1,760.50 range this week as of the pit close.
The two-sided trade has even resulted in mixed opinions on the technicals.
Charles Nedoss, senior market strategist with Olympus Futures,
looks for gold to uptick after its ability to hold around the $1,700
support area this week, particularly during heavy selling on Thursday.
“We’re at the low end of the (recent) range. So I’m going to
say we’re higher at the end of next week,”
Nedoss said. The area around
“$1,700 is psychological support. We keep coming down there and
holding on, so I think you’re seeing some value seekers in that area.”
Nevertheless, Darin Newsom, DTN senior analyst, fears technical
pressure will hit gold, with the market close to support after being
turned back from overhead resistance this week. If February gold breaks
down through the nearby support, he said, there is scope for a retest
of the $1,670.50 low from Nov. 21.
Still other analysts pointed out that the near-term technicals
picture is dented with February gold below its 20-day moving average,
which stood just below $1,734 as the Friday pit session ended. Some
traders also pointed to declining volume, typical ahead of year-end, as
a near-term factor likely to hold prices back.
For now, gold is not attracting the safe-haven flows of the
past when the world focused on debt issues, some observers said. But
others see potential for market participants to return to gold as a
store of value, particularly if traders see more worrisome headlines
about sovereign debt around the world.
“At the moment, we’ve lost a bit of the flight to safety,” said
Frank Lesh, broker and futures analyst with FuturePath Trading, who
looks for steady to lower prices next week.
“The market remains nervous about the European debt situation.
But our worst fears (about Europe) have not been realized. The
eurozone at the moment is not breaking up. Whether they will or not
next year is still in question, but for the moment, the markets have
been appeased by this new (proposed) treaty.
“They have managed to put a Band-Aid on the wound and stabilize
the patient for the time-being. So it looks like we go into next year
with the Euroland intact – in trouble, but intact.”
European leaders announced an agreement overnight on deeper
financial and economic integration, including tighter anti-deficit
rules and with sanctions for those who do not follow them. Countries
will make an additional 200 billion euros available to the
International Monetary Fund so it has resources to deal with the crisis,
and the European Stability Mechanism, a new bailout fund, will go into
effect sooner than previously planned.
Still, Zachary Oxman, managing director of TrendMax Futures,
sees potential for European worries to escalate again, leading to
buying of gold.
“I think there are going to be the inevitable credit downgrades
in a number of European sovereign nations and a continued worry across
the board of currency printing,” he said. “The store-of-value trade, I
think, is going to take hold and grab. We’re going to see higher highs
and higher lows. We built a very firm base around $1,705 to $1,700 this
week.
”Another factor that could hold back gold in the short term,
at least, is year-end profit taking and book squaring, analysts said.
Speculators in the New York futures market remains net long in gold and
silver, even though they have pared that net length from earlier in the
year.
“They quietly sell into rallies (to book profits),” Lesh said.
“You don’t just wholesale liquidate…We are seeing liquidation by some
of the longs, especially on the futures side of thing.”
But while gold could continue to consolidate, Lesh also
cautioned that “we could really shoot up” if traders are unsettled
enough by any breaking news. “The market does remain nervousness and
people remain ready to jump back in if they need to,” Lesh said.
By Allen Sykora of Kitco News; asykora@kitco.com
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