World Economy

Traders Tracking Gold Fluctuations

Traders Tracking Gold Fluctuations Traders Tracking Gold Fluctuations

Gold prices are set to drop next week with the yellow metal expected to continue battling a stronger US dollar, buoyed by the strengthening US economy.

Traders will track physical demand in Asia to see how buying tied to the ongoing wedding season in India and early purchases linked to 2015’s Chinese New Year celebrations influence prices.

They will also track developments in India, the leading gold consumer, where the government could introduce import curbs, a move that will hit demand and negatively influence prices.

As many as 11 of 19 analysts polled in a Kitco Gold Survey said they expected gold prices to trade lower next week, while five predicted that prices will rise and three forecast prices to trade sideways.

Ken Morrison, editor of online newsletter Morrison on the Markets, told Kitco: “The most interesting development has been the sharp increase in futures open interest over the past week, up 8% and a two-year high, during a period when prices were consolidating.

“It indicates a lot of new money making big directional bets. Given the strengthening dollar here at week’s end combined with the bear-flag-like pattern in gold futures, the risk/reward favours the bears for at least a retest of the [7 November] $1,130 low sometime in the next few days.”

 Difference of Opinion

But a BofA Merrill Lynch note took the opposite view. It said: “We are turning bullish on gold. The Friday Bullish Reversal (Key Day Reversal) and completing impulsive declines from Sep’11, Jul-10 and Oct-21 say that the tide has turned from bearish to bullish.

“Further supportive of gold is the fact that the US is also in the process of topping out. Above 1180/1184 clears the way for 1241/1255 and, eventually, beyond.”

Earlier, Commerzbank Corporates & Markets said in a note: “The gold price finds itself under pressure from a firmer US dollar, buoyant equity markets and continuing outflows from goldETFs...Gold could face additional headwind from India, where the government and central bank are considering introducing new import restrictions in response to the considerable surge in goldimports recently.

“...The introduction of new import restrictions would thus have correspondingly negative effects on Indian gold demand in the coming months. For the time being, the upcoming gold referendum to be held in Switzerland on 30 November should preclude any more significant decline in prices.”

US gold futures for delivery in December finished $15.80 higher for the week at $1,185.60 per ounce.