Just as DB, Barclays Commodities Research has been fairly constructive on gold. Here is their reasoning:
1. Although non-commercial positions remain elevated, they are off the recent highs reached in the run-up to the QE3 announcement. Tactical allocators have taken some profits due to the recent stability of the dollar (see discussion). That reduced some of the "fast money" in the market.
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| Net non-commercial gold futures positions (CFTC) |
2. There is a common belief among metals investors that retail activity in the US is a good leading indicator for the direction of gold prices. This is quite different from equities, where large retail participation tends to indicate frothy markets.
Barclays: - Physically backed ETPs rose for the fourth straight month, taking total metal held in trust to 2645 tonnes, yet another fresh high and almost the equivalent of our annual mine output estimate for this year. US gold coin sales more than doubled m/m and trebled y/y.3. Central banks continue to be net buyers. Demand from China's official sector is expected to increase (see discussion).
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| Source: Barclays Capital |
4. Interest from China's private sector seems to be improving, as the Shanghai Gold Exchange volumes pick up.
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| Source: Barclays Capital |
5. On the supply side, global gold mining output is expected to remain roughly flat in 2013.
Clearly the largest risk for gold remains the strength of the US dollar. That is why Barclays' projection is not nearly as aggressive as DB's. They forecast gold to reach $1815/oz in 2013.
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