Editor's Note: Correction: TDS sees gold prices hitting $2,700 an ounce by Q1 2025
(Kitco News) - The gold market has seen significant profit-taking after hitting all-time highs above $2,480 an ounce at the start of the week. While prices may continue to move lower, one bank is warning investors against betting against the precious metal.
As gold prices were falling on Friday, analysts at TD Securities noted that positioning risks were asymmetrically skewed to the downside for the first time in months.
“Today's rout has likely been triggered by a rise in yields across the curve, a firmer greenback, and a slowdown in seasonal demand for physical gold,” said Bart Melek, Head of Commodity Strategy at TD Securities, in his latest research note. “The concern is that specs may not keep up their buying momentum and may also not continue growing ETF positions. As the more fundamentalist traders eased up on buying, the systematic funds followed suit, adding to the selling pressure.”
Melek added that there are indications the selling pressure could continue into next week, as gold prices look to end Friday at a critical support level. August gold futures last traded at $2,399.10 an ounce, down more than 2% on the day and roughly 0.5% from last week.
Although downside risks for gold are growing in the near term, Melek said that this is no time to be bearish on the precious metal.
“Technicals, U.S. politics, monetary policy, and geopolitics all suggest that a further sustained sharp selloff is not in the cards,” he said.
Melek added that below $2,400, he is watching support at $2,389 an ounce.
Gold’s rally to all-time highs this week came as investors focused on growing expectations that former President Donald Trump could win the November presidential election. At the same time, markets have all but completely priced in a rate cut in September.
Melek said that these two factors will continue to support gold’s long-term uptrend, even as price volatility increases.
He noted that the political rhetoric is just starting to heat up, making the geopolitical landscape messier.
At the same time, slowing economic activity will support expectations that the Federal Reserve will start a new easing cycle after the summer.
“Once the market settles and we see confirmation that the economy is slowing sufficiently to justify aggressive Fed easing, it is likely that gold will test new record highs again. Higher levels are in the cards thereafter, as institutional investors increase their appetite for ETFs, bullion, and futures returns,” he said. “As such, we continue to see gold reach a new quarterly record average of $2,475 and a trading high of $2,700+.”
