The short-term trend turns lower

Gold futures for December delivery rose $33.30, or 1.9 per cent, to $1,814.70 an ounce on the Comex on Friday, on concerns that Europe's debt crisis will threaten economies worldwide. Yet, the gold prices declined 2.4 per cent this week on profit booking.

The trading pattern on Friday in the most-active December gold contract on the Comex division of the New York Mercantile Exchange suggested a price level of $1,857 an ounce next week. On a weekly market picture chart, gold is expected to move around $1,886, with strong support below $1,800. There was no significant volume in the call and put options, as the participants were wary of taking either side.

Weakness in the technical charts in the short-term and the investors returning to other riskier markets like equities could weigh on the gold prices next week, according to participants in the Kitco News gold survey. Of the 28 participants, nine see the prices up, while 15 see these down and four see these sideways or unchanged. The participants included bullion dealers, investment banks, futures traders and technical chart analysts.

"Those who see lower prices the next week cite both the resurgence in the US dollar and the technical chart patterns. There are indications we could break the recent $1,702 low, not necessarily the next week, but in the short term. Volume is trading to the downside. So, the short-term outlook is bearish, possibly beyond the next week. We would have to see the volume come back in dramatically to the upside and probably take out recent highs ($1,922) to reverse this stance," said Mark Leibovit, chief market strategist of VRGoldTrader.com. Those who see higher prices next week said the market continues to see strong physical buying at the lower levels and also cited the structural financial problems in Europe as support.

September is proving to be tough for the bulls, as prices are trading near three-week lows despite the continued uncertainty regarding the European debt situation. Traders are also noticing that technically the prices have started to look weak and are failing to touch new highs, which may be scaring some weak longs from the market and preventing the short-term momentum traders from adding the long positions to the market strength. Though the short-term trend has turned lower, the longer-term trend is still providing optimism for higher prices. An annual price forecast of HSBC has raised its outlook for 2012 to $2,025 per ounce.