NEW YORK (Commodity Online): While maintaining a gold price target of $1875/oz for Q4 2011, Barclays says that even though gold fundamentals are positive on the macro outlook, the need for liquidity and risk aversion will set the tone for the near term. Gold prices are expected to find selling pressure in the $1700 area.
Gold prices are expected to average $2000/oz in 2012.
The Macro-environment focused on Europe
-Spain was downgraded by Moody's and France's deteriorating credit was also highlighted in an annual credit report.
-US industrial data remained firm, German ZEW investor sentiment fell to its lowest level in 3 years while China's Q3 GDP remained in line with expectations, albeit a bit lower.
-The European Council meeting on Sunday offer little indication as to how the debt crisis will be resolved. Key issues with regard to EFSF leverage, Greek haircuts and bank recapitalization are expected to be taken on the October 26.
Investor Flows have stabilized
-Gold ETP holdings rose by 1.5 tonnes in the past week to their highest level in a month while COMEX gold speculative positions have lowered for the week ending October 18. However, these positions seem to have stabilized after a sharp decrease.
Central bank interest in gold
-Russia Central bank commented on increasing its gold reserves in the coming days by “acquiring huge volumes (of gold)” while gold holding amongst European banks have remained relatively stable.
Mine disruptions
-Mine strikes at Freeport McMoRan's Grasberg mine and Newmont's Yanacocha mine have been facing production disruptions due to labour strikes. Freeport lowered their 2012 gold output forecast to 1.1Million oz from 1.2 Million oz.
Technical Outlook
Any spike to the $1700 area will find selling interest. Look for a break below $1580 for a test of $1550/$1530. Bollinger bands are narrowing
Support seen at $1580/$1600 while Resistance seen at $1670/$1705
Source: Barclays Capital Commodities Research
