After a prolonged sell-off in gold, prices have started climbing again this week. For Barclays Research, this has been a time for introspection on its outllook for the yellow metal. They have now concluded that the sell-off rally was overstretched and perhaps it is time to start buying gold again changing their view from desperation on fall in prices to recent cautiously bullish to bullish view-- thereby completing a circle.
The investment Bank is bullish on the macro environment as well as investor inflows. On the fundamental front, the Bank is neutral and from the point of view of technicals, they have a bullish strategy.
“The sell-off in gold is starting to get stretched. Given the context of the larger bull trend and the currently oversold and overly bearish momentum and sentiment, we would look to start buying. Short-term support can be found around the nearby lows at 1672. Against that level, we remain medium-term bulls, with today’s bullish outside day helping support the bullish argument in the short term.” the Bank said in a report.
Gold ETP interest has continued to scale fresh highs as total metal held in trust is up 6.2 tonnes for the first week of December. Year to date flows have reached 268 tonnes as total holdings closed the week at 2,645 tonnes.
The latest CFTC data show that tactical investors decreased their exposure to Comex gold by 28k lots during the week ended 4 December. The fall was driven primarily by the fall in long positioning (26.3 k lots), while short positioning rose by 1.8k lots. Net non-commercial positions have fallen since last week but are not any lower than two weeks prior, at 38% of total open interest-- the Bank said about investor inflows.
Continuity is the theme for US monetary policy. "Our economists expect the highly accommodative stance to remain in place for 2013, given that even if Bernanke steps down as FOMC chairman in 2014, President Obama will likely choose a replacement who shares Bernanke’s views", the bank report added.
Price forecast: Q4 2012: $1810/oz, 2012 annual average: $1691/oz
Resistance: $1730, support: $1672
