UNITED STATES July 14 2014 10:07 AM
NEW YORK (Scrap Register): While much of the past quarter has been dominated by the lack of a cross-complex theme for precious metals, recently Barclays has seen higher prices across the complex, most of which in our view look toppy.
Barclays would suggest selling rallies from these levels; given that current gold and silver prices represent healthy shorting opportunities in their view, with even palladium, the darling of the complex so far this year, beginning to look a bit stretched.
Earlier last week, a weaker dollar may have contributed to some of gold’s strength, as has recent weakness in equities. That said, the big news was both on the macro and the physical side of the market. Last week marked the release of the June FOMC minutes.
In Barclays US economists’ view, the committee is confident enough in the economic outlook to signal the end of the purchase program more clearly (tapering to conclude in October), but not so much so as to provide firm guidance on the expected timing of any rate hike cycle. The committee continues to expect only modest wage growth and for inflation to remain at or below its 2% target over the forecast horizon.
Barclays maintains the view that convergence toward the Fed’s targets will be faster than the committee expects and look for the first increase in interest rates in June 2015. The committee is gradually coming to a consensus about the exit strategy and there will likely be more concrete guidance by the September FOMC meeting and press conference, in their view.
Gold will closely watch for any news around the timing of a rate hike, which if earlier than expected, will likely introduce downside risks to the precious metal. Barclays has marked to market their annual price forecasts with Q2 14 actual prices, bringing our 2014 annual price forecasts for gold and silver to $1260/oz and $19.8/oz respectively.