Gold, crude to trade higher from current levels: Barratt

Jonathan Barratt of BarrattsBulletin.com tells CNBC-TV18 that both Brent crude and gold will trade higher from current levels.

Even though both metals were stuck in a trading range, Barratt expects to breakout and move higher. “Brent can stabilise around USD 114-116, and the trade higher once we get over a few hurdles,” he said, adding that increased consumption will help push gold past USD 1660 per ounce. On the precious metal, his eyes are set on USD 1740 per ounce if it does break the closer support level of USD 1665. Below is an edited transcript of his interview with Latha Venkatesh and Ekta Batra. Also watch the accompanying video. Q: What exactly do you think is a sustainable level for Brent crude in particular in 2012? A: Crude is being very stable off late, there is no doubt about it. We are under a little bit of pressure, but I actually feel that we can stabilize pretty much around about this lower end of USD 114-116 for Brent. I actually think that Brent will start to trade higher once we get over few hurdles over the next couple of weeks because I can see that that fever of demand back in the market and I can see that oil prices will start to move higher. Q: At least for the last eight weeks or so, crude has been showing lower lows and lower highs. How much can the highs be thereafter because we are getting pretty dismal manufacturing data from practically around the world? A: When I look at what's happening in the global economy, I can see that we have got problems in Europe. But Europe accounts for only a certain amount of consumption of oil. When I look at America, China and India, where we see most of the consumption, I feel that those economies seem to be starting to get out of the problems we have had. When I look at inventories, they are rising but product demand is also increasing. So when I combine the two, I see that there will be more demand for crude in those economies which are emerging and those economies which are rebuilding. So I am actually more bullish on crude than most people out there for those reasons that the economies of some of those countries are actually growing rather than falling. Q: Gold has been pretty much sticking to the USD 1660 per ounce mark. Where does it break this range, on the upside or on the downside, and when do you think this consolidation period might end? A: It ends very soon because it has been trading in this range USD 1630-1665 for sometime. When I look at the physical side of the market, we know that demand in India is off but we also know that demand in China is up. So I actually feel that gold, given that we’ll see increased consumption over time, will start to trade higher. I’m concerned about the parity between what the US dollar does and what gold does, because if people move to the US dollar safe haven seeing what's happening in the euro at the moment, that will dampen the price for gold. But I see gold still as a good buy, I still hold gold and I look forward to continue to trade higher and hopefully break that USD 1665 per ounce mark pretty soon. Q: There were expectations that it could rise to USD 2000 per ounce at one point in time. What are the levels that you would be working on the upside? A: I have still got that USD 2000 level at the moment. That was one of the predictions we had for this year and when we get into closer half the year it’s bit of a concern. On USD 1665, the next level is USD 1740 and then we can see it trade up to that USD 1800. I really have to see that we are getting the right dynamics and that dynamics will come from an inflationary perspective and more people looking at exchange traded products. So if we get that inflationary burst then I’ll see that demand will follow through. So let’s look at USD 1665 break than USD 1740. Q: The other mover which we saw in terms of the commodity space in 2012 was copper. Its given returns of 10% already. What are the levels that you are seeing on copper and how much of an up move do you expect on it? A: Copper has been a great play. When you look at copper and the other base metals, it’s one that has held true to its value over the last six months. When I look at copper, I can see USD 9000 per tonne. The main reason for that is purely a question of supply of the metal. While we see some of these emerging economies start to pick up, there will be more demand for. Another key concern we have is the grades and the fact that the ore grades are lower is actually decreasing the amount of supply. So when I look at current prices, dips should be well supported, but look for a lot more upside.