Make Kitco Your Homepage

TD Securities shorting gold at $1,800 as market fails to catch a bid as real yields drop

Kitco News

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) - Gold's recent lackluster performance and its inability to hold gains much above $1,800 an ounce are starting to attract some bears to the marketplace.

Friday, commodity analysts at TD Securities said in a note to clients that they have initiated a tactical short position in gold and are looking for prices to fall to $1,730 an ounce.

"Gold prices are struggling to firm despite crumbling real rates. The yellow metal's persistent weakness against real yields points to a vulnerable microstructure, while at the same time, gold's inability to rally despite the risk-off trading environment highlights that speculative flows remain particularly weak," said Daniel Ghali, commodity strategist at TD Securities and the author of the note.

"Global macro growth angst catalyzed a repricing in expectations for Fed hikes, but gold still wasn't able to catch a bid, reinforcing the potential for a deeper pullback," Ghali added.

The bearish bet comes after the 10-year yield fell to its lowest point since early February, briefly dropping to 1.12% at the start of the week. Meanwhile, real interest rates dropped to -1.1%, a level not seen since the start of the year.

Despite lower bond yields, gold prices have struggled to find any bullish momentum. Friday, prices briefly dropped to a one-month low below $1,800 an ounce. Some analysts have noted that gold is being held back by resilient strength in the U.S. dollar.

TD Securities said that near-term the pain threshold for gold investors is around $1,780. A push below this could trigger a wave of selling, particularly from investors in gold-backed ETFs.

TD is looking to hold the trade for the next month with a stop loss at $1,850 an ounce.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.