Friday May 17th, 2013 12:08 PM
A stronger dollar and continued strong equities are expected to weigh on gold prices next week, with a majority of participants in the Kitco News Gold Survey forecasting weaker prices.
In the Kitco News Gold Survey, out of 36 participants, 28 responded this week. Of those 28 participants, nine see prices up, while 17 see prices down and two see prices moving sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.
Those who see weaker prices cite currency factors and technical-chart trends. The strength of the U.S. dollar, which rose to its highest level since August 2010, pressured gold and other commodities this week.
“The June contract has moved through technical price support at $1,384.80 and could now target its previous low of $1,321.50,” said Darin Newsom, DTN senior analyst.
Several respondents said they see a trip down to test the April lows of $1,321.50, and another participant said he wouldn’t be surprised to see gold fall under $1,300 next week, given the pace of the weakness this week.
Those who see higher prices said they expect gold to find support near current levels, saying that the sentiment in gold has become too bearish.
“No one should be surprised if gold prices take another dive. The market certainly remains vulnerable to more institutional selling. That said, I'm looking for a bounce-back in the week ahead -- with the yellow metal recovering some of the ground lost in the recent flash crash -- if only because the price has fallen so far, so fast…. However, the key to recovery is in the paper market. What the hedge funds and other large-scale institutional traders need now is a sense that downside risks are retreating and some degree of comfort that prices have hit bottom,” said Jeffrey Nichols, managing director, American Precious Metals Advisors and senior economic advisor, Rosland Capital.
Those who are neutral or see a sideways trade said they believe gold prices are trying to build a base of support in the $1,300s region.
Allen Sykora contributed to this survey.
By Debbie Carlson of Kitco News firstname.lastname@example.org
MADRID (MarketWatch) — Gold futures fell sharply on Friday, setting up for a weekly loss, as the U.S. dollar continued to ramp up against the yen. Meanwhile, BNP Paribas cut its gold price view, but said the metal will be trading back above $1,600 an ounce in six months.
Losses for the June gold contractGCM3 -2.51% were ramping up, down $40.90, or 2.8%, to $1,427.92 an ounce. The precious metal sliced a weekly gain to a loss of 2.4%, on the heels of two straight winning weeks.
Gold on Thursday fell $5.10, or 0.4%, extending losses after the U.S. Labor Department said weekly initial claims for unemployment benefits fell by 4,000 to 323,000, the lowest level in more than five years and beating forecasts calling for a slight rise. A week prior the Labor Department reported the economy added 165,000 jobs in April, and that the unemployment rate slipped to 7.5% from 7.6%, blowing out forecasts.
The Federal Reserve has indicated it’s likely to taper monetary stimulus depending on improvement in the labor market. The Fed’s quantitative-easing program has been a benefit for gold, as QE tends to pressure the dollar and can lead to inflation. Gold is often seen as an inflation hedge.
Following the jobless-claims data, the U.S. dollar DXY +0.42% climbed above ¥100 for the first time since April 2009, and the Australian dollar AUDUSD -0.7829% fell near parity. The dollar extended gains against the yen on Friday, trading above ¥101.
A stronger dollar tends to hurt prices for dollar-denominated commodities such as gold as it makes them more expensive for holders of other currencies.
BNP analysts Harry Tchilinguirian and Stephen Briggs cut their 2013 gold forecast by 5% to $1,580 an ounce from an earlier outlook in a note. They also knocked their 2014 forecast by 5% to $1,520 an ounce, also down 5%.
However, in six months, the analysts predicted gold will be trading back above $1,600 an ounce. Accommodative Federal Reserve policy is one reason, along with continued low inflation and low nominal interest rates.
Meanwhile, silver for July delivery SIN3 -2.28% on Friday fell 57 cents, or 2.4%, to $23.33 an ounce, and copper for July delivery HGN3 +0.20% was flat at $3.34 a pound.
June palladium PAM3 -2.41% fell $12.75, or 1.8%, to $702 an ounce. July platinumPLN3 -1.89% tumbled $24, or 1.6%, to $1,492.50 an ounce.
Palladium prices were on track for a weekly rise of 1.3%, but platinum was looking at a 0.6% drop and copper was higher by 1%. Silver prices were poised for a loss of 2.8% for the last week.