The upside catalyst for silver is above the range highs near $37.50, said Barclays in a recent report on precious metals. Barclays expects silver to reflect a bullish move in gold.
Heading into 2013, Barclays is staying bullish overall for gold. The preference would be to fade any weakness and would stay bullish while the greater range lows in the 1520 area remain intact.
“A move below that level would force us to adopt a neutral stance. For now however, we expect the December 2011 lows to provide buying interest. In the very least for 2013, we would expect an extension of the range that we have seen over the past year.” Barclays said in the report.
A “weak” year for gold would suggest a close somewhere in the region of 1775 at the end of this year. Ultimately, a move above the range highs in the 1800 area would encourage Barclays to adopt a more bullish view, with scope seen toward the 2000 handle.
The annual average price for gold in 2013 has been forecast at $1778/oz by Barclays. Barclays has estimated gold price for Q1 2013 at $1710/oz. [Resistance: 1695, 1725; Support: 1620, 1590 ]
Gold has had a roller-coaster start to the year, rallying after the US agreement on fiscal revenues but selling off after the FOMC minutes revealed that QE may taper off sooner than expected.
Despite the uncertainty surrounding the US fiscal cliff at the end of 2012, and the dollar weakening against the euro, gold prices remained under pressure, falling to levels last seen in August 2012.
In the view of Barclays, the hurdles are mounting for gold, particularly in light of the soft physical market, failing to respond as a safe-haven asset, slowdown in investor interest and sidelining dollar weakness.
However, in the near term, potential catalysts still exist that could push prices higher toward the end of the first quarter.
The US fiscal cliff issues are far from fully resolved, the debt ceiling vote is set to coincide with the deadline for the agreement on spending cuts and despite the tax deal, Moody’s has said it was not enough to remove the risk of a downgrade of the US credit rating.
Given that risks are skewed towards the near term, Barclays believes Q1 13 will be key in setting the tone of trading not only for the year but also in terms of signalling a turning point for prices should gold fail to respond.
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