Survey by Bloomberg revealed that traders have turned the most positive on the Gold

A weekly gold survey by Bloomberg revealed that traders have turned the most positive on the Gold in three months. The latest results showed that 88% of respondents expect the price of gold to rise next week – the highest level since mid-July. The positive sentiment was attributed to ongoing concerns over “Europe’s debt crisis, slowing growth and a bear market in equities,” according to Bloomberg.

While the data is encouraging on the surface, it could also be viewed as a bearish indicator from a contrarian perspective.

The gold price rebounded Friday morning, gaining $12.47 to $1,680.54 per ounce in spite of a better than expected report on U.S. retail sales. Silver climbed alongside the price of gold, advancing 1.9% to $32.42 per ounce. Strength in gold and silver prices was fueled by modest weakness in the U.S. dollar, which lost 0.3% against a basket of the world’s leading currencies.

Gold price slid back below $1,670 per ounce Friday morning after U.S. weekly jobless claims came in modestly ahead of expectations

The gold price slid back below $1,670 per ounce Friday morning after U.S. weekly jobless claims came in modestly ahead of expectations. Silver retreated alongside the gold price, by $0.53, or 1.6%, to $32.08 per ounce. In the currency markets, the U.S. Dollar Index advanced 0.2% to 77.20, while the euro fell 0.4% to 1.3731 against the greenback.

The gold price held near $1,680 per ounce on Wednesday after the Fed minutes revealed rising concerns over the health of the U.S. economy. “Stresses in global financial markets, sluggish growth in households’ real incomes, and heightened uncertainty about economic prospects seemed to have contributed to lower consumer and business sentiment and to be weighing on economic growth. Recent indicators pointed to continuing weakness in overall labor market conditions, and the unemployment rate remained elevated,” according to the transcript of the most recent Federal Open Market Committee (FOMC) meeting.

The Fed also spent a considerable amount of time discussing European sovereign debt issues. Although the central bank noted that the impact of euro zone concerns on U.S. financial institutions had thus far been muted, the Fed issued a warning for their counterparts across the Atlantic. “Participants agreed that, if European policymakers did not respond effectively, European sovereign debt and banking problems could intensify, with potentially serious spillovers to the U.S. economy.”

As for U.S. monetary policy, the minutes disclosed that the majority of the FOMC felt that Operation Twist “could contribute importantly to better outcomes in terms of the Committee’s dual mandate of maximum employment and price stability.” While most FOMC members supported the “maturity extension program,” the minutes revealed that two Fed Governors favored “stronger policy action.” Although the Fed did not identify the two, their existence could raise the possibility of a third round of quantitative easing – which would likely be quite favorable for the price of gold.

Fundamentally bullish on gold, regardless of recent trends

As for the gold price, Dr. Martin Murelbeeld, chief economist at Dundee Wealth Economics predicted that it “will likely trend sideways, within a fairly wide band, until such time as the ECB/EFSF readies the aforementioned bazooka, which it will inevitably have to do when a major bank default occurs.” Murenbeeld – a long-time gold bull – also noted that “We are fundamentally bullish on gold, regardless of recent trends.”

“If 2008 is a guide then there is a chance” that the gold price’s 200-day moving average “could be tested in due course,” Murenbeeld contended. “Pressure continues to build for a European policy response however, so we cannot rule out a sudden updraft in the gold price on the back of new monetary policy initiatives in Europe. Leaders seem to agree that something needs to be done but, as of yet, the ‘bazooka’ is nowhere to be seen.”

David Rosenberg – another long-time gold price bull – offered similar advice for Europe in a note to clients on Tuesday. “No doubt it is good to see EU policymakers shift from denial to acceptance but the reality is that the extent of the bank recapitalization needs to far exceed any government’s capacity to remedy the situation in its entirety.”

The gold price climbed $16.51, or 1.0%, to $1,678.76 per ounce Wednesday afternoon amid a broad-based rally on Wall Street. Strength in the price of gold was fueled by a decline in the U.S. dollar against a basket of foreign currencies. The SPDR Gold Trust (GLD), a proxy for the gold price, rose $1.43, or 0.9%, to $163.53 per share.

European policymakers may help fuel a rally in the price of gold

Recent measures by European policymakers may help fuel a rally in the price of gold, according to TD Securities strategist Bart Melek.

In a note to clients published on Tuesday, Melek wrote the following:

The gold market went into correction mode at roughly the same time as specs started taking outsized short euro positions and boosted their gold shorts slightly. The uncertainty associated with the European sovereign debt crisis was the prime catalyst behind the move away from the euro and gold.

