Survey: Gold May Decline on Concern Prices Rose Too High

Friday, 29 Oct 2010 05:57 PM

 

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Gold may decline on concern that prices rose too high amid speculation about Federal Reserve asset purchases, a survey found.

Thirteen of 26 traders, investors and analysts surveyed by Bloomberg, or 50 percent, said the metal will fall next week. Eight forecast higher prices and five were neutral. Gold for December delivery was up 0.7 percent for this week at $1,335 an ounce at 11:15 a.m. yesterday on the Comex in New York. It reached an all-time high of $1,388.10 on Oct. 14.

Before last week, prices rallied for five weeks as the dollar sank on speculation about further so-called quantitative easing by the Fed. The currency rebounded last week amid speculation that the central bank may expand easing steps gradually, slowing the dollar’s depreciation. Gold usually moves inversely to the greenback.

“The expectation of a gradual introduction of quantitative easing is leading to selling in the gold market on the belief that gold had become overbought,” said Mark O’Byrne, executive director of brokerage GoldCore Ltd. in Dublin. “The short-term trend appears to have changed after last week’s lower close.”

Estimates for the amount of Fed asset purchases range from $1 trillion at Bank of America-Merrill Lynch to $2 trillion at Goldman Sachs Group Inc. Economists at both firms agree the Fed will likely start by announcing $500 billion after policy makers’ Nov. 2-3 meeting.

The red bars on the attached chart are derived by subtracting bearish forecasts from bullish estimates, with readings below zero signaling that most respondents expect a decline. The green line shows the gold price. The data shown are as of Oct. 22.

The weekly gold survey that started six years ago has forecast prices accurately in 193 of 334 weeks, or 58 percent of the time.

This week’s survey results: Bullish: 8 Bearish: 13 Neutral: 5

© Copyright 2014 Bloomberg News. All rights reserved.

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