Gold is primed for a breakout in the coming week, but it may be in either direction.
Gold futures retreated Friday on profit-taking as traders sought more details on whether Spain would finally seek a bailout.
On Friday, gold for December delivery lost $10.90, or 0.6%, to close at $1,759.70 an ounce, ending the week 1.2% lower. A weaker dollar triggered gold prices 0.3% higher on Thursday.
Close from its record level of 2011, gold prices seem to be ready to break free from the trading range they have been stuck in during the past months.
Concerns about overall global economic strength have kept gold in a pretty tight trading range, but this is typical just before some type of breakout. At present, the weight of the evidence points toward higher prices. Many market analysts tend to believe that tat gold prices will end the year above $2,000 an once, but there are also contrarians who see the yellow metal’s price at around $1,600 an ounce, nearly 60% retracement.
For more than a year, gold futures have been trading within a less than $400-an-ounce range, which is a pretty vide range. The intraday high in electronic trading of $1,909 was recorded on Aug. 23, 2011, while an intraday low of around $1,525 was seen on Dec. 29, 2011.
Gold’s recent return to near $1,800 could be taken as a sign that some rationality has returned to the market.
In 2013, most of the developed countries are going to have to deal with its massive debt problems and policies that have spent the last few years devaluing local currencies. As this happens, gold will be one of few safe havens available to investors looking to protect their wealth.
To many market analysts, gold’s chances for a rally, as well as a new record level by the end of the year are strong. The anticipation and realization of a third round of quantitative easing by the Fed has predominantly contributed to the consistent rise in asset prices of the past two months. In general, quantitative easing tends to be negative for a country’s currency and positive for gold and other hard assets that are seen as an alternative and hedge against devaluation and inflation.
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