NEW YORK (Commodity Online): Barclays is bullish on gold and awaiting for a break above $1763, the investment bank said in a recent report. However, gold still has hurdles to overcome such as potential bouts of dollar strength, technical resistance levels and profit-taking, the report adds.
Although gold prices have surrendered most of their weekly gains, they remain in positive territory as real interest rates are expected to remain negative for longer while concerns over currency debasement and inflationary pressures have resurfaced, the backdrop remains gold fertile
Following a dovish FOMC statement, Fed Chairman Bernanke subsequently made no secret of his dissatisfaction with the pace of the US economic recovery. The investment bank estimate that there is still a non-negligible probability of a third round of large-scale asset purchases, despite the more-positive non-farm payroll data and their assumption that the payroll tax cut expiry (due at month-end) will, most likely, be extended to year-end.
Investor flows have been positive. Gold held across the physically backed ETPs rose by 20 tonnes last week. Non-commercial positions in Comex gold rose by 29.1k lots during the week ended 31 January, driven by the establishment of fresh long positions.
In China, volume traded on the Shanghai Gold Exchange are above its one-month rolling average following reports of strong sales during the Lunar New Year holidays while the Ministry of Industry and Information Technology reported gold output was up 15.7% YoY at 37.6 tonnes, taking production for the full year up 5.9% YoY to a record 360.95 tonnes, securing China's position as the world's largest producer.
Technically, gold remains in the ascendancy and as such, the bank remains bullish on the yellow metal. A multi-week channel defines the uptrend and a break above its nearby target in the $1763/$1769 area will signal further advancement toward last November's 1803 highs, the reports adds.
Support: $1716/$1680; Resistance: $1803/$1763 Medium term: Neutral
Source: Barclays Commodities Research report
