Gold prices are expected to trade sideways next week as the absence of physical demand and big-ticket economic data will force the precious metal to contend with geopolitical tensions in the Middle East and Ukraine.
As many as 11 of 25 analysts polled in a Kitco Gold Survey said they expected gold prices to trade higher next week, while nine predicted that prices will drop and five forecast prices to trade sideways.
Gold's safe-haven status could get a boost if tensions in the Ukraine heighten. Pro-Russian separatists, who are believed to have shot down Malaysia Airlines flight MH17, are apparently covering their tracks by obstructing European investigators at the crash site.
Gold could also get a boost if fighting between the Israeli military and Hamas forces intensifies. The Jewish state's ground offensive to maim Hamas's "terror infrastructure" has entered the third day.
Adrian Day, chief executive, Adrian Day Asset Management said: "The tragic geopolitical situation, however it transpires in both Gaza and Ukraine, gives gold support. At the same time, the market had overcompensated for the reduction in stimulus by the [US Federal Reserve] and with sentiment on gold very negative. So up next week."
But Ken Morrison, editor of online newsletter Morrison on the Markets, took an opposite view of bullion's reaction to geopolitical tensions.
Morrison said: "If a day of rising tensions in Russia and Ukraine and ground-fighting in Gaza can only muster a 1% rally in gold, what will it take to really get a rally going? Funds' trading performance in gold has been horrific the past two-three months... getting short at the low, getting long at higher levels, now caught in the middle of a $1,275-$1,350 trading range.
"I believe the recent poor performance is having the effect of funds going to the sidelines which is one reason gold can't rally well. I look for gold to drift a little lower probably re-testing $1,275'ish over the next one to two weeks."
Commerzbank Corporates & Markets said in a note to cleints: "...with the Chinese growth outlook stabilising, Asian gold demand looks set to rebound in the remainder of the year. Moreover, India, formerly the leading gold consumer worldwide, may in the end ease its import restrictions in the face of the improving trade balance. By year-end, we hence expect gold prices to pick up to $1,350 per troy ounce."
Gold Ends Lower
US gold for delivery in August shed $7.40 to finish at $1,309.40 on 18 July after the markets noted that tensions in Ukraine had not escalated on Friday.
Prices are down 2.1% for the week as a whole.
Spot gold shed 0.5% to $1,313 an ounce on 18 July.