Strength in the U.S. dollar may also put pressure on gold, market watchers said.
On the week, December gold futures prices on the Comex division of the New York Mercantile Exchange settled at $1,814.70 an ounce down two.4% on the week. December silver settled at $40.831 an ounce, down one.9% on the week.
Gold prices could continue to weaken in to next week as nervousness over European banks eases , technical chart patterns turn short-term bearish & investors turn to riskier assets like the stock market.
In the Kitco News Gold Survey, 28 out of 34 participants responded. Of those 28 participants, nine see prices up, while 15 see prices down & see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders & technical chart analysts.
Tom Pawlicki, precious metals analyst at MFGlobal, said precious metals are expected to keep the mixed-to-lower cost trend in the near-term as investors appetite for risk improved. They said it�s feasible to see gold prices falling back to the $1,750 level as technical chart factors recommend prices could fall as low as $1,750.
Gero is keen to see what the open interest levels will be in the Comex gold futures one time the session ends. Gold futures saw small rise in open interest in the coursework of the rally to new highs & open interest has been stagnant lately, which can be a sign that new participants are not coming to the market. �I require to see open interest not only up in the front months, but also in the back months,� Gero said.
After sinking this week, gold prices rallied on Friday, which George Gero, vice president of RBC Capital Markets Global Futures & precious metals strategist, attributed to short covering, than new purchasing. They said the meeting in Poland regarding the eurozone�s financial health & general worries about Europe have created some anxiety in the hearts of traders going in to the weekend. Merge that with a mostly steady stock market & gold rallied.
For those market watchers like Pawlicki who think there is small chance of any further quantitative easing said the disappointment could weigh on prices.
Next week the sizable factor for the financial markets, metals included, will be the two-day Federal Reserve financial policyowner meeting, set for Sept. 20-21. Market watchers who expect the Fed to announce some kind of stimulus program said that may gain advantage all markets, including metals.
Pawlicki pointed out that the Fed�s efforts to supply liquidity back in 2008 & 2009 ultimately didn�t have much impact on gold prices. �Gold appeared to be more sensitive to the impact of the credit squeeze on the economy & to events in the stock market with regard to �risk-on/risk-off.� Gold prices actually moved lower in the coursework of the period that liquidity swaps were made obtainable, but it was likely because stocks were falling sharply at the time & gold positions were likely sold in order to raise capital,� they said.
News reports that European banks have been selling gold to raise dollars also pressured prices, they said.
While the short term concerns about Europe have simmered, the issues there with sovereign debt have not changed & longer term this will support prices, several market participants said, making current weakness a temporary issue.
European banks� access to dollars ought to be eased now following the European Central Bank & other central banks decision to floodwater the market with dollars. European banks faced a credit crunch when private banks wouldn�t lend to them, but the ECB�s action ought to ease worries for the time being about the solvency of those banks. This move gives investors less reason to seek a refuge, several market watchers said.
News headlines will shape short term direction, said TD Securities, �with investors switching from pessimism to optimism on the flimsiest of information & rumors. They expect this trend to continue for the foreseeable future, with industrial commodities & gold moving up & down in an erratic manner.�
Despite the ebb & flow of news, the basics point to higher gold & selling pressure on industrial commodities in the short to medium term, they said, noting that there ought to be �some kind of Greek restructuring in the approaching months, weak economic western world performance & low rates of interest for longer in the US & Europe.�
Inevitably, the bank said, the basics for gold have not changed, & although Germany & Frances have had �kind words uttered� for Greece�s residency in the eurozone, restructuring of its national debt will must happen & that will have contagion effect on debt offered by other European countries with shaky economies.
Robin Bhar, senior metals analyst at Credit Agricole-CIB sees gold prices beginning to bottom out after recent weakness, & they said gold ought to hold over $1,750 next week. In addition to wariness ahead of the FOMC meeting, they said trading volume may be lighter than normal because of the meeting of the London Bullion Market Association�s meeting in Montreal next week, a key industry gathering.
Gero said silver is struggling at the $41 level. While it's tied its fortunes to gold, its industrial use can delay any rallies since there's concerns about the global economic health. Longer-term, though, silver has potential to rally, they said.
Regard silver, market watchers said thinking about the metal�s cost has broken technical chart support, it is vulnerable to seeing further weakness, if gold prices continue to tumble. Pawlicki said that December silver could reach support at $38.76 from the Aug 25 low.
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