Poised for new high of $1,959

Volatility will continue in the gold market next week, but traders’ bias favour high prices for the metal. Gold had a crazy ride last week, having hit record high of $1,923.70 an ounce and traded as low as $1,793 by mid-Wednesday. The December gold contract settled at $1,859.50, up 0.9 per cent over the week.

The trading pattern on Friday in most-active December gold contract on the Comex division of the New York Mercantile Exchange suggests price level of $1,900 an ounce next week. On a weekly market picture chart gold is poised for new high of $1,959, with strong support below $1,860.

In the Kitco News Gold Survey, out of 21 responded last week, nine see prices up, while six see prices down, and six see prices sideways or unchanged. Richard Baker, editor of the Eureka Miner and president of CP Analytics, said the direction for gold prices next week is a ‘tough call’ but he leans towards firmer prices.

Barclays Capital technical analysts said while they are bullish on gold prices, they’d rather buy the metal on dips ‘toward $1,750 against the $1,700 low. Our upside targets are at $1,930 and then $1,970.’ Analysts with Barclays Capital say they remain constructive on gold and look for prices to average at $1,875 in the fourth quarter and $2,000 in 2012. The market picture chart sourced from Bloomberg hinting at price level of $1,900 on upside and the lower end support below $1,860 as the December futures saw volume-based buying below that level. There was no significant volume in the call and put options, as participants were wary of either side positions.

Trading was guided by risk appetite swings within thinly traded markets, but experts agree there is still room to grow for the yellow metal, with UBS reiterating its estimate that gold will trade at $1,950 in the next 31 days. Gold’s direction seems to have been guided by risk appetite, UBS’ FX research team opined. CFTC data for the week ended September 6 shows tactical investors increased their exposure to Comex gold for the first time in four weeks. Net fund length rose by 7.4k lots as fresh longs (11.2k lots) offset the establishment of fresh shorts (3.8k lots). Gold physical ETP holdings edged lower but were mostly stable despite volatile prices. Holdings closed the week at 2,191 tonnes across the 25 ETF products.

Gold prices continued to surge at the domestic bullion market in Mumbai on Saturday on heavy speculative and investment buying amidst firm global market. Silver recovered moderately on fresh stockist as well as industrial demand. Standard gold (99.5 purity) spurted by Rs 445 per 10 grams to end at Rs 28,140 from Friday's closing level of Rs 27,695.