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Macro environment remains bearish despite recent gains on geo-political tensions whether it be Russia-Ukraine or Iraq. Barclays expects a rise in US payrolls this week by 250,000 which is higher than 217,000 of May

30 Jun 2014

LONDON (Commodity Online): Gold remains elevated above $1300 per ounce and provides a selling opportunity as prices are unlikely to sustain over a longer time frame.

Barclays noted that gold prices still have the possibility of a slow return to $1370/85 per ounce levels.

Price forecasts: Q2 2014:$1250/oz, 2014: $1250/oz.

Macro environment remains bearish despite recent gains on geo-political tensions whether it be Russia-Ukraine or Iraq. Barclays expects a rise in US payrolls this week by 250,000 which is higher than 217,000 of May. A surprise to the upside in jobs growth would imply some downside for gold as the correlation betweeen one-day moves in gold prices and job numbers continue to stand strong, at more than -60%. And US dollar is expected to gradually outperform most other G20 currencies. Gradual USD strength would mean lower gold prices.

Net flows in exchange traded funds were negative in June by 5.6 ton.

"Flows have been positive for roughly a week though, which has eaten into otherwise more negative flows. While ETPs have turned from the hefty net redemptions seen last year, we do not expect a sustained upward trend in holdings in the near term, as at best, daily flows should continue to bounce between inflows and outflows," Barclays said.

China’s gold imports from Hong Kong dropped in May to the lowest level since January 2013, at 52.6 tonnes. Trading volume on the Shanghai Gold Exchange, however, has remained relatively steady w/w, indicating consistent if not lackluster changes in demand.

-In India, according to Reuters, the Revenue Intelligence Service recommended that the gold import duty be cut by 2 percentage points, yet admitted that the Finance Ministry was unlikely to make such a move given risks around the current account. Bar premiums have calmed in the country lately.

-Meanwhile, Turkey and Russia increased their central bank gold holdings by 6.0 tonnes and 9.5 tonnes, respectively, in May, while euro system holdings fell by 2.1 tonnes according to IMF data. For the week ending 20 June, the latest data from the ECB indicates that gold holdings from euro-system central banks increased by around 1koz.

Technical strategy: Bullish
-Gold signs of outperformance against the EUR and also against WTI crude (despite the recent energy bid). For gold in USD, the risk is for a slow return to 1370/85.
-Support: 1306, 1285; Resistance: 1326, 1331.


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