Monday, 28 April 2014

Gold destined to move lower on soft investor demand

Gold is exposed to downside pressure on prices as physical demand is not making up for soft investor demand, according to Barcalys.

In a weekly report it pointed out that strong dollar would only worsen the scenario for the yellow metal.
Price forecasts : Q2 2014:$1250/Oz, 2014:$1250/Oz.

Range bound trade is expected in the near term as this week's sell-off failed to maintain the breach of nearby range lows in the $1277 are. "Overall, we expect the broader $1180/1430 range to encapsulate trading for the time being and look for a break above the $1430 highs in order to suggest upside traction. A move above the former range lows near $1520 would suggest the multi-year move up is resuming.

Support :$1265, 1237, resistance $1301, $1331.

Fundamentals for gold appear to be bearish as volume traded on Shanghai Gold Exchange was seen to be noticeably weak and dragged down the rolling monthly average to its lowest since the beginning of November 2013, with single day volumes on 24 April being the lowest in several years.

Most elsewhere in Asia, bar premiums have been stable – at $1.10/oz in Singapore and $1.00/oz in Hong Kong. Meanwhile in Tokyo, premiums have fallen from $0.90/oz to zero.
After having risen in February, gold holdings in both Turkey and Russia fell by 14.3 tonnes to 482 tonnes and 1.2 tonnes to 1041 tonnes respectively in March.

The macro environment is neutral for gold with China and emergin market seem to be stalling in terms of driving global economic growth. The latest economic data confirm that the US and EU are becoming the main drivers of global growth.

US dollar strength is likely to put prressure on gold with Nonfarm payrolls expected at 250 k and an unemployment rate of 6.6%. The rising geo-political riks in Ukraine is also likely USD supportive, exposing downside for gold.

No comments:

Post a Comment