Gold has regained the $1600/ounce threshold even though there is no signals on quantitative easing from US Fed Reserve and European Central Bank, according to an analysis by Barclays Capital.
In the absence of a firm catalyst, gold may struggle to gain traction but Central Banks continue to favour gold holdings amidst weak physical demand in Asian regions especially India due to seasonal weakness.
Price forecast: Q3 12: $1665/oz; 2012 annual average: $1672/oz.
Investor interest continues to be strong with Exchange Traded Funds (ETF) witnessing positive inflows in early August,however, July was a soft month for gold ETP interest with preliminary estimates showing net redemptions of 19.3 tonnes. This follows a strong June with net inflows of 41.8 tonnes. Total metal held in trust remains relatively resilient and is just 27 tonnes shy of the peak set in mid-March.
The latest CFTC data reflect market positioning before last week's FOMC meeting. Although prices started to ease ahead of the Fed announcement, speculative positioning rose by 13.1k lots during the week ended 31 July, driven by a combination of fresh longs being established (5.2k lots) ,as well as short covering activity (7.8k lots). Although the increase only takes net positions to a two-week high, this is the largest weekly net increase since early June and gross short positions are at their lowest since 8 May. However, market positioning remains relatively light at 31% of open interest.
Gold remains bullish and investors should use dips with in the ongoing mid-year range to enter long positions at better levels. "But a break above $1640 highs are required to confirm potential upside toward initial targest near $1700 and $1800". It would take an unexpected move below 1520 to force us to re-evaluate, but for now we are staying focused to the upside," according to Barclays Capital.
-Resistance: 1612/1630
-Support: 1584/1560
-Medium term: Neutral
Source: Commodity Online