Prices could backtrack

As expected, the yellow metal hit an all-time high of $1,448.60 an ounce on Thursday and closed on a weak note on Friday as traders sought to pocket some money ahead of the weekend. April gold futures on the Comex division of the New York Mercantile Exchange settled at $1,426.20, up 0.71 per cent on the week. International gold analysts expect prices could backtrack a bit next week, but the downside for gold will be limited due to global uncertainty and dollar weakness.

Ken Morrison, editor of online newsletter Morrison on the markets, said historically gold has witnessed pullbacks every time it made a new high. “Gold is now a perfect five for five over the past six months in terms of when it makes a new high, it is followed almost immediately (zero to three days) of a downside correction of varying degrees of magnitude,” he said. It seems that gold has found buying support when it falls to the $1,400 area.

Next week, the April contract could come under pressure as rolling of positions from the April contract to the June contract will become more pronounced. Near-term resistance for gold is seen at $1,450, with most market watchers looking for $1,500 ultimately. Gold is expected to face resistance above $1,448-mark as the traders were seen booking profit at that level on Thursday and there was buying support above $1,428 on Friday, trade summary matrix (TSM) data suggest.

Gold is likely to move in a narrowband next week, suggest the trading pattern in the April futures and strong price-based selling pressure above the point of control ($1,428). Technically, prices are expected to face resistance at $1,450 and support at $1,410. Friday’s MKTP chart for April futures hint at a strong resistance above $1,442 and support around $1,414. Call buyers expect gold to face strong resistance above $1,440 and significant support around $1,400.

Goldman Sachs said in a research report on Thursday that it expects gold to rally “towards 3-month price target of $1,480 an ounce”. Goldman is recommending investors get long on gold by buying the December 2011 futures contract currently trading at $1,426.10 an ounce. Goldman expects US rates to recover as the second round of quantitative easing ends in June and as the US economy continues to strengthen. As a result, Goldman believes gold prices will peak in 2012.