"We feel the story will evolve to the bullish side in Q2 and Q3," writes Jonathan Barratt
When we consider the fundamental picture for
gold we can see that the reasons to buy the metal have slightly shifted from last year: geopolitical events do not warrant a major premium at the moment; prospects for inflation remain controlled; and economic recovery is telling us to move into other asset classes. This could all turn around within a heart beat however. The CB [central-bank gold-buying] theme which appears to be the only current bright spot, remains alive, and we are sure that CBs would see any major dip as an opportunity to buy more of the metal. Although as an influence on the market we feel the CB activity will have limited impact as it is mostly masked. ...
So in a nutshell, what are we thinking? We have been hardened bulls for some time for the metal but a few weeks ago we questioned the ability of the rally to be sustained given changes in the fundamental picture. Technically, it followed suit when the market broke through support at US1640. Our call for
gold has been a neutral to bearish since, however we have been looking for the right time to buy back into the metal. We continue to look for the right time, however it is just not yet. We feel that the bull market is not over and that we are just in a holding pattern at the moment. We suspect that we could still be in for a deep consolidation period that may see it back to US1535 however, will continue to look for signs that the geopolitical and economic pictures will put a low in place. We feel the story will evolve to the bullish side in Q2 and Q3, however for the time being it just may be a question of toughing it out and perhaps putting a "little ice" in the belly on any positions. We are still bulls.
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