LONDON (Bullion Street): The near term outllook for gold remains fragile and is exposed to downside risk on sharp fall in holdings in exchange traded funds, according to Barclays Research.??Price forecasts: Q2 13: $1350/oz; 2013: $1483/oz?
"Beyond this, we believe the macro backdrop remains gold-supportive, and expect prices to recover to average $1500/oz in Q4 13," Barclays added.
The US QQ GDP data is expected to show a real growth of 3% annualised and in Europe, euro area PMI (Tuesday) and Germany’s IFO (Wednesday) data could push the ECB to cut rates while Japan is expected to remain accomodative. The macro-environment in general is bulish for gold, Barclays added.
On the other hand, investor flows especially to exchange traded funds, which fell 117 tons for month to day, already surpassing February as the weakest month on record.Outflows have reached 277 tonnes for the year-to-date, which is almost equivalent to inflows in 2012 at 279 tonnes.
Surprisingly, the latest CFTC data for the week ended 16 April revealed that net fund length in Comex gold rose by 9.5k lots to 128.9k lots, the highest in three weeks. Gross long non-commercial positions were mostly stable at 204.7k lots (from 203.8k lots the previous week) and gross short positions actually fell by 8.7k lots. The data including futures and options reveal a similar picture. Given the speed and magnitude of the price decline on Friday and Monday, which is captured within these data, it would appear any positions of size that were instigated were quickly closed, whether it was long liquidation followed by fresh longs at lower levels or fresh shorts covered subsequently, Barclays report said.?
Physical demand has been strong in China, India, US Mint has reported record coin sales of 167.5koz so far in April, while Gold bar premiums in Singapore has gained considerably.
Technical Strategy: "BEARISH?-Last week’s break below the important range lows near 1521 signals a deeper-than-initially-expected pullback in gold. For now, we view this as a cyclical correction rather than a major reversal. Our revised downside targets are in the 1275 area, which would equate to a similar percentage decline off the highs, as was seen back in 2008. It would take a move back above the former lows near 1521 to alleviate the current downside pressure.?-Support: 1340, 1321, 1275?-Resistance: 1426, 1455, 1521," Barclays added.
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