Gold in consolidating phase; see support at $1800: Barratt

Jonathan Barratt, CEO of barrattsbulletin.com believes the concerns in the Middle East will give support to crude oil prices. According to him, gold is going through a consolidation phase currently and the key level for the golden metal would be USD 1800 mark. He further adds, if the American election results are in favour of Obama, it will lead to a gold rally. Besides, USD 8000 would be a psychological support level for copper, said Barratt.

Here is the edited transcript of the interview on CNBC-TV18. Q: Crude has fallen partly on growth concerns and partly because of the restoration of a pipeline. Do you see more dips?
A: When you look at the supply issue there is a little bit more supply than it is actually demanded at the moment. That comes through those weekly numbers which we get from the Energy Information Administration (EIA). When it comes down to the commerce side, I would probably expect prices to be a bit lower.
They were under significant pressures due to expiry of the November contract that came off the board last night. But we have seen a little bit of a rebound. I would like to think that is a little bit of a low. There are still concerns in the Middle East at the moment which I think will help prices stabilize around this level. When I look at it, I still think there are concerns there. That should suggest that crude should be quite stable, if not start to trend a little bit higher. Q: Would that be your view till the end of 2012?
A: I think when we look at the price action over the last couple of months, we are pretty much stuck in a range. When I look towards the end of the year, I can actually see that range remaining in the next couple of months. We are at the lower end of the range, but we have also got to be mindful of what is happening in the Middle East because that to me is a major concern.
When we look at the supply and demand side from general economics perspective, you can see that there are still major issues in the market and of course we have got the US election, the budgetary concerns and the fiscal cliff around the corner. Whilst we have not got any clear direction on what is happening, you will probably find that the market will perceive there is still softness in the economy. As a result of that prices should remain relatively stable.
_PAGEBREAK_ Q: What about precious metals? We have seen silver weaken a bit, but gold is pretty much ranged between that USD 1,700-1,750 level. How are you placed on precious metals?
A: When you look at gold and silver together USD 35.20 is a very tough resistance on silver. On gold USD 1,800 is the key. It really needs to get through that area if it is going to trade higher. I actually feel we are going through a consolidation phase for gold at the moment.
When you look at the price action that we have noted over the last couple of trading sessions, we are actually getting some very good physical demand. I think it is that physical demand around USD 1,720 which suggests to me that we still have a lot of interest on any dip.
Although I still feel we are in a consolidation phase, I actually feel these levels will hold. But, we really need some real action or some positive news to get it through that USD 1,800 level, which of course is at significant resistance. Q: What exactly are the odds according to you that gold will cross USD 1,800? How would you see it trade in the next six months?
A: I think USD 1,800 will be taken out. One of the key concerns that we have is with the US presidential election. If Obama loses the election, we will get a slightly different fold of management in the economies. To me that is one of the big keys in trying to get that decision as to whether or not gold will break through that USD 1,800 level or not.
At the moment we can see some inflationary pressures obviously from the Obama administration in terms of their fiscal and monetary policies. We can see that is continuing to extend itself. If it does, I think gold will get through USD 1,800 level. If we get a Romney government then that is more conservative and as a result of that we will not be a spin thrift as we first thought.
If we do get that then you can probably see gold coming under some more pressure because there is not that impetus to actually print more money. If that is the scenario then gold will come under a little bit pressure. I really think it is up to what is going to happen in the US presidential election.
As to whether or not we will get through that USD 1,800 level, my guess at the moment is that it has got to do a lot of work. I think if you look six months down the track and if you have an Obama administration, USD 1,800 will be cracked. If you have Romney then perhaps it will not. Q: Copper has risen from six week lows, but can it really rise much? What is your range for copper in 2012?
A: I think when you look at it, USD 8000 is a psychological support for it. A break through USD 8000 sees it quite quickly down to USD 7700. If it holds through these levels then we go back up to USD 8200 and perhaps a little bit higher than that.
When I look at the three month forecast at the moment, I can probably suggest that the prices will remain weak, particularly on what we see China doing in terms of their economic performance and so to gauge the slowdown. When I look at the housing sector in the States, I think that is starting to pick up and that should provide some support.
I actually like copper trading longer. When I look at the 3-6 months forecast, I actually think that copper will find a low and start to trend higher. Q: Finally, a word on the soft commodities. What are you putting your money on? Are you bearish on soft commodities?
A: I am actually bullish. I am actually looking at rice for the moment. I think we have concerns on the weather front in terms of rain coming. At the moment, I think that is a bit of a concern that should underpin prices. Also because we have got such adverse weather conditions around the world, you will probably find more of a pinch and I am actually looking for the rice price to pick up from these levels and can see it actually trending back to USD 15.
When I look at some of the other soft commodities, I like wheat as well because I certainly see that we are coming into the sowing season in the States and we do not have enough sub-soil moisture to keep that crop going. As a result of that when I look at the soft commodities wheat and rice are my picks.

More to come.