METALS OUTLOOK: Gold Traders Watching $1,350/Oz Level, FOMC For Next Week's Action
Debbie Carlson
Traders who follow technical charts and those who watch fundamental factors both have something to monitor next week in the gold market, as gold trades around the pivotal $1,350-an-ounce area ahead of a Federal Open Market Committee two-day meeting.
December gold futures rose Friday, settling at $1,352.50 an ounce on the Comex division of the New York Mercantile Exchange, up 2.9% on the week. December silver fell Friday, settling at $22.639 an ounce, but up 3.3% on the week.
In the Kitco News Gold Survey, out of 34 participants, 26 responded this week. Of these, 20 see prices up, while five see prices down and one sees prices sideways. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
Gold prices rallied this week, supported by a weaker dollar. December gold futures prices on Thursday settled a hair above $1,350, and on Friday managed to shrug off earlier losses to add to a second day of settlements north of $1,350.
Bob Haberkorn, senior commodities broker, RJO Futures called the move “impressive for the bulls.”
Because of the near-$38 an ounce price rise this week, he sees the market adding to its gains in the coming week.
Part of what might determine if gold can hold above $1,350 an ounce is how the market acts after the November options expiration, said George Gero, precious metals strategist and vice president at RBC Capital Markets Global Futures. He said some of the selling on Friday is from traders who wanted to get out of positions ahead of time. “If we get a close above $1,350 after options expire, we could see the market work higher,” he said.
Gold has struggled to move much above $1,350 in the past, market watchers noted. The market has held in a wider range of about $1,280 to $1,350 recently, with physical buying coming in at the lows and selling by exchange-traded-fund investors when prices rise. One precious metals trader at a bullion bank said while he sees higher prices next week, “the only fly in the ointment is that premiums on the Shanghai Futures Exchange are slipping and that shows that Chinese are selling gold. (That may be) just some profit taking, though.”
Frank Lesh, broker and futures analyst with FuturePath Trading, pointed out several technical-chart considerations to keep in mind. He said he believes gold is likely to trade around the current area as the market consolidates its recent gains.
“Gold has retraced over 50% of the recent range of $1,434 to $1,251. This midpoint is $1,342 and should become an important support area. Looking at this year’s range of $1,704 to $1,182, this market still has a ways to go to achieve the midpoint of $1,443, with $1,381 the 0.382 (Fibonacci) retracement level. Gold did push through the down trend line and remains above the 20-day (moving average) for now. Gold is now a trade against the dollar and the inverse correlation is very strong right now,” Lesh said.
Next week also brings the FOMC meeting, which concludes on Wednesday. The Fed is widely expected to stand pat on its quantitative-easing program. Analysts said a combination of the lack of economic data because of the three-week U.S. government shutdown and the likely hit the economy took because of the closure are among the reasons the Fed will continue the program.
There’s debate whether the Fed’s announcement will push gold through $1,350. Bulls said confirmation that the Fed will continue to buy bonds could encourage traders to buy gold, especially if dollar weakness persists. Haberkorn doesn’t agree.
“I don’t think we’ll see a big move after the Fed. We couldn’t hold after the surprising news after the September meeting,” he said.
Haberkorn said while he thinks gold could see gains next week, he doesn’t see gold in a new bullish trend.
“For the rest of the year, I’m thinking we’re going to be in a tug-of-war and a lot of sideways action going on. I can’t see the bullish trend (restarting) until we get over $1,430. What I’d do now is play the ranges and be willing to do some short-term trades,” he said.
The problem gold – and other precious metals – have is that there’s a lack of outsider investor interest for now, he said. Instead, he said, “they’re all in the equity market. Our customers tell us they’re killing it in equities and you open your 401(k) and it’s like Christmas time. So people have their eyes off metals.”
Source :kitco.com