(Kitco News) - The Federal Reserve’s monetary policy shift – signaling impending rate cuts even as inflation remains elevated – has sparked renewed interest in gold. However, the precious metal’s breakout rally is also attracting some profit-taking.
Over the past six sessions, gold prices have surged by roughly $200 an ounce and are now trading above $3,500 an ounce. This breakout follows four months of consolidation within a $200 range around $3,300 an ounce.
Although gold remains in a bullish uptrend, commodity analysts at TD Securities announced Wednesday that they were closing their tactical long-gold position and booking profits of more than $3 million.
TDS entered its bullish trade in June, viewing the precious metal as a “low-risk hedge against geopolitical uncertainty.”
The Canadian bank initiated its position at $3,345 an ounce, anticipating that eventual rate cuts—against a backdrop of growing stagflationary fears—would drive gold prices higher. TDS had set an initial price target of $3,635 an ounce.
Although gold has yet to reach that target, the analysts said they are taking profits due to imminent headline risks. The bank also noted that market volatility surrounding global trade issues has eased and that the long side is once again starting to look crowded, potentially limiting near-term upside.
“Gold remains #overbought but #under-owned, but additional macro fund participation will ultimately diminish the asymmetry in the positioning profile,” the analysts said.
Still, the commodity analysts do not expect gold’s bull market to end anytime soon, as they continue to foresee further weakness in the U.S. dollar.
“The USD is (partly) losing its store-of-value function. This is the most compelling megatheme underscoring global markets. In turn, we remain strategically bullish gold,” the analysts said. “For as long as this megatheme persists, we will look to re-engage into upsides.”
