TDS sees Gold building upon strong first-quarter gains

UNITED STATES April 12 2016 11:09 PM

NEW YORK (Scrap Register): TD Securities sees gold continuing to build on the strong gains from the first quarter. A weaker U.S. dollar, dovish Federal Open Market Committee, equity-market volatility and growing concerns about a potential U.K. exit from the European Union (Brexit) have gotten investors interested in the yellow metal again, TDS added.

“Reduced opportunity cost of holding gold and a limited pool of assets investors/managers have available to hedge against Brexit-related volatility would suggest that prices may still test recent highs near $1,285/oz if not $1,307/oz as the quarter unfolds,” said analysts at TDS. 

Exchange-traded-fund gold buying, which has jumped some 21% so far this year, could be an additional factor helping gold as the U.K. exit vote approaches, said TDS. 

Further, the risk of moving even deeper into negative-rates territory by the Bank of Japan and European Central Bank, in order to fight disinflation and the rise of their currencies, could be another catalyst helping gold, TDS added.

However, TDS continued that, the current positioning of speculative and swap dealers “should keep the rally from taking the yellow metal materially above $1,300/oz. The likelihood that the U.S. central bank will pull the trigger on rates in the second half should also keep any rally quite well contained.”