Gold futures - Weekly outlook: January 2 - 6

Investing.com – Gold futures rose for the first time in seven sessions on Friday, as the previous day’s drop to a six-month low created bargain buying opportunities for investors reluctant to bet that prices would fall further in the new year.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery settled at USD1,566.15 a troy ounce by close of trade on Friday, dropping 2.63% over the week.

Gold futures were likely to find at USD1,523.95 a troy ounce, the low of December 29 and a six-month low and resistance at USD1,594.25, the high of December 28.

Gold prices fell 3.4% in the fourth quarter, the first quarterly loss in three years. Despite the recent slump, prices gained 10% in 2011, marking an eleventh consecutive annual gain.

Gold futures plunged nearly 5.5% in the six sessions leading up to Friday, as investors were reluctant to open new positions before the new year amid lingering concerns over the euro zone’s debt crisis, with moves amplified in poor year-end liquidity.

Year-end selling by hedge funds and tight liquidity in European interbank money markets have also contributed to recent price falls.

Prices fell to the lowest level since early July on Thursday after Italy’s Treasury sold just over EUR7 billion of long-term debt maturing between 2014 and 2022, below the maximum target of EUR8.5 billion.

The sale was seen as the first test of European banks' willingness to purchase long-term sovereign debt of distressed euro zone countries, following the preceding week’s nearly EUR500 billion cash infusion by the European Central Bank.

For much of 2011, investors' typical reaction to bad news from Europe was to buy gold, as it boosts the safe haven appeal of the precious metal, but that relationship has unraveled in recent months,

Gold prices lost nearly 21% since hitting a record high of USD1923.70 in early September, as investors turned to the U.S. dollar as their safe haven of choice amid Europe’s deepening sovereign debt crisis.    

Looking ahead to 2012, many market analysts expect gold prices to retest September’s record high as the same factors that have boosted gold remain intact.  

Wall Street investment bank Goldman Sachs said in a report Thursday that they expect gold prices to peak at over USD1,900 in 2012 on “low real interest rates, negative risk sentiment and a tight supply/demand balance”.

Meanwhile, Morgan Stanley expects gold to average USD2,200 an ounce in 2012, citing low interest rates in the U.S. and the potential for more economic stimulus in developed economies.

Elsewhere on the Comex, silver for March delivery settled at USD27.81 a troy ounce by close of trade on Friday, losing 4.4% on the week, while copper for March delivery settled at USD3.433 a pound, slumping 0.98% over the week.

On the year, silver prices declined 9.8%, the first annual loss since 2009, while copper, which is often regarded as a leading indicator of the global economy, saw prices tumble 23%, the first yearly decline since 2008.

Comex floor trading will be closed on Monday, January 2 in observance of the New Year’s holiday.