Spot Gold Prices Set For Breakout: Analysts


NEW YORK (TheStreet) -- Spot gold prices could break out of a tight trading range next week pending a visit by the Chinese president, the release of retail slaes numbers and ahead of the Chinese new year holiday, analysts say.

In the meantime, one analyst continues to believe that junior gold stocks will offer the best exposure to any uptick in gold prices.

Kitco senior analyst Jon Nadler said gold prices could hop if signs of discord between the U.S. and China arise amid Chinese President Hu Jintao's visit to the White House next week. However, he thinks that it's more likely that the nations' leaders will stick to cooperative dialogue.

Nadler said to turn bullish again, gold needs to overcome $1,390 an ounce and not break support under $1,360.

News relating to Europe's sovereign debt and inflation has already been baked into the current gold prices, Nadler said.

"I would look for gold to stay in this trading range until we get a new piece of news," said Casimir Capital managing director Wayne Atwell.

James DiGeorgia, the founder and editor of Gold & Energy Advisor said gold managed to push above its 50-day moving average of about $1,384 Tuesday, and as long as the yellow metal stays at these levels, it could again rise above $1,400.

I think the big upward move in both platinum and palladium are very bullish for the precious metals complex," he said.

"The big kahuna I see on the horizon next week will be retail sales for December," Chuck Butler, President of EverBank said. "If retail sales do disappoint ... we could very well see spot gold back to $1,400 and silver to $30. December retail sales, to be released on Friday, are expected to come in flat versus the prior month's rise of 0.8%.

Meanwhile, BullionVault's head of research Adrian Ash notes that profit-taking by Western funds after the year-end has met "massive" demand from China ahead of the Chinese new year holiday that begins on Feb. 3.

"Everyone we speak to says Chinese dealers will take all the gold they can get at these prices."

New York spot gold prices fell $10.20, or about 0.7%, to $1,377.80 an ounce Thursday.

Spot silver prices slid 87 cents, or 2.9%, to $28.78 an ounce.
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Spot platinum prices rose $8, or 0.4%, to $1,809 an ounce.
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New York spot palladium prices ticked down $2, or 0.3%, to $807 an ounce.

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Precious metal mining stocks were largely falling during the trading session, with some exceptions. Mining stocks offer another form of exposure to precious metals.

Market Vectors Junior Gold Miners ETF ( GDXJ) was falling 2.6% to $36.94 and Barrick Gold ( ABX) was down 3.5% to $48.24. Yamana Gold ( AUY) was falling 1.9% to $12.10.

Shares of Brigus Gold ( BRD) were up 0.5% to $1.84. This junior gold stock is a favorite of Casimir's Atwell. He noted that 2010 was an "excellent year" for junior gold shares, with the The Casimir Junior Gold index rising 47.6% during 2010 compared with 29.4% for the Major Gold share index and 29.7% for gold. He expects that 2011 will be another strong year for junior gold shares.

Reasons Atwell is bullish on junior gold companies include the ability of junior gold miners to tap into the entire gold property population, whereas intermediate and major gold companies can only pursue 5% to 10% of the available properties, given that they need the bigger projects.

"A new discovery would have more impact on a junior because their denominator's smaller," he explained. "The majors are going to have to replace depleting resources whereas the juniors will be ramping up, and that probably wouldn't be an issue." He also noted the potential for more merger and acquisition activities among the juniors than the majors.

ETFS Physical Platinum Shares ( PPLT) were up 0.4% to $179.86, while North American Palladium ( PAL) was rising 2.9% to $7.40.

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