Gold may see volatile trade next week amid lack of major cues

Gold could trade either way next week amid a lack of major cues in a holiday shortened trading week.

Given that there has been no fundamental change in the US or the global economy, some analysts expect the gold market to take its cues from the smaller details.

George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures, told Kitco News that gold was trading in "no-man's land" as there was no clear direction for bulls or bears.

Gero noted that he expects the US dollar strength to be the biggest factor for the gold market.

He added that any data that supports a June US Federal Reserve interest rate increase will support the US dollar and weigh on gold.

Matthew Turner, commodity analyst at Macquarie, told Kitco that US data will have the biggest impact on the gold market next week, but added that investors still need to track geopolitical tensions in Europe, where Greece will continue negotiating with its international creditors to create a new financing agreement.

Inflection point

Turner added that the gold market was "dancing around a major inflection point", suggesting that the smaller details will have a major impact on price movements.

Looking at the technical picture, Teddy Sloup, senior market strategist at iiTrader, said there was definitely risk for gold to push lower as it was hovering and testing support above the key trend line around $1,220 an ounce.

He added that a break below that area could easily send the precious metal back down to the psychological support at $1,200 an ounce.

Sloup said that gold has to break near-term resistance of $1,245 to $1,250 to attract new buying momentum.

Gero said: "The gold market's current environment, coupled with the fact that US markets are closed on [16 February] for Presidents' Day, could create some higher volatility next week as investors try to gauge the next trend."

Earlier, analysts at Capital Economics reiterated their target that gold prices will end 2015 at $1,400 an ounce, saying the uncertainty surrounding the Greek negotiations could be good for the gold market.

Capital Economics said in a separate note: "It would be wrong to write off gold this year purely on the basis that the Fed is likely to start to raise interest rates, probably in June.

"We expect the withdrawal of monetary stimulus in the US to be gradual, leaving plenty of scope for other, more positive factors to dominate. These include further monetary easing elsewhere and strong demand from emerging economies.

"Indeed, the prospect of a further escalation of the crisis in the eurozone suggests that the risks even to our (above-consensus) forecasts for the gold price lie on the upside."

Gold drops

US gold for delivery in April finished at $1,237.10 an ounce on 13 February, down 0.71% from 9 February's opening price.