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Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh on April 11, 2012. (Ajay Verma/Reuters)
Gold bars are displayed at a gold jewellery shop in the northern Indian city of Chandigarh on April 11, 2012. (Ajay Verma/Reuters)

SURVEY

Market players bracing for gold to extend rally next week Add to ...

The big move in gold prices this week after the bond-buying announcement by the European Central Bank and hopes for more stimulus from the Federal Reserve next week has most participants in the weekly Kitco News Gold Survey suggesting values for the yellow metal could rise again.

In the Kitco News Gold Survey, out of 33 participants, 29 responded this week. Of those 29 participants, 22 see prices up, while four 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.

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Several participants echoed what Ira Epstein director of the Ira Epstein division of The Linn Group said, which is that there are expectations that the Fed will announce another stimulus plan, which will lower the value of the U.S. dollar.

The Federal Open Market Committee meets Wednesday and Thursday. After the release of the minutes from the previous FOMC meeting and comments by Fed Chairman Ben Bernanke at the Jackson Hole, Wyo., Fed symposium, survey participants said that hopes are high that the Fed will act. That view was given more credence on Friday following a lower-than-expected August jobs report.

Sean Lusk, gold and precious metals analyst at Iron Beam, said: “If some form of stimulus is announced gold could trade up to or even surpass yearly highs up at $1,800. However the market will need to hear it from Bernanke’s mouth for obvious verification.”

Those who see weaker prices said that gold is due for a correction after such a stout rally this week, especially if the Fed opts not act at the FOMC meeting.

Similarly, those who are neutral on prices said they want to see how gold acts after this week’s gains and the Fed meeting.

“Gold may have trouble extending on last week’s rally after the bulk of the inflationary news is out. The Fed will most likely stand aside and wait to see the results of the ECB’s new bond-buying program before embarking on its own QE plan. This will cause investors to question whether to keep gold as a core holding or take the money and run leaving the door for profit taking,” said Phillip Streible, senior commodities broker at RJO Futures.

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