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“Although our greater view for gold is bullish, the current bounce to the upside is likely to be a temporary reaction to the precipitous fall of the past few weeks. We expect selling interest in the 1522 area to..

29 Apr 2013

LONDON (Commodity Online): ETP outflows may remain as a key downside risk for gold in the near term and prices are expected to touch $1350/oz in the second quarter of 2013 and $1483/oz this year, stated London based Barclays in its recent market analysis.

“In our view, the vulnerability of further ETP outflows subsides should prices recover to above the $1500/oz level or equity markets under perform given the stronger correlation between the two,” it added.

Gold prices recovered last week, ending the week above the $1450/oz level, after hitting their lowest level since February 2011 the week prior.

Although ETP outflows continued to put pressure on prices, a surge in coin sales at various Mints, coupled with strong physical demand from both China and India, persisted in response to the lower price environment.

The key question in the near term is whether retail and jewellery demand can continue to counter ETP outflows and the rise in gross shorts.

This week, economists at Barclays expect the employment report on 3 May to reveal a 150k increase in non farm payrolls (consensus 145k), private payrolls to increase 160k (consensus 170k) and for the unemployment rate to remain at 7.6%. US Q1 GDP rose 2.5% q/q, below both Barclays economists’ and consensus forecasts of 3%.

This was mainly attributed to a strong increase in imports, which Barclays economists doubt will persist (US Q1 GDP: Strong consumption unlikely to persist, 26 April 2013). At the upcoming FOMC meeting this week (30 April – 1 May), Barclays economists expect neither any change in the Fed’s policy stance, nor more than a few changes to the statement.

According to economists at Barclays, recent comments by ECB, combined with weak economic, credit and inflation outlooks, suggest that further monetary easing in Europe is likely, although not to the same extent as that of the Fed or BoJ. (Central banks sweep the board, 26 April 2013).

“Our economists see a 25bp cut in the main refinancing rate as likely, perhaps as soon as the 2 May ECB meeting,” Barclays noted.

“In Japan, our economists believe that the BoJ is likely to come under renewed pressure to ease policy further in October when it revisit its CPI forecast, as it will likely not reach the stated CPI target of 2% in two years (BoJ Outlook Report and Abenomics - Act II, 26 April 2013),” the bank added.

Continued ETP outflows remain a key downside risk to prices in the near term and are on track to mark a fresh record high, surpassing the weakness in February.

However, in as per Barclays view the vulnerability of further ETP outflows subsides should prices recover to above $1500/oz or equity markets under perform given the stronger correlation between the two.

Technical Strategy

“Although our greater view for gold is bullish, the current bounce to the upside is likely to be a temporary reaction to the precipitous fall of the past few weeks. We expect selling interest in the 1522 area to provide a cap and look for a sideways lower chop to ensue over the coming weeks,” the bank noted.

“Ultimately, we will be looking for signs of a base over the 1275 area. A decisive break back above 1522 would suggest that the downside risk for gold is abating. It would take a move back above the 1800 area, however, to signal that the longer-term bull trend is returning and target new highs,” Barclays concluded.

--Resistance: 1505, 1521

--Support: 1404, 1356


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COMMENTS (1)
Gold Prices
03 May 2013
Gold has been a wildcard if you pay attention to most of the main stream media when in fact it is the only thing I have in my portfolio that has provided certainty for me. This article makes a lot of good points, points Iíve heard before but in a different way. It will be interesting to see where gold prices head from here. goldpricesdirect
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