Gold Correction 'Not In The Cards', Metal To Test $1,357 - TD Securities
“Softening USD, inflation and geopolitical risks drive gold into $1,340s territory, lift precious complex— correction in gold not in the cards even as Fed tightens,” said Bart Melek, head of commodity strategy at TD Securities.
Melek is maintaining a bullish view on gold in early-2018. His outlook comes as the yellow metal paused its rally on Tuesday, with February Comex gold last at $1,334.70, down 0.01% on the day.
“Investors seem ready to take larger and larger long gold positions, even as equity markets are surging and nominal rates rise,” he said.
His short-term view is that gold could hit the $1,357 an ounce level and then possibly make a move to $1,375. The second option would require the Fed to be perceived by markets as dovish when signaling further rate hikes.
“The Fed's December dovish rate hike, US tax reform which is seen as somewhat neutral for the economy and a weak USD all helped to lift gold to another high this year,” Melek noted. “Real yields, a key driver for gold, remain range-bound— while higher US nominal yields are being offset by a still flattish yield curve.”
TD Securities added that there are reasons to believe that the Fed might be “measured” in a way it proceeds to tighten its monetary policy due to lack of evidence when it comes to wage pressures in the U.S. job market.