We see gold trapped within a 270 dollar range and believe that support from the physical market and central bank buying should be enough to arrest any attempts on key support at 1,530 USD/oz, says Ole Hansen, Head of Commodity Strategy, Saxo Bank, in TradingFloor.com's Q2 Insights. If this level is broken, it could signal a much deeper correction than the one already witnessed. The current US economic expansion is running at a pace that at this stage does not warrant any early exit from asset purchases, something we believe the market has not yet fully taken into account. The lack of strong political management of the Eurozone debt crisis raises the risk of contagion, which could also provide renewed support.

However, continued focus on US economic data probably holds the near-term key and any softness, as seen recently, could provide gold with the catalyst that has been missing for months. Speculative positioning held  by hedge funds in both gold and silver are near the lowest levels since 2006 and any signs of renewed life in the sector will leave many professional investors underexposed, which should help both metals and silver in particular to perform. We lower our average price target for 2013 from 1,740 USD/oz to 1,640 USD/oz on the back of the weak price action during Q1. We see continued range-bound trading during the coming quarter at about 1,650 USD/oz. As mentioned before, we are acutely aware of the potential downside risk that gold poses because it has become an emotional trade for many investors. Further price weakness below 1,500 USD/oz will increasingly make this a pain trade as it erodes confidence among many weak longs. 

For more on TradingFloor.com's Insights for the second quarter 2013 see: http://www.tradingfloor.com/blogs/quarterly-outlook