By Allen Sykora of Kitco News
(Kitco News) -- Gold should keep rising in the fourth quarter but with potential for profit-taking pullbacks that could impede its progress, strategists with FOREX.com said Tuesday.

Meanwhile, the U.S. dollar is likely to move sideways against the world’s other most heavily traded currencies, but could weaken against so-called minor currencies, they said during a Webcast outlining forecasts for the fourth quarter.

FOREX.com, a division of GAIN Capital Group LLC, has a trading platform with volume of $250 billion per month. Market participants can trade 45 currency crosses, along with gold and silver.

“Generally speaking, we think there is more upside potential for gold prices in the months ahead,” said Eric Viloria, currency strategist with FOREX.com. “However, we also think there is potential for a short-term correction lower, especially in light of potential profit-taking interest around the $1,300 psychological level and near-record long gold positioning, according to the latest CFTC commitments of traders report.”

The most recent data from the Commodity Futures Trading Commission showed that managed-money accounts were net long by 227,384 lots for futures and options combined as of Sept. 14. The high was 238,943 last October.

Gold potentially could get as high as $1,400 an ounce based on seasonal factors, Viloria said. Yet, seasonals also suggest potential for a correction, since the months of October and December have shown a tendency for retreats over the last 20 years.

FOREX.com’s predicted range is $1,190 to $1,350, with the risk of a pullback all the way to $1,030 if the market were to fall below $1,190.

“Our fundamental view for higher gold prices is underscored by the overall weakness in many major currencies,” Viloria said. “High sovereign debt levels, low interest rates and unconventional monetary policy are all working to undermine the value of the key currencies, and we think this has spurred demand for gold as a currency alternative.”

However, said Brian Dolan, chief currency strategist with FOREX.com, “fresh gains will be impeded by profit-taking and may be harder to come by.” Still, any correction to $1,250 may be a “buying opportunity on a longer-term basis,” he added.

FOREX.com looks for silver to outperform gold, with the gold/silver ratio falling toward 51 in the longer term, near the historical average of around 48, Viloria said. The ratio, calculated by dividing the price of an ounce of gold by an ounce of silver, is currently around 62.

“We think the dollar is most likely to trade sideways against the other major currencies, namely the euro, sterling and yen,” Dolan said. However, he continued, the greenback could weaken further against the Canadian, Australian and New Zealand dollars, plus the Swiss franc.

“The risks for the dollar in our view are two-sided,” Dolan said. On one hand, any moves toward additional quantitative easing by the Federal Reserve could undermine the U.S. currency further. But on the other hand, he said, if global economic growth deteriorates more significantly, the dollar could benefit if investors turn to U.S. Treasury securities for a safety play.

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