Gold Prices Seen Falling Next Week

After a sharp rally to record nominal price highs over $1,800 an ounce, gold prices could see a retreat next week, most participants in the Kitco News Gold Survey said.

In the Kitco News Gold Survey, out of 34 participants, 23 responded this week. Of those 23 participants, five see prices up, while 14 see prices down, and four see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.

A downgrading of the U.S. credit rating by Standard & Poor’s, worries about the stability of some European economies and other general financial malaise pushed gold prices to a high of $1,817.60, only to fall back from that level.

Participants who see weaker prices next week cited the rebound in equities and the CME Group’s move to raise margin levels for gold futures traders as a reason for gold’s weaker trade toward the week’s end. Several of them also expect the weakness to continue as the market continues to correct.

“I expect gold to trade at $1,675 sometime within the next week. The parabolic move of this week when lead-month futures (December) set both a daily volume record for a lead month (Tuesday) and a daily volume record Thursday for a day when prices were lower (are a reason). Erratic trading behaviors at extreme highs are indicative near the turn in trends,” said Ken Morrison, founder and editor of online newsletter Morrison on the Markets.

The few who see higher prices said the stronger underlying trend, despite the pullback, will eventually revert and drag prices higher.

By Debbie Carlson of Kitco News dcarlson@kitco.com

Cecilia Tulikowski-Denison and Alexander Létourneau contributed to the survey. Friday August 12, 2011 12:15 PM

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