Chartists see gold and silver at new peaks

London: Gold is expected to close the year on a stronger note and has potential to set new highs in 2007, but the market will continue to remain choppy in the near term, according to chartists.

"I think we are going to go back initially to the $690-an-ounce area and at some stage to revisit that peak (set) in May this year," said independent metals analyst Cliff Green.

"There would still be plenty of short-term dips in this market," he said, but added that any near-term weakness should be aggressively bought.

Gold rallied to a 26-year high of $730 in mid-May as funds poured money into commodities amid worries about rising energy costs, tensions in the Middle East and uncertainties in the dollar's outlook. It hit an all-time high of $850 an ounce in January 1980.

Robin Wilkin, technical analyst at JPMorgan, said gold's broad trading range of $550-$700 in 2006 was going to give way for a move towards the record high. "(But) half of the problem is that a lot of gamma trading is going on. So every time it rallies, all the options guys are just selling loads and it's dampening the effect," he added.

Gamma trading refers to dealers covering their options exposure as a contract moves towards maturity.

Some chartists predicted that gold would trade in a range in the coming months before moving higher. "You have got potentially further consolidation in the first quarter, but beyond that look for further upside," said MacNeil Curry, technical analyst at Barclays Capital.

Weekly chart pattern suggested that the choppy price range would give way to higher prices in the medium term, he added.

"Longer term, spot gold has resumed its long-term bull move," Karen Jones of Commerzbank wrote in a weekly report, adding that several technical patterns were supportive of metal's positive view. Technical analysts, who predict future price movements based on past market performance, said silver was also showing similar technical patterns, and prices were expected to set new highs.

Last week, spot silver rose to a six-month high of $14.00 an ounce and was last quoted at $13.84/$13.91. Prices surged to a 25-year high of $15.17 an ounce in May. "All the precious metals would see new highs next year," said Wilkin, adding silver would try to move towards $17-$18 in the long term.

Chartists said any drop in silver prices to around $12.50 an ounce on profit-taking would do some damage to the trend, but the metal was expected to resume its upward journey after a consolidation phase.