(Kitco News) - A strong rally on Friday and persistent
worries about the Eurozone sovereign debt issues are likely
to keep gold prices supported into next week, with a chance
to possibly test new highs.
Silver remains volatile and this will likely keep most
market participants sidelined, traders said.
August gold futures on the Comex division of the New York
Mercantile Exchange settled at $1,537.30 an ounce, up 1.8%
on the week, while June gold settled at $1,537.30, up 1.8%.
July silver settled at $37.863 an ounce, up 7.9% on the
week.
In the Kitco News Gold Survey, out of 34 participants,
19 responded this week. Of those 19 participants, 14 see
prices up, while three see prices down and two see prices
sideways or unchanged. Market participants include bullion
dealers, investment banks, futures traders and technical
chart analysts.
Market watchers were impressed with gold’s move above
the May 11 high of $1,526.80 basis the June futures ($1,527.90
basis August) on Friday. The market’s price saw a
gentle upslope for the week, which is also a positive sign
for those who see further gains next week.
“I think we’ll test the $1,600 mark sometime
in the next two weeks,” said Zach Oxman, managing
director of TrendMax Futures. “There are worries about
the Eurozone and concerns about China slowing down. Despite
the fall to $1,480, gold didn’t take the hit that
silver and crude oil did.”
The debt crisis in the southern-tier European nations remains
a significant factor for the markets. Greece is at the forefront
of the most recent problems as concerns flared that it would
not receive its next tranche of payments from the International
Monetary Fund and the European Union. There are also some
thoughts that China’s attempts to slow its economy
are starting to take hold.
Jimmy Tintle, analyst at Transworld Futures, said the trend
for gold for the past two weeks has been solidly higher
and prices could easily test $1,560 next week provided there
is no big news to change the trend. He is a little cautious
about the markets because both the U.S. and the U.K. have
three-day weekends ahead of them. Markets are closed on
Monday in the U.S. for Memorial Day and in the U.K. for
a bank holiday.
If prices do rise to $1,560, then gold is in striking distance
of taking out the all-time nominal highs set at the beginning
of the month, $1,577.40 for June gold and $1,577.70 for
August gold.
Charles Nedoss, senior market strategist with Olympus Futures,
said he’s “very bullish” on gold going
into next week, especially given the poor performance by
the U.S. dollar. The sovereign debt issue in Europe is the
main support, he said. Still, he said, targeting the recent
high of the $1,577 area would be “a lot of work for
gold to do,” but doesn’t rule out $1,550.
When concerns over the Eurozone have flared up, that has
at times supported the U.S. dollar, which at times can put
pressure on gold because it is dollar-denominated. Oxman
said dollar-strength might have some capping effect on gold,
the fact that gold is keeping its safe-haven currency status
limits much downside.
Silver continues to see big trading ranges after the sharp
drop from near $50 set in April. Oxman said he has no position
in silver because it remains so volatile. The market is
still “very choppy” and that’s likely
keeping traders to the sidelines.
Silver has a hard time building on gains when it returns
to the $40 level, Tintle said. Selling usually appears at
$38.50 to $39, with buying support around $34. Silver is
caught in a Catch-22 between industrial demand versus precious
metal demand. With recent economic reports showing sluggishness
in the manufacturing sector and a dismal pending home sales
report from April which came out Friday, the industrial
component of silver could keep it tethered.
Because of that, Tintle said, the gold-silver ration may
widen out again in gold’s favor.