Crude's expensive; gold to trade back to $1,450/oz: Barratt

FOMC may do something on stimulus sooner rather than later and this in turn might affect price of crude oil, says Jonathan Barratt, BarrattsBulletin.com. He feels crude at current levels is rather expensive.

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On gold, he says any weakness will temporarily hurt its price but will soon track higher based on US yields which has started to reward, and has reached to two year high. So, inflationary concerns are starting to plague the market.
At present, USD 1,375-1,380 per ounce is resistance for gold and USD 1,340 per ounce is support. If the yellow metal sustains above USD 1,370 per ounce, then it will trade back to USD 1,450 per ounce. Below is the verbatim transcript of Jonathan Barratt's interview on CNBC-TV18 Q: In terms of the movement ahead of the Federal Open Market Committee (FOMC) minutes tomorrow, what sort of movements or what sort of buying interest are you seeing coming in on gold as well as on Brent crude?
A: I think it is going to be quite interesting in terms of what the FOMC does come out and say. I think at the end of the day they are going to look to do something on the stimulus sooner rather than later and then it might affect the price of crude oil. Already we are at top so we might be in front of a bit of a correction. Q: Gold’s recovery is surprising because it’s accompanied by dollar strength at least versus emerging market currencies as well as rise in yields, in dollar yields. Does that surprise you or is now gold reacting to a medium-term fear of return of inflation now that growth seems to be in place in Organization of Economic Co-operation and Development (OECD) countries?
A: Gold has seen an interesting move; just in the last couple of hours in fact it has come out of quite a bit of pressure. I think the US dollar has been affected but not as much. The market is focused on stimulus and tapering because with tapering people start to sell gold as a result but it has been quite funny because we have seen exceptional amount of physical buying, we have seen the funds start to turn around in this buying, so I actually feel any weakness will be temporary for gold price and then will find good level and start to track higher purely based on the fact that US yields are starting to reward, have just reached to two year high. So, there are inflationary concerns starting to plague the market. Q: What is your near term and medium-term view of gold? Where does it go now and for the rest of 2013?
A: It is quite interesting. I think the USD 1,375 per ounce-USD 1,380 per ounce is resistance. On the downside USD 1,340 per ounce is support. So, whilst we hold that range, I am looking at this current move to be corrective. If we can get there, a sustain break above USD 1,370 per ounce, which is certainly on the cards then I will say it trade back to USD 1,450 per ounce, maybe a bit higher towards the close of the year, so quite a bullish outlook. I am looking for concerns particularly in the emerging markets and looking for inflationary concerns starting to fade through which will support the market further. Q: In terms of levels for Brent crude what would you be looking at and what would be the near term triggers as well?
A: When you look at Brent obviously, we have to focus on what is happening in Egypt and if anything there we might come close to some resolution. It appears to me that the market is now discounting the concerns in Suez, Suez Canal. So, I wouldn’t be surprised to think that we are going to have a lot of concerns moving through that USD 110 per bbl level and in fact I probably think that will start to come under a bit of pressure.
Let us see exactly what happens with inventories in the US, but I think that crude in my mind is looking rather expensive at these levels. It just feels as if it’s looking heavy and some of those economics are coming through, which are relatively mixed and as a result of that it went too high. So, look for further losses there for Brent and West Texas Intermediate (WTI).