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METALS OUTLOOK: Gold Falls On Week, But Outlook Still Firm

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METALS OUTLOOK: Gold Falls On Week, But Outlook Still Firm

Gold prices ended lower on the week after a stronger dollar put pressure on precious metals prices, but the markets managed to hold above key support levels which should give support into next week’s action.

Futures prices for the week on the Comex division of the New York Mercantile Exchange dipped for gold, with the December down 1% at $1,352.30 an ounce. December silver meanwhile, rose 4.8% at $27.179 an ounce.

After being bloodied and bruised for several weeks, the dollar rallied a bit versus the euro this week over jitters regarding the solvency of Irish banks. The European Union, the International Monetary Fund and the United Kingdom all pledged to help the beleaguered banks, even as the Irish government attempted to fend off the aid.

Dollar strength weighed on precious metals and kept prices under $1,400 the entire week. “That doesn’t mean this market is bearish, not all, this market is still extremely bullish, but we’re in a correction with extreme volatility,” said Scott Meyers, New York branch manager with the Pioneer Futures division of MF Global.

The fact December gold was able to scratch out a close over $1,350 is a positive sign going into next week, said Bob Haberkorn, senior market strategist, Lind-Waldock, and gold could try to go back and retest the $1,400 area.

Haberkorn also said he noticed buyers at the Comex were placing bullish position in the options market, with purchasing far out of the money calls, such as July silver $40 calls and the $1,600 February gold calls.

That could be a tall order for next week, however, as the U.S. markets head into the big Thanksgiving holiday on Thursday. Markets are closed that day and the Nymex metals contracts have shortened trading hours Friday. Many traders opt to extend the holiday by one extra day, so trading volume could be light, but could also be volatile.

Precious metals prices also sagged over worries of a Chinese interest rate hike. Early Friday, China said it would tell banks to raise their reserves, effective Nov. 29, but markets cut early losses. Haberkorn said early chatter that the CME Group, which owns the Comex, would raise margins again pulled down prices, but when that did not materialize the market shook off some of the losses.

He said going forward that the markets will continue to keep an eye on any political tensions between the U.S. and China, especially after Federal Reserve Chairman Ben Bernanke’s speech overnight that chastised an unnamed country for undervaluing its currency and potentially curbing global growth.

“The next thing we need to watch is the political and economic fight with China. If there are global concerns again, that could lift the dollar. But gold and silver might rally regardless of the dollar, much like it did this spring when the Europe (fiscal worries) happened,” Haberkorn said.

Both Meyers and Haberkorn said they remain bullish on gold, even with the price retreat. Meyer said support for gold is seen first at $1,330-35 with major support seen at the Oct 21-22 low of $1,315-20. Resistance is at the recent high


By Debbie Carlson of Kitco News