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TDS takes tactical short position in gold after hawkish Fed meeting

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(Kitco News) - Hawkish comments from Federal Reserve Chair Jerome Powell after the U.S. central bank said that it could raise interest rates "soon" have helped push gold prices below $1,800 an ounce.

According to commodity analysts at TD Securities, gold has room to fall further.

Thursday, the Canadian bank announced a tactical short position on gold for the next four to six weeks. In the note, the commodity analysts said that they shorted gold at $1,821 and are looking for prices to fall to $1,740 an ounce.

After Wednesday's Federal Reserve monetary policy meeting, markets started pricing in the potential for five rate hikes. At the same time, markets see the potential for liftoff of the new tightening cycle in March.

In the press conference following the Federal Reserve's decision Powell said there was plenty of room to raise rates without hurting the jobs market.

Gold price down but not out as Fed looks to raise interest rates soon

"There's quite a bit of room to raise interests without threatening the labor market. This is by so many measures a historically tight labor market — record levels of job openings, quits, wages are moving up at the highest pace they have in decades," Powell said.

TDS said that the Fed rates hikes have largely been priced in by the gold market; however, the Federal Reserve's plan to reduce its balance sheet before the end of the year remains a wild card.

"Markets have priced-in a March hike for some time, which takes the sting out of the hiking signals, but evidence that quantitative tightening might be more impactful for asset prices suggests that this axis will still be relevant," the analysts said. "With little additional information provided about the pace of quantitative tightening, the complex should continue to struggle to attract capital in the face of a hawkish Fed."

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