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There Is More Upside For Gold, Metal To Test $1,360 - TD Securities

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There Is More Upside For Gold, Metal To Test $1,360 — TD Securities

(Kitco News) - After Monday’s rally, gold prices still have more upside and could soon be testing $1,360 an ounce, TD Securities said in a report.

“Flat curve, waning yields and equity angst suggest upside remains for gold,” the bank’s head of commodity strategy Bart Melek wrote on Monday.

Gold prices saw a significant jump on Monday amid a major equities’ selloff, rising from below $1,330 to near $1,345. Comex June gold futures were last trading at $1,344.80 an ounce, down 0.16% on the day, while spot gold on was last seen at $1,339.70, down 0.10 on the day.

“Markets [were] respond[ing] to sliding US yields, with 2-year Treasuries dropping to just 2.25 percent and 10-year yields falling to 2.73 percent, as well as a sharp selloff in equity markets, higher volatility and a rise in geopolitical risk,” Melek explained.

“This, along with a very flat yield curve and modest long exposure suggests that the yellow metal has some upside as it has been bucking that well established relationship over the last little while. It would not be surprising to see prices test recent highs near $1,360/oz,” he added.

But, TD Securities sees gold prices sustainably breaking the $1,360 barrier only in the third quarter of 2019, when prices are expected to climb to $1,375, according to the report.

Risk sentiment is one of the key triggers precious metals traders are watching this week, with trade talk being of high priority.

“Trade will be in focus especially since China has launched its first counterattack against the U.S. by announcing tariffs on 128 American goods, ranging from frozen pork to wine and nuts,” Melek said. “The Middle Kingdom's recent retaliation against U.S. steel and aluminum tariffs, although largely expected, has again raised concerns over the prospects of a tit-for-tat trade war. And, considering that President Trump is expected to unveil his technology-targeted tariff list this week, we could see risk sentiment further deteriorate before it recovers.”

On top of that, traders are keeping an eye on this Friday’s U.S. non-farm payroll report, which is projected to show an additional 195,000 positions added in March.

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