Kitco News - METALS OUTLOOK: Gold Likely To Remain Range-Bound Next Week; Watching ECB

By Debbie Carlson of Kitco News Friday February, 2013 2:28 PM

(Kitco News) - Gold prices are likely to remain in their current range, continuing to try and test $1,700 an ounce on the upside and the $1,650s area on the downside, but with few visible catalysts to break out of the range.
The market will look ahead to next week’s European Central Bank meeting for direction as economic data releases in the U.S. will be light, market watchers said.
Prices were up on the day and the week. Most-active April gold on the Comex division of the Nymex settled at $1,670.60, up 0.71% on the week. March silver settled at $31.351, up 0.47% on the week. 
In the Kitco News Gold Survey, out of 33 participants, 26 responded this week. Of those 26 participants, 12 see prices up, while four see prices down, and 10 see prices moving sideways. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts.
Gold prices rose slightly on Friday, getting a modest boost from lower-than-expected monthly jobs data from the U.S. Department of Labor. For the month of January, the Labor Department said 157,000 jobs and the unemployment rate ticked up to 7.9%. Slightly offsetting that news was that the U.S. economy added more jobs in 2012 than previously thought.
Despite Friday’s gains, the support gold received after initial fourth-quarter U.S. gross domestic product data showed an unexpected drop of 0.1% and a continued affirmation of bond-buying by the Federal Reserve, gold prices are still trapped under $1,700, said Daniel Pavilonis, senior commodities broker with RJO Futures.
“There are a lot of reasons why we should be higher, the weak GDP, (lackluster) employment numbers, but we’re not,” he said
For that reason, gold will likely hew to the current range of $1,700 to $1,650. “I see us still in a range. There is a chance we could try and touch $1,700, but there’s no catalyst to take it above there,” Pavilonis said.
Given this week’s price activity, several analysts said gold has been extremely sensitive to U.S. economic data. Edward Meir, commodities consultant at INTL FCStone, called gold’s action this week “a remarkable dis­play of schizophrenic volatility.”
Although GDP was a surprise, for the most part, U.S. economic data has been slightly better than expected, which giving credence to those who believe the fourth-quarter contraction will likely limited and that the first-quarter data should improve. That makes “the case for buying gold less compelling,” Meir said.
Another cap on gold’s strength this week was the rise in U.S. 10-year Treasury yields, which are hovering around 2%, noted UBS Analyst Joni Teves. Teves said gold has found buying interest from value-minded shoppers around the $1,640-$1,650 area, “although the stronger support should come in around the $1,625 key technical area where longer-term holders are likely to take notice.”
Looking ahead to next week, in the U.S. it’s a very light data week, with only the trade balance report, slated for release Friday, to have any passing interest. 
Of more interest will be the European Central Bank meeting on Thursday. Analysts at Nomura said they expect interest rates to remain unchanged. “President (Mario) Draghi might provide some soothing words … by restating that the ECB will continue providing ample liquidity for quite some time... Overall, we do not expect any change to the key language from the ECB, particularly with regards to the risks surrounding the economic outlook that we expect to remain on the downside.”

By Debbie Carlson of Kitco News dcarlson@kitco.com