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Time to take profits in gold: TD Securities points to $1,489 level

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Time to take profits in gold: TD Securities points to $1,489 level

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(Kitco News) It might be time to retreat and take some profits off the table, said TD Securities in its latest model portfolio update.

TD Securities is still bullish on gold, seeing prices hit the $1,600 level next year. But, the bank is advising to take some profits in the short-term as the Federal Reserve’s October meeting approaches.

"We previously entered a long gold trade at $1298/oz, as we expected deteriorating global growth to prompt investors to call the end of the U.S. tightening cycle. The evolution of this trade has seen us adjusting the target higher in anticipation of Fed cuts and sharply lower real rates once before,” strategists at TD Securities wrote on Monday.

In its latest update, TD Securities pointed to $1,489.40 as a good level to take some profits in long gold trades.

“With the October Fed meeting largely priced-in, we opt to take a tactical retreat to preserve our profits as the balance of risks shifts out of our favor. We take profits at $1,489.40/oz,” the strategists said.

The reason for the downside risk to prices is the Fed’s attitude towards more cuts in 2020, according to the bank. And until Fed Chair Jerome Powell’s stance becomes clearer, prices might struggle to move much higher.

“While we still see gold moving above $1,600/oz next year as global central banks cut further amid a global economic slowdown, the Fed's communiqué on the potential for additional rate cuts are not as certain. This prompts us to make a tactical retreat from our long gold position in our model portfolio,” the strategists said. “The risk that prices will break lower is growing, with current prices challenging the upward trend which formed this summer.”

Additional risk appetite in the marketplace is also putting short-term pressure on the yellow metal, especially progress in the U.S.-China trade talks.

“Risk appetite may firm due to a possible U.S.-China trade deal and as the belief that monetary easing will help the economy avoid a steep downturn grows, which may reduce interest in the yellow metal for now,” the strategists added.

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