"Gold is now approaching overhead resistance of USD 1,600/oz. Downside risks will mount if prices fail to break higher. Investors still seem to be cautious on bidding gold higher. The latest CFTC report showed another 1.7% w/w decline in US gold futures as of 22 May, although the pace of decline slowed. Physical ETF holdings of gold also fell by 0.4% w/w. However, the latest figures from the IMF, highlighted below, show that central banks are still buying gold."
We see downside risks for the short term but remain long-term bulls.
Near-term resistance is around USD 1,600/oz. Next support should be seen around USD 1,520-1,530/oz.
We are bullish on the USD in the short term and see EUR-USD at 1.22 by end-Q2-2012.
Net long positions in US gold futures fell another 1.7% w/w as of 22 May, but the pace of decline has slowed."
Standard Chartered Research.