Gold prices driven by external markets, technical strategy Bullish: Barclays

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LONDON (Bullion Street): Gold prices have to break above $1522 per ounce levels to suggest that the recent consolidation phase has ended, according to Barclays. It sees price support at 1350, 1315 and resistance at $1416,$1434 per ounce.

Gold prices remain driven by external markets. Prices eased as 10y US Treasuries rose, equity markets recovered some of their losses, and the dollar strengthened amid better-than-expected macro data. While heightened geopolitical tensions regarding Syria have contributed to gold’s recent strength, it was the external markets becoming gold-favourable that aided the short covering rally ahead of the September FOMC meeting and the August non-farm payroll data, Barclays report added.

Although the weaker-than-expected non-farm payrolls data provided a boost to prices, "our economists believe the report was sufficient to greenlight a tapering of Fed asset purchases this month. Combined with the debt ceiling debate and our in-house view for the dollar and Treasuries to strengthen further, prices are likely to face downside risk in the near term."

Forex markets are mildly bullish which may not augur well for gold but gold is awaiting a strong season ahead until November and hence some upside movements can be expected. Gold exchange traded funds (ETF) is witnessing stabilisation of outflows and inflows and should aid price recovery. However, it needs to gather positive momentum to make a big impact on prices.

Tactical positioning in Comex gold fell by a modest 0.1k lots during the week ended 3 September, as fresh short positions (2k lots) offset the establishment of fresh longs (1.9k lots). This was the first week of additional gross short positions in seven weeks and the first decrease, albeit modest, in four weeks. With gross longs at a four-week high, it does not appear that short-term sentiment toward gold is becoming positive quickly, and given that gross short positions remain close to their March lows, the scope for additional significant unwinding of bearish positions looks to be drawing to a close. -According to the latest data from the US Mint, gold coin sales reached 21.5koz in all of August and have reached just 2koz so far in September. This continues to show a slowdown in sales since April, although 2013 has already surpassed full-year 2012 gold coin sales (883koz versus 841koz). Price forecasts: Q3 2013:$1200/oz, 2013: $1393/oz