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June
01
2017

Gold To Move Closer To $1,300 This Week - TD Securities
Anna Golubova

As gold holds near a one-month peak, one bank projects even higher prices for the yellow metal this week — forecasting a move closer to $1,300 level.

Gold is currently being driven largely by dovish Federal Reserve, renewed political uncertainty and weaker U.S. dollar, TD Securities said in a recently published report.

“Given the current political circumstances and emerging uncertainty surrounding US rate hikes and broader monetary and fiscal policy, we believe there could be further room for gold to move higher still,” TD Securities said in its Commodities Weekly note. “The yellow metal may well trend toward a technically determined high near the upper bound of the trading range just under $1,290.”

Gold reached its highest level since May 1 on Friday, trading at $1,269.50 an ounce.

The precious metal picked up steam last week following the release of the FOMC minutes from the May 2-3 meeting, which turned out to be more dovish than anticipated by the market.

“FOMC voting members think it would be prudent to wait for further evidence that the Q1 slowdown was transitory, before continuing with the tightening cycle. This signalled that Chair Yellen seems a bit more worried about the weakness in the US data, which saw expectations of future rate hikes diminish, giving the precious complex a boost,” TD Securities' global head of commodity strategy Bart Melek and the bank's commodity strategist Ryan McKay said in the report.

The yellow metal’s move up was further supported by new geopolitical tensions triggered by U.S. and Japan announcing firmer sanctions against North Korea after a series of ballistic missile tests conducted by the secluded nation.

“Political uncertainty has traditionally helped gold and the precious metals complex, particularly when this could reduce the speed at which the Fed increases interest rates,” TD analysts noted.

The typical thinking that geopolitical events don’t have a lasting impact on gold’s price moves cannot be applied here, according to the report. “It is likely that this time around it will have a material and lasting influence on the economy, equity market outlook and central bank monetary policy action. As the market starts to increasingly question the Fed's determination to pursue a robust monetary policy tightening into 2018, gold should benefit further.”

One of the main fears the market has with the Trump administration is that the highly anticipated fiscal agenda “has no chance of passing anytime soon,” as the president continues to battle against investigations.

“This suggests a flattish yield curve, low interest rates, a moderating USD and an equity market which could be subject to a correction, all very positive developments for the yellow metal,” the report specified. “Safe-haven buying may accelerate, driving specs into derivatives and other investors into ETFs.”

Data dependency

Whether gold will actually reach close to $1,300 level will depend on various key data releases scheduled for this week, including U.S. personal spending and income, the Conference Board consumer confidence, the ISM manufacturing and non-manufacturing data, and most importantly the non-farm payrolls release.

In regards to the latter, a figure below 150,000 will be “very positive catalyst for gold”, while anything over 200,000 will be “negative,” Melek and McKay wrote.

At the time of publication, spot gold on Kitco.com held steady around $1,266 and June Comex gold was last seen at $1,266.30.

Anna Golubova is the Social Media Reporter for Kitco News. As a journalist with five years of experience, she has covered a range of topics, focusing on economy and politics. Anna began to exclusively cover economic news in 2013, attending media lockups at the Bank of Canada and Statistics Canada to report on a range of key macro economic events, including interest rate announcements, GDP, unemployment, and retail. She holds a Master of Arts in International Relations from NPSIA, Carleton and a Bachelor's degree in Political Science and History from the University of Ottawa.

www.kitco.com