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Gold bars (iStockphoto)
Gold bars (iStockphoto)

Survey

Market players expect gold to break out to the upside next week Add to ...

Higher prices for gold are expected next week, according to a majority of participants in the Kitco News gold survey, breaking a string of weeks where there was no dominant viewpoint regarding the direction for the gold price.

Out of 33 participants, 25 responded this week. Of those 25 participants, 17 see prices up, while two see prices down, and six see prices moving sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.

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Many survey participants have turned bullish on gold prices for next week, with several suggesting that gold is building a base in the $1,570s, which is above the February low around $1,554 (U.S.) an ounce.

Jeffrey Nichols, senior economic adviser to Rosland Capital, said momentum and technical indicators are firming, and central bank buying and the whiff of inflation as seen in Friday’s consumer price index report could push gold over $1,600 an ounce. “Today’s reported acceleration in consumer price inflation, although to a significant extent caused by higher gasoline prices, will serve as a reminder to investors and traders alike that higher inflation is lurking down the road,” he said.

Those who see prices holding sideways said so far gold seems to be trapped in a tight range between the $1,550s and $1,600 area, and without a catalyst, there’s no reason to think prices can’t break through either side.

Ken Morrison, founder and editor of online newsletter Morrison on the Markets, said he’s neutral. A “slightly higher open interest (for Comex gold futures) indicates we’ve found a range that attracts a few new longs and shorts, thus the trading range for now,” he said.

The few who see lower prices said U.S. dollar strength may hinder gold, along with the strength in the stock markets and better-than-expected economic data. Sean Lusk, precious metals analyst at Ironbeam, said the Federal Reserve might hint at such improvements, which would be bearish for gold.

“I believe there will be some changes in the Fed’s statement and possible revisions to their unemployment and economic projections for the latter half of 2013 and 2014. They seem to be changing their outlook on a month-to-month basis for whatever reason. I believe they will not alter the current $85-billion in stimulus for now, but rather offer hints or clues that it could be reduced or done away with in the future,” he said, noting the last time Fed governors came out with a slightly better take on the U.S. economy, gold fell, until the metal found some support after the Fed announced the current stimulus plan.

 

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