Prices fell on the week, but rose on Friday. The most-active February gold contract on the Comex division of the New York Mercantile Exchange settled at $1,566.80 an ounce, down 2.4% on the week. March silver settled at $27.915 an ounce, down 4% on the week. Even with a weak fourth quarter, gold price still ended the year up about 10%, its 11th straight year of gains. Silver prices ended the year down about 11%.
Markets will be closed Monday for the New Year’s day holiday; normal trade resumes on Tuesday. In the Kitco News Gold Survey, out of 32 participants, 19 responded this week. Of those 19 participants, 14 see prices up, while four see prices down, and one is neutral on prices. Market participants include bullion dealers, investment banks, futures traders, money managers and technical chart analysts.
After falling to a low of $1,523.90 basis the February Comex contract on Thursday, gold prices rebounded Friday. Market watchers said the rally was likely a combination of short covering and a little bargain hunting.
“Gold had a really good day on Friday,” said Mike Daly, precious metals strategist at PFGBest. “It was the last day of the year so we had some short covering – essentially since Dec. 1 gold’s lost $175. Plus I think people might be watching this war of words over the Strait of Hormuz. There are some muscles being flexed. Maybe cooler heads will prevail, maybe they won’t. Any military action will be good for gold.”
Iran has threatened to cut off access to the Strait of Hormuz, an important oil shipping lane, while U.S. warships are sitting nearby. Normally crude oil and gold react with rallies over geopolitical tensions, but so far there’s been little upward movement on this news this week.
Gold prices could see some gains into the first part of next week, said Sterling Smith, commodity trading adviser with Country Hedging. “The early part of next year could see some bullish days, but after that I think sentiment will fizzle out. We could get a pop and some spec buying might push it $1,600, which the market will fail to take out. That will start to loosen up (sellers) and the market could fall back to $1,550 and maybe test $1,500,” he said.
Rich DeFalco, founder, Bay Ridge Holdings, also said he sees higher prices temporarily for gold next week, but given all the uncertainty out there and the way the gold market has reacted in the last few months, gold could continue to swing wildly next year, with the metal possibly trading to both $1,200 and $1,900. “It is just so wide open,” he said. “I think we’ll see people coming in to reestablish positions in the first of the year, but beyond there, who knows. The question we have to ask ourselves: ‘Is gold trading as a metal, a safe-haven or a currency?’”
Because of the new downtrend gold has established, he said prices might have an easier time testing $1,200, before going to $1,900.
Smith said, sometime by April, gold prices could fall as far south as $1,350. He said once the New Year’s holiday is out of the way, the markets will resume looking at the eurozone debt situation. Considering that gold prices were falling while discussion on what European leaders will do to rectify the situation, there’s little reason to believe the downtrend won’t resume once everyone returns to the markets, he said.
Silver prices, which found support at the $26 level, are likely to follow gold and if the yellow metal falls, silver will do so, too. Smith said silver will initially test support at $25, but could dip to $22 to $22.50 in the first quarter. For the latest updates on the stock market, visit Stock Market Today For the latest updates PRESS CTR + D or visit Stock Market news Today
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