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Tactical investors are yet to turn favourable towards gold, but the data suggest that prices could find support from a short covering rally.

06 May 2013

LONDON (Commodity Online): Barclays, in its latest report on gold has projected Q2 13 price of gold at $1350/oz and 2013 price at $1483/oz.

Gold prices fluctuated around the $1460/oz price level last week as gold ETPs reached a monthly record net outflow in April. While gold prices rose after the ECB rate cut, prices ended the week roughly flat, after Friday’s US employment report. Although ETP outflows continued to put pressure on prices, coin sales at various Mints remained strong in April.

In Barclays' view, the vulnerability of further ETP outflows subsides should prices recover to above the $1500/oz level; however, Barclays continues to believe ETP outflows remain a key downside risk in the near term.

Meanwhile, in Japan, Barclays' economists have raised GDP growth forecast to 2% q/q saar from 1.1%; however, they expect the BoJ to continue along its easing path. The BoJ’s strategy of pushing prices higher is largely through the expectations channel.

According to the latest CFTC data for the week ending 30 April, tactical positioning in Comex gold scaled back further by 7.2k lots, split roughly evenly between an increase in short positioning of 3.3k lots and a decrease in long positioning of 3.9k lots. Gross shorts have scaled yet another high and are now at their highest since June 1999.

Tactical investors are yet to turn favourable towards gold, but the data suggest that prices could find support from a short covering rally.

Gold coin sales from the US Mint hit their highest monthly sales volume since December 2009, at 209.5koz in April. May sales have already hit 10koz, and YTD sales are now at 512koz, compared with 753koz in all of 2012. Retail demand has bucked the trend seen across ETP holdings.


While the three-day holiday in China meant an absence of trading volume on the Shanghai Gold Exchange until Thursday, volumes returned at the end of the week at elevated levels, reflecting continued physical demand. While daily trading volumes were not as high as last week, they were high
enough to push the monthly average even higher after having set a record the week prior. Asian bar premiums remained high as well, as the premium in Hong Kong clung to its highest since January 2011 at $3.00/oz. Likewise, Tokyo bar premiums continue to be elevated and rose to nearly 8cents/oz last week.

In India, prices rose above the INR27,000 per 10g level, and while volumes had been strong since the price drop, physical interest came off last week as jewellers are “interested in only bargain-buying,” according to a dealer with a state-run bank in Mumbai (Reuters). Turkish gold imports jumped from 18 tonnes in March, to nearly 46 tonnes in April, reflecting a surge in physical demand that took place after the price drop earlier in April.

The latest statement from the ECB indicated that Euro system central bank gold holdings remained unchanged for the week ending 26 April.

Technical strategy

Gold has been buoyant lately but while it is under stronger resistance at 1522, we think larger downside risks exist. The focus remains lower in the near term, toward 1439 range lows.

Resistance: 1485, 1522; Support: 1439, 1404.

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