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Gold Has 'Staying Power' As $1,380 Is Still Within Reach - TD Securities

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Gold Has A 'Staying Power' And $1,380 Is Within Reach — TD Securities

(Kitco News) - The recent correction in equities showed that “gold has staying power,” said analysts at TD Securities, adding that the $1,380-an-ounce target is still within reach this year.

Gold’s losses during the past two weeks have been limited and a recovery could be just around the corner, TD Securities’ head of commodity strategy Bart Melek and commodity strategists Ryan McKay and Daniel Ghali wrote in a note on Monday.

“After dropping from the recent high of $1,366.66/oz to just above our recent target of $1,320/oz, gold prices are not expected to deteriorate much more,” analysts said. “Underlying demand will likely remain firm as investors keep gold positions to diversify from equities, which are now known to be vulnerable to sharp corrections, with specs having room to grow.”

Some of the factors supporting higher gold prices will likely be U.S. dollar strength reversal and a more dovish Federal Reserve, according to the analysts.

“It would not be surprising to see the Fed and other central banks walk back some of the recent hawkishness they have been projecting,” they wrote.

TD Securities still sees the upper bound of around $1,380 as within the realm of possibility for 2018, especially if the Fed is willing “to err on the side of growth.”

Gold finished in the negative territory on Friday for the second week in a row, largely in reaction to stronger U.S. dollar index, a correction in equities and more aggressive rate hike perceptions.

“Although gold mostly held its ground amid last week's market turmoil, prices eased as the yellow metal was likely sold to cover margins amid equity market turmoil,” analysts at TD Securities said.

Live 24 hours gold chart [Kitco Inc.]

This week, investors will be focused on the U.S. inflation data and speculation around the Fed’s possible reaction to the figures.

“After some evidence of wage inflation, CPI data will be watched with a keen eye, and a strong print could further jolt Fed expectations, prompting a rise in yields and adding to the equity market's vulnerability,” Melek, McKay and Ghali wrote. “On the other hand, disappointing data could provide a slight relief rally, although this would be unlikely to shift the market's expectations of higher inflation later this year.”

Analysts project a “whippy week” for the yellow metal as risk-on/risk-off appetites could pull prices in different directions.

Early Tuesday, gold was flat in Asian trading, with spot gold on last at $1,322.70, up 0.02% on the day.

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