Await fresh signal.

Potential short-term higher low in place.
• Gold has failed to move above its resistance area near 1376 (see also the declining trendline and the low of the broken rising channel). The potential higher low at 1306 (24/09/2013 low) suggests weakening short-term selling pressures. Another support stands at 1292. An initial resistance is given by the declining trendline (around 1359).
• The medium-term technical configuration remains biased to the downside given the break of the rising channel and the longer term bearish trend. Key supports are at 1268 and 1181, while a key resistance stands at 1434.

Tactically, we see support for gold on approach of $1,300 — largely from physical de-mand. However, we expect rallies to fade as new long positions from the investment community remain largely absent — something that is needed for gold to push higher. Resistance is at $1,348 — a level beyond which we expect physical buying support to fade fast. Base metals are all higher today, driven largely by short-covering on the Shanghai futures exchange. Gold has moved above the $1,330 resistance level on what we see as generally strong physical demand. Next resistance is at $1,348. Gold is moving higher as US government bond yields are moving lower, with the 10-year bond yield now at 2.62%, down from 2.84% a week ago. Gold support is at $1,309 and $1,300. Re-sistance is at $1,343 and $1,348. Silver support is at $21.34 and $20.99, resis-tance is at $22.03 and $22.36.

Focus — Gold physical demand marginally up
In the week during the run-up to the Fed FOMC meeting, we indicated that physical gold demand from Asia had improved only marginally despite the gold price moving towards the $1,300. However, after the FOMC meeting, physical demand started to improve at a much better rate, especially with gold below $1,330 the past few days. The improvement in demand is clear from our Gold Physical Flow Index (GPFI) . However, what remains also clear is that demand remains well below levels seen in June and July.
Overall, however, YTD demand remains exceptionally strong when comparing our GPFI YTD in 2013 with 2012 and 2011 .The physical demand from Asia does seem to be able to absorb current ETF liquidation, which has slowed considerably since the start of August, quite well. That said, we continue to doubt that physical demand would be able to push the gold price on a sustainable basis much higher — towards the $1,400 level seen in August. The main reason would be that physical demand is becoming quite sensitive to the price levels. For example, we have seen demand fall away quite quickly back in August with gold close to $1,400 — and we would expect the same to happen should gold move back there again. As a result, we currently read the gold physical demand as providing good support around the $1,300 level, but this support is likely to decline the further we move away from $1,300.We maintain that an aspect of demand that may drive the gold price higher, and attract more longs, would be seasonal demand.
In the past, we have seen an improvement in demand starting in September. However, buying demand from India specifically so has been lacklustre running into this high seasonal demand period.
We subscribed this to the weak Indian rupee and higher import duties.
Tactically, we see support for gold on approach of $1,300 — largely from physical demand. However, we expect rallies to fade as new long positions from the investment community remain largely absent — something that is needed for gold to push higher. Resistance is at $1,348 — a level beyond which we expect physical buying support to fade fast.

Source