See weak dollar; buy gold below 1360 USD/oz: Fat Prophet

David Lennox of Fat Prophets expects the US Federal Reserve to continue its quantitative easing (QE) programme. According to him, the American private sector is not strong enough yet to cope with weak macro data and soaring interest rates.

Thus, he expects the US dollar to remain weak in the near-term, which will be favourable for commodities as an asset class. Speaking to CNBC-TV18 he said, one could look at buying gold below 1360 per ounce. Also read: Weak US economic data can support gold prices: Emkay

Below is the edited transcript of Lennox's interview to CNBC-TV18. Q: What are the kind of highs you think crude can touch given this shifting views on whether the Fed will pullback money or not pullback money. Yesterday’s weak data gave the impression that the Fed will continue with its dollar printing. What is the sense you are getting over the next quarter or so, the highs and the lows that crude can touch? A: We certainly think that the markets are now concentrating on every single bit of data that is coming out of the US. They are now trying to second guess whether or not that means that the Fed will continue with its quantitative easing (QE). We believe they will actually continue with their QE programme. At this stage, we think that the US private sector is probably not in any condition to actually cope with either the shrinking US government sector or the rising interest rates. So, from that point of view, we think that the US dollar is probably going to be weak in the near-term and that is going to be very good for commodities. Q: We see intermittent dips in gold, but it does not seem to fall too much below the USD 1,340-1,350 per ounce level and every time it goes a bit lower you are seeing some buying interest coming through. What is the near-term outlook on gold? Do you see a bottom for gold at levels of USD 1,350 per ounce thereabout? A: Gold is now trading just over USD 1,400 per ounce. That is probably the floor that we will see for sometime as we start to see gold repair from the recent price fall. Those visits down into the USD 1,360 per ounce region we think is the downward spikes that are opening up opportunities for buyers to come in and drive the prospect fairly quickly. However, again it is really going to be dependent on where the US dollar is going to go over the next few weeks and that will really direct the price of gold going forward. Q: For the entire range of soft commodities – grains, corn, what is the view for the next six months? Do you think that there is some kind of softness in all the soft commodities for 2013 itself? A lot of people are calling for lower food inflation on the basis of that? A: It has been really quite difficult to come to grip with pricing for a lot of the softer commodities, especially the food commodities. This is because we are seeing significant changes globally in some climates. In some regions where particular items of commodity are grown or produced, these changes unfortunately have not been beneficial. That is putting pressure on a lot of the softer commodity prices to actually keep them higher. That has happened with corn, cocoa. It is really becoming more a matter of looking at meteorology charts rather than demand and supply equations just to see how the weather is impacting on those types of commodities. Q: What is the range that you see on Brent? You spoke about a floor for gold price, closer to levels of USD 1400 per ounce or thereabout. On Brent, what is your near-term range? A: We have held pretty tightly to our 2013 view for Brent and that is between about USD 92 - USD 120 per barrel. We have probably not seen the top-end of the price already occur for 2013 and going forward, perhaps there is a little more risk in the downside, but again, not significantly so. There are enough factors in terms of uncertainty, in what is happening around the producing areas of the Middle East that is just keeping the prices from probably slipping below our floor price of USD 92 per barrel. Q: If you do track iron ore and coking coal, how do you see the range over the next quarter or for the remaining part of 2013? A: We are looking for iron ore to probably stabilise at about this USD 109-110 a tonne. Coking coal is a little more difficult to come to grip with because the supply that was going to perhaps come on stream will now be held back because we have seen a significant drop in the pricing. So, going forward the risk probably for both is perhaps just a little bit softer, but not significantly so. So, we would suggest perhaps flat for the next quarter for both of them.