With European governments becoming more committed to recapitalizing the European banking system and providing a plan to backstop highly indebted EZ (eur zone) nations, there may be less impetus to buy dollars in order to build cash positions. The required bond issuance to fund the European Financial Stability Facility (EFSF) will very likely deepen the euro bond market and may very well lift euro demand, prompting short covering of euro positions and depressing the greenback. Gold could very well rally as traders cover their short euro and gold positions, and as there is less impetus to build dollar cash balances.

The gold price retreated on Tuesday, falling nearly 1.1% to $1,661 per ounce. Risk aversion rose across the globe, leading to lower stock and commodity prices. Oil and copper prices fell 1.2% and 3.5% to $84.35 per barrel and 3.24 per pound, respectively.

Gold bar supply is tightening in Hong Kong and Singapore

The Wall Street Journal noted that Credit Agricole analyst Robin Bhar wrote in a note to clients that resurgent Asian physical demand is helping to support the gold market. ”Intraday price volatility has subsided sharply, a major factor in giving the bulls enough confidence to re-enter the market against a background of very active physical buying,” Bhar noted.

He later added that gold bar supply is tightening in Hong Kong and Singapore, while premiums are now at their highest level since February of this year.

The gold price surged higher Monday, rising $39.00 to $1,677 per ounce. Weakness in the U.S. dollar, spurred by healthier risk appetites amongst investors, propelled the price of gold. The euro rose against the greenback following a pledge this past weekend from French and German leaders to do whatever is necessary to prevent a banking crisis. S&P 500 stock futures climbed 15.40 to 1170.30, which crude oil rose 2.2% to $84.80 per barrel.

Gold price held firm near $1,638 per ounce

The gold price held firm near $1,638 per ounce closing this week despite the better than expected U.S. employment report. The spot price of gold climbed to as high as $1,665.20 in overnight trading and remained in positive territory after the release of the September non-farm payrolls report. Silver prices headed north alongside the gold price, advancing $0.59, or 1.8%, to $32.59 per ounce.

The September jobs report showed that non-farm payrolls increased by 103,000 in September, well above the 60,000 consensus estimate among economists. The unemployment rate remained at 9.1%, in-line with expectations. Despite the sell-off, gold futures posted a weekly gain of $13.50, or 0.8%. In doing so, gold snapped a four-week losing streak by posting its first weekly advance since August 29-September 2.

While the ECB did not cut rates yesterday, it did offer some respite by granting 1-year repurchase agreements. This easing of liquidity boosted market confidence and saw renewed interest across asset classes. The BoE extended its quantitative easing programme by £75bn. Gold and other precious metals have benefited. This is not surprising, given their close positive relationship with global liquidity and the threat that a drying up of liquidity would pose to all commodities, even precious metals.

Yesterday, there were reports that Vietnam’s central bank has allowed six institutions (including the Saigon Jewellery Co.—the country’s top gold trader) to re-open offshore gold trading accounts. Although the impact might be taken as bullish, if it should lead to a rise in gold imports into Vietnam, these are likely to be too little to prompt any significant price action. As alluded to the past few days, all eyes will be on today’s US non-farm payrolls data. Our G10 analyst sees a risk of a higher reading than expectations (consensus: 55k), but certainly not a particularly firm number. Consequently, long-term support for gold and silver from continued concerns over a possible US recession remains in place. In addition, Eurozone debt problems will also continue to remain a focus, and consequently benefit gold from a safe-haven demand perspective.

Price of gold is likely to remain in this range for the next couple of months

Although the gold price bounced back from Tuesday’s 2.1% sell-off, it remained near the middle of its recent $1,600-$1,670 trading range. Michael Lewis, an analyst with Deutsche Bank, contended that the price of gold is likely to remain in this range for the next couple of months. “My sense is that gold is a bit like silver after its collapse (in May 2011) from almost $50 to around $35,” Lewis noted. “It was incredibly erratic but with quite a stable performance over about six to eight weeks.”

Lewis went on to say that “I don’t think there is going to be much clear direction for gold at the moment. To some extent the market is just a bit broken, and needs to repair itself… the strength that we saw (earlier this year) is going be difficult to repeat.”

The gold price stabilized near $1,650 per ounce Friday morning after weekly jobless claims in the U.S. came in roughly in-line with expectations at 401,000. The spot price of gold climbed to as high as $1,656.10 earlier this morning, but pared its gains heading into the open of U.S. equity markets. In contrast to the gold price, silver climbed $0.27, or 0.9%, to $30.76 per ounce.