Gold Set for Continued Gains

Cina Coren

Predictions are that gold prices are likely to head higher this week as several fundamental factors come into play at the same time. Tensions in the Middle East and the Ukraine have been growing and signs of stress in Europe's banking system in addition to a weaker dollar continue to support demand for bullion.

The precious metal posted its sixth straight weekly gain last week, hitting $1,345 an ounce last Thursday – the highest since March. But firmer equity markets and technical selling on Monday took some of the steam out of the rally, pushing gold down 1.5 percent to an Asian session low of $1,317.55 an ounce. To some, the pullback suggested fatigue is setting in among buyers after the multi-week melt-up.

However gold bulls seem to form a clear majority in a recent survey of market professionals, with 90 percent of respondents (18 out of 20) forecasting further gold price gains this week. Only one respondent expects a pullback while one says prices will be changed very little.

The positive outlook for gold is reinforced by data from IG Markets showing that 75 percent of clients with open positions expect gold prices to rise.

"The safe haven stars are currently aligned for gold," said Scott Carter, the chief executive officer of Los Angeles-based Lear Capital. "The world is a powder-keg of unrest. Quite frankly anyone that is not looking at gold as a timely investment is simply not paying attention."

A key risk event for gold will be Fed Chair Janet Yellen's closely-watched semi-annual testimony this week and any hints she may offer on the timing of the U.S. central bank's first rate hike. Many believe it's still too early for Yellen to signal that such normalization is coming since the economic data doesn’t warrant it yet. Evidence of weak physical demand from top Asian buyers China and India is also likely to keep prices in check.

Analysts at UBS, remain neutral for this week and credited gold's recent gains to financial speculators unwinding bearish bets in the futures markets. According to several UBS analysts, the price of gold is “expected to top out at $1,350 and move towards $1,200 again over the next six months.” They advise making use of the recent bounce to reduce excessive gold exposure.

Cina Coren
Cina Coren is a former Wall Street broker and financial advisor. She holds a Master's degree in Communications and spent many years writing for international news outlets and journalistic publications. Today, Cina spends most of her time writing internet articles and blogs, and reading various newspapers to stay on top of the news.

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