Gold languishes as safe haven buying remains in the wings

Gold is trading below the levels reached after the US Federal Reserve decision to hold off on tapering QE, despite a number of catalysts that should have prompted safe haven buying. Gold prices fell below the psychologically important US$1,300/oz mark on October 2, after having risen above US$1,350/oz after the US Federal Reserve decision in mid-September. Catalysts such as delayed tapering, the US government shutdown and political uncertainty in Italy have failed to ignite safe haven buying. Gold closed Friday at US$1,309.75/oz on the London Bullion Market, down from the previous day's US$1,316/oz. Lack of physical demand while the Chinese are on holiday has also hit the price. There are short term upside risks in the coming weeks, according to Barclays Capital. "Signs of improvement in demand, delayed tapering and our FX strategists' near-term view for the dollar to remain weak pose upside risks to gold prices," Barclays said in a note. The upcoming debt ceiling debate has scope to add to these upside risks. "Our economists maintain the view the debt ceiling will be raised by 17 October," the bank said, although they acknowledge a much larger risk to the market if the debt ceiling is not raised. Earlier this week, delegates and attendees at the London Bullion Market Association's annual gold conference in Rome forecast a price rebound to US$1,405/oz by November 2014. However, gold market sentiment remains challenging, according to Philip Newman, director of Metals Focus. "The market is unconvinced that there are a lot of legs for gold to move higher," Newman said in an interview with Kitco News at the conference. After gold's fall from grace in April, the market has been characterized by volatility and uncertainty, according to Newman, with institutional investors unconvinced about the path for gold. "Gold is still set to lose critical legs of support and will likely face renewed pressure in 2014," Barclays said. The bank is forecasting an average yellow metal price of US$1,425/oz this year and US$1,310/oz in 2014. Silver closed Friday at US$21.65/oz, up from US$21.57/oz in the previous trading session.