Where will gold go?

Gold may fall in New York as some investors sell the metal after prices rallied to a record on demand for a protection of wealth and an alternative to a weakening dollar. Silver declined from a 30-year high. The dollar rebounded from the lowest level in more than six months against the euro after the Financial Times reported Ireland's budget deficit this year will be higher than earlier forecast. Bullion futures, which usually move inversely to the greenback, reached a record $1,322 an ounce on Oct. 1. “For the moment, it looks like we could see a bit of profit-taking,” said Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva. “The safe-haven buying is what is keeping the gold market up. The euro region is facing problems, but the dollar is still facing more problems.” Gold futures for December delivery lost 70 cents, or 0.1 percent, to $1,317.10 an ounce at 8 a.m. on the Comex in New York. Prices swung between a gain and a loss of 0.3 percent. Bullion for immediate delivery in London was 0.2 percent lower at $1,316.25 after reaching a record $1,320.70 on Oct. 1. Bullion was little changed at $1,316 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from a record $1,316.25 at the afternoon fixing on Oct. 1. The recent rally has driven gold futures's 14-day relative strength index, a gauge of whether a commodity is overbought or oversold, to 79.70. Some analysts and traders who study technical charts view readings higher than 70 as a signal that prices may be poised to drop. Participation ‘Shockingly High' “The level of participation in the gold market and the over-extended nature of the market may not be unprecedented, but it is shockingly high nonetheless,” said economist Dennis Gartman, editor of the Suffolk, Virginia-based Gartman Letter. While gold “may continue higher, its continued strength means that the inevitable correction shall be violent and very severe.” Gold, up 20 percent this year, is heading for its 10th consecutive annual gain, the longest winning streak since at least 1920 in London. Bullion has outperformed global equities, Treasuries and most industrial metals, prompting record investment in gold-backed exchange-traded products. The metal rallied as central banks and governments maintained low borrowing costs and spent trillions of dollars to stimulate economies. The Federal Reserve has left its benchmark interest-rate target at a record low and pledged to take more steps to spur growth if necessary. The outlook for U.S. job growth and inflation is “unacceptable” and the Fed will probably need to act to spur the recovery and avert deflation, Fed Bank of New York President William Dudley said Oct. 1. Fed policy makers next meet on Nov. 2-3. Further Easing “There's still talk of further quantitative easing in the U.S., which will probably continue weighing on the dollar,” said Park Jong Beom, a trader at Tong Yang Futures Trading Co. in Seoul, referring to debt purchases by the Fed. Any “correction” for gold will be “short-lived, and bullion is more likely to head upward,” Park said. Gold assets in ETPs declined 2.02 metric tons to 2,095 tons on Oct. 1, according to data compiled by Bloomberg from 10 providers. Holdings reached a record 2,097.01 tons on Sept. 30 and are up 17 percent this year. Gold prices may have “a sharp correction lower” toward the end of the year as seasonal jewelry demand wanes and “speculative interest unwinds,” Standard Bank Plc said today in a report. Platinum, Palladium Fall Silver for December delivery in New York was unchanged at $22.06 an ounce after touching $22.235, the highest level since October 1980. The metal, used to create the first telegraph messages, reached a record $50.35 an ounce in New York in 1980, a year after the Hunt brothers tried to corner the market. Holdings of silver in ETPs rose 13.66 tons to 13,749.30 tons on Oct. 1, the most in at least seven months, data compiled by Bloomberg from four providers show. Platinum for January fell 0.4 percent to $1,676 an ounce. Prices reached $1,689.40 on Oct. 1, the highest level since May 18. Palladium for December declined 0.9 percent to $569.55 an ounce.