Gold to average $1,810/oz in Q3 2012: Barclays

LONDON (Scrap Monster): Barclays Capital has revised up its gold forecasts to $1,810 an ounce for the fourth quarter and an annual average of $1,860 for 2013.

The metal has already risen sharply after the Federal Reserve embarked upon a third found of quantitative easing, but Barclays sees potential for further buying.

“Physically backed gold ETPs (exchange-traded products) have gained momentum to set a fresh record high but speculative positioning, which has risen, is not overextended,” Barclays says.

Open interest, gross long and net non-commercial positions on Comex gold are at their highest since February but 30% below their peak, implying room for investor demand to expand.

The U.S. dollar has weakened since QE3 although this may not endure if the European Central Bank pursues balance-sheet expansion, the bank says.

“Real interest rates remaining negative for longer also bodes well for gold, particularly as concerns over inflation have started to build, given that asset purchases are open ended and focused on labor conditions,” Barclays says.

Meanwhile, continued central-bank buying has offset some weakness that otherwise was seen in the physical market, Barclays concludes.