Gold may pull back on profit-taking, according to an outlook from FOREX.com, although it is likely to continue to gain as currencies are expected to show weakness. After the correction, precious metals are expected to continue to advance.
Brian Dolan, FOREX.com’s chief currency strategist, explained that a pullback was expected in gold prices because of record high long positioning in the metal, and seasonal weakness in gold in October and December. “That,” he said, “coupled with the psychologically significant $1,300 level–it was at a high of $1,296 in the past 48 hours–once it breaks through [$1,300] the [resulting] correction will increase profit taking.”
Currencies are likely to find themselves under extreme pressure if there are additional asset purchases by the Fed and the BOE; additionally, Eurozone sovereign debt continues to be of concern toward the end of the third quarter. And of course there are the U.S. elections to be considered; while Republicans seem poised to take control of both houses of Congress, the report says that Democrats may hold on to the Senate, which has the potential for split control.