Tuesday, November 5th 06:34 AM IST

A bullish strategy for Gold in a weak market: Barclays

# gold  # US Fed tapering  # US dollar  # ETF  # central bank  

The latest data from the US Mint shows that gold coin sales reached 66.5koz in October and have already hit 3koz in November. This brings 2013 YTD gold coin sales to 973.5koz, where as 2012 full year sales were 857.5koz.

LONDON (Bullion Street): Macro-economic conditions remain favourable for gold although its own fundamentals haven't been quite supportive with outflows from exchange traded funds in October exceeding net redemptions in past two months while Indian seasonal demand appears weak, Barclays said in a weekly report.

US Federal Reserve is expected to keep tapering measures on hold till more favourable data is seen on the economic front with respect to manufacturing and employment.

The forex market remains neutral for gold and Barclays has projected one month targets for EUR/USD at 1.35, USD/JPY 98, USD/CHF 0.92. With the Fed firmly in data dependent mode, the outcome of US economic data, and especially the employment report, continues to drive the market’s expectations regarding the Fed’s next move and the USD in coming months.

The latest data from the US Mint shows that gold coin sales reached 66.5koz in October and have already hit 3koz in November. This brings 2013 YTD gold coin sales to 973.5koz, where as 2012 full year sales were 857.5koz.

The latest IMF statistics revealed central banks remained net purchasers in September but buying has slowed down. Azerbaijan added 6 tonnes to its reserves, Kazakhstan added 2.5 tonnes (up 21.7 tonnes YTD, gold reserves ~24%), Ukraine added 0.3 tonnes while Mexico and Russia sold less than half a tonne each (gold reserves ~9%). Russia has sold small quantities over the past two years but is still the largest net purchaser over the first three quarters of the year, according to the IMF statistics (up 57 tonnes). The latest weekly ECB statement for the week ended 25 October revealed gold holdings remained unchanged across the Euro-system banks. We maintain the view we expect the official sector to remain net buyers in 2013 and 2014 albeit to a smaller extent compared with last year.

Technical strategy: Bullish
-Gold rolls over as the USD strengthens and yield tick higher. Risking a return to 1250/1270 before a bounce.-Resistance: 1328, 1344; Support 1288, 1270.

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