TDS: Any Dip Below $1,200/Oz Gold ‘Should Be Bought’

Tuesday November 22, 2016 10:36
TD Securities does not anticipate a complete collapse in gold and suggests any price dips below the $1,200-an-ounce level “should be bought.” Gold tumbled over the last two weeks on a higher U.S. dollar, steepening yield curve and expected rise in so-called carry costs, TDS says. Higher yields and a strong dollar could drive still more traders away from still-elevated long positions, TDS says, meaning potential for gold to slip below $1,200. “But a rout is not expected, as the U.S. central bank is likely to continue to message a very measured approach,” TDS says. “At the same time, the market is pricing perfection from the new administration and Congress—pricing out any possibility of a trade war and assuming all the tax cuts and spending programs mentioned in the election campaign will materialize as proposed.” Meanwhile, TDS points out that Chinese demand has been strong, as reflected by a “remarkable” increase in the Shanghai gold premium