Gold Prices Likely Weaker Next
Week as Fears For Global Economy Recede
July 2010, 2:00 p.m.
By Debbie Carlson
Of Kitco News
-- (Kitco News) --Complacency in the global
economic outlook should spell a weaker price-bias for
gold next week, while copper could continue to rise
if equities hold their footing.
worries about Europe on the backburner and currency
markets generally quiet, gold prices have little reason
to rally, analysts said.
bought gold because they thought Europe was going to
fall into the ocean and the euro would disappear. Now,
the question is, what’s the reason to be in gold?” said
Shawn Hackett, president of Hackett Global Advisers.
seems to be the question speculators are asking themselves
in the short-term, especially with the outflows this
week from the various gold exchange-traded funds. The
break of key support for gold in the $1,180-$1,170 area
this week pushed prices under 2010 levels and prompted
selling. Barclays Capital noted Friday that holdings
in the main ETFs they follow declined again, by 0.6
metric tons Thursday. Delayed data showed the outflows
for ETFs on Wednesday actually reached 20.7 tons. Gold
ETF holdings in total now stand at 2068.7 tons and have
fallen 22.1 tons for the month thus far.
this trend continue next week? “Probably,” said Frank
Lesh, futures analyst at FuturePath Trading.
the panic out of the markets and signs of global economic
recovery and stable foreign exchange rates, the lure
of gold is less bright. Combine that with the seasonally
slow period and many Europeans being out of the picture
because of August vacations, the path of least resistance
is down. “Further net redemptions are likely to weigh
upon gold prices, while physical buying in the seasonally
slow summer months is likely to provide a soft floor,”
Barclays said Friday.
Lesh said, downside support for gold is in the $1,140s,
with resistance just above the former support area,
from $1,190 to $1,180.
also pointed out while other commodity markets have
had a good week of rallies - grain, softs and base markets
were stronger - gold couldn’t join in, which is a disappointing
sign for bulls. If gold tries to trade a bit higher
next week, he said, the upside is limited. Hackett believes
gold might be a better buy in September or October than
ETFs are seeing outflows, volume on the Comex division
of the New York Mercantile Exchange is setting records
as the prices decay. “You don’t like to see record volume
when prices are going down,” Lesh said.
a sign of new short positions being established he said,
as these investors “ride the near-term wave lower. They’re
trading the correction.”
received only a modest bump after the second-quarter
U.S. gross domestic product data showed a 2.4% rise
on Friday. That was just under consensus estimates,
but Lesh said its about as expected. “We knew we were
slowing down, but really, 2.5% is about what we’re projecting
for the year,” he said.
data for next week includes construction spending, factory
orders and the all-important July unemployment situation.
gold prices will likely stumble around, copper should
continue to hold its gains if the equity markets rally.
Lesh points out that copper also has good fundamentals
as metal usage picks up because of growth – albeit slow
– in manufacturing. As long as global equity markets
are up, copper should see strength.