Gold prices may correct this week, but trend remains up

Gold prices could retreat a bit this week following five weeks of gains, but overall market watchers said any correction by the yellow metal next week should be light and short-lived, as the overall trend for Gold remains higher.

Prices fell on Friday and were mixed on the week. The most-active April gold contract on the Comex division of the New York Mercantile Exchange settled at $1,740.30 an ounce, up 0.28% on the week. March Silver settled at $33.749 an ounce, down 0.12% on the week.

In the Kitco News Gold Survey, out of 32 participants, 24 responded this week. Of those 24 participants, 14 see prices up, while seven see prices down, and three are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical chart analysts.

Gold prices slipped following a surprisingly strong report on U.S. jobs for January. The headline figure of 243,000 jobs created was far above even the highest trade estimates and about double the average forecast of about 120,000. The rise in new jobs pushed the unemployment rate to 8.3% from 8.5%. Marc Chandler, head of global currency strategy at Brown Brothers Harriman, said this data has two-fold implications.

“First, it eases fears that this year was repeating the past two years where a fairly robust fourth quarter was followed by a softer first quarter. This coupled with other recent reports for January show the year has begun off on a firm note. Second, it has policy implications.

The prospects for QE3 (a third quantitative easing), for which recent comments by (Federal Reserve Chairman Ben) Bernanke suggests the bar may be lower than previously perceived, is not as imminent as some observers have argued,” Chandler said.

Jeff Rosen, economist at Briefing Research, said the jobs report shows the U.S. “economy is moving ahead and is on stable footing.”

This was the largest increase in private payrolls since April 2011, Rosen said. “More importantly, aggregate wages increased 0.4% in January. That level is indicative of strong consumption growth. Payroll growth was widespread,” he added.

Ken Morrison, editor and founder of online newsletter Morrison on the Markets, agreed with those sentiments. “Today’s U.S. employment report and upward revisions to past months will re-establish some doubt about the need for monetary stimulus in the U.S., thus the expectations for a mild pullback in gold,” he said.

Morrison said a downside target could be $1,700 to $1,680.

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Posted by admin on Feb 6 2012. Filed under Gold predictions. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry