Aug. 23 (MF Global) -- Price Outlook

Precious metals markets should continue to advance in the near-term, with gold prices potentially reaching $1,946. Metals will benefit in near-term trade from the expectation that Fed Chairman Bernanke announces new methods of stimulus such as extending balance sheet maturities. A re-pricing of recession odds following Thursday’s disastrous Philadelphia Fed index could also be supportive, while the Chinese flash PMI Monday evening will provide further clarity on this issue. Silver may benefit from its breakout above the Aug 4th high at $42.29. Beyond the next few days, however, we’re not altogether clear that the market will maintain its rally. A return of risk appetite later in the week could be negative for the market as would comments from the Bombay Bullion Association yesterday suggesting that Indian demand may suffer during the festival season if prices remain high. Technical pressure will be offered to gold from Fibonacci extension resistance at $1,946. We favor trading metals as trading affairs today.