Support for gold at $1700; may not move up soon: Barratt

Gold has seen some pressure of late and has forced the metal to trade lower. Jonathan Barratt of BarrattsBulletin.com feels the traditional cues should actually support gold prices and eventually, it will go up. A weak dollar, increased demand for ETFs along with a growing demand for gold due to the wedding season is likely to push gold higher, opined Barratt.

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"Moving forward USD 1,700 per ounce is traditionally a very good support," added Barratt. However, he is not very optimistic about gold in 2013 and believes gold will probably not touch the USD 2000 per ounce mark. But, the weakness can be utilised to buy gold, he said. Here is the edited transcript of the interview on CNBC-TV18. Q: Was it just a technical drop that we saw in gold or is it more pressure coming in for gold going forward?
A: It is very hard to look at the prices of gold and naturally to see and understand why it has come under quite a lot of technical selling. When you look at the traditional lines of rhetoric that supports the price of gold, it should be going up.
We have a weakening US dollar, we have increased demand from ETF and thirdly, there is more physical demand due to the wedding season. When you look at the overall picture then gold should be steady to go higher. However, it is not.
It is under pressure and what we do feel is that there is technically a large seller in the market which is basically on the top and as a result of those forces it continues to trade lower. Q: According to you why has gold not been able to break that USD 1,750 per ounce barrier? The talk among technical traders is that because it couldn’t break USD 1,750 per ounce the frustration led to the break below USD 1,700 per ounce. But what is your sense. What is giving that resistance to that USD 1,750 per ounce mark?
A: That has been quite interesting, USD 1,700-1,800 per ounce was a very key level for a lot of this,. A lot of people went long through that USD 1,730 per ounce but, it basically turned and what we are finding is that when we look at the reasons for people selling, it is just a frustration that it hasn’t been moving on.
 
I guess a lot of hot money is responsible for these gyrations. I guess moving forward USD 1,700 per ounce is traditionally a very good support. I would like to say it will hold but, there is so much hot money in the market that once they start losing it they will begin to sell. Q: What is your view of gold in 2013 because 2012 has not been a blazing year for gold? It couldn’t scale the highs that it saw in the earlier part of the year but what is 2013 looking like. Does it look like Greece looks less of a problem now and the fiscal cliff will be behind us, the Chinese soft landing is perhaps now getting more and more accepted. So is there a feeling that money will chase equities rather than gold in 2013?
A: I think that is certainly a worry that we have to focus on. All year we have been looking for gold to breach that USD 1,800 per ounce and there have been many calls for it to trade to USD 2000 per ounce and above. I think that gold as an asset class in equity market via the ETF will continue to shine and will still gets significant demand from that sector also.
It will also have a significant demand from the central bank sector as well.
I feel that the weakness still looks as an opportunity to buy but, there is nothing on the horizon that says we are going to USD 2,000 per ounce in 2013, not unless we can get some inflationary rhetoric coming to the market. I think anything sub USD 1,700 per ounce looks well supported but, I do not think it is moving too much higher in 2013. Q: It was the other precious metals which fell yesterday as well. We had silver which was down around 2-2.5 percent, we had palladium too which fell. If you had to give your bets in terms of further upmoves within the precious metal space which one would you be most bullish on going into 2013 despite the fact that you do not expect much in gold?
A: I tend to lean towards silver. Silver has its industrial applications as well as it is a precious metal. So when I look at the market I tend to lean towards silver. There is still a considerable demand and if we start to move out of this slowness in growth around the world and we start to see some positive economic performances starting to come particularly out of China, I can be quite well supportive.