Stocks, Oil, Dollar Will Give Gold Direction Next Week
Toronto (Oct 13) Gold prices eked out a higher close for the week for the first time since the last week of August as the U.S. dollar retreated following a sharp rally in the past few months.
How the dollar acts next week, along with the trend in equities and crude oil, could go a long way to influencing what happens to gold prices, analysts said. Also, gold-market watchers will keep an eye on the Indian market to gauge metal demand ahead of the Diwali holiday later this month.
December gold futures fell Friday, settling at $1,221.70 an ounce on the Comex division of the New York Mercantile Exchange, up 2.4% on the week. December silver fell Friday, settling at $17.303 an ounce, up 2.8% on the week.
In the Kitco News Gold Survey, 23 people responded this week. Of those, 10 see higher prices, nine see lower prices and four see prices trading sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
Gold prices bounced off 2014 lows this week after testing support around the $1,180 area, a price gold hadn’t seen since June and December 2013. Analysts said short covering, which is the buying back of previously sold positions, and the return of Chinese traders from their Golden Week holiday helped return the yellow metal above $1,200.
Several traders with ties to the bullion market said physical demand started to return to gold with the dip under $1,200, but they said volumes weren’t as strong as they thought they might be.
“We’re seeing some OK demand out of India ahead of the holiday (Diwali). Outside of that, demand isn’t what it should be given where we are (price-wise),” said Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA in Geneva.
He said volumes might increase as the time draws closer to Diwali, with the main festival day on Oct. 25, but he said it is possible prices may need to slip back under $1,200 to get buyers excited again. Part of the issue is there’s so much supply available that it’s keeping premiums to loco London in check.
Robin Bhar, head of metals research at Societe Generale, said Diwali buying this year likely will be subdued compared to 2013’s volumes. First, he said, last year shoppers were eager to buy because of the huge drop in gold prices at the time. Second, the Indian monsoon was a little disappointing and that may mean less disposable income for farmers. Third, most import restrictions remain on gold.
“It’s a very different market this year,” he said.
Source: KitcoNews
