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Gold’s Impending Decline – Weekly Forecast

March 30th, 2009 Posted in Oil and Precious Metals Bookmark and Share

Gold
Gold prices fell Friday, extending their weekly losses to more than 3% as the U.S. dollar gained ground against most of its major rivals and effectively reduced the metal’s investment appeal. Investors have weighed support from lingering economic uncertainty against growing appetite for riskier assets such as equities. Gold was down at $927 per ounce, dipping from $933.05 late in New York on Thursday. Analysts said that Gold prices were coming under pressure due to recent steps by the U.S. government to bolster the economy which had encouraged market players to brave battered stock markets.

Gold prices have been stuck in ranges as players await new incentives now that the U.S. government appears to have taken all measures possible to deal with the country’s economic and financial distress, traders said. Gold may further extend its decline after failing to breach the resistance level at $977.41 an ounce; the metal may drop to less than $900 within a week.

Silver
Silver prices were under pressure last week, largely stemming from a climb in the USD against its major competitors and a reduced safe-haven demand after recent U.S. steps to stem an economic crisis. Silver was at $13.29 an ounce, down 1.3% from its previous finish of $13.46, as the negative outlook for metals is to some extent already priced in, according to analysts, and investors are looking to play on a short-term recovery in the U.S currency.

Silver prices have been stuck in ranges as traders await new incentives now that the U.S. government appears to have taken all measures possible to deal with the country’s economic and financial distress. A higher U.S. currency makes metals priced in dollars, including Silver, more expensive for holders of other currencies. It’s all Dollar related, and due to the fact that the Dollar rose more than 2% against the European currency, market players might expected Silver to drift even lower.

Crude Oil
After several days of gains, Crude Oil prices fell nearly $2 on Friday as weaker stock markets, soft economic data, and evidence of the Organization of the Petroleum Exporting Countries’ (OPEC) over-production encouraged investors’ profit-taking. Economists estimate that OPEC will cut its crude shipments by 3.3% in the 4 weeks ended April 11, down from the previous 4 weeks, as the group keeps an output reduction in place. Oil was traded down $1.96 to settle at $52.38 a barrel, pulling back from Thursday’s 4-month high.

Crude oil had hit its highest level so far in 2009 on Thursday at $54.66 a barrel on expectations that efforts by the U.S. government to tackle bad debts would help boost oil demand. The correction of Oil’s rally was unavoidable because near-term demand for Crude isn’t yet strong enough to support a sustained advance, analysts said.

Next week the market may witness Crude decline even further on speculation that U.S. oil and fuel inventories will increase because the recession has curbed demand and the stock market rally loses steam. However, Oil prices have already reached a floor of $40 a barrel earlier this year and prices are likely to continue rising as compliance with OPEC production cuts improves.

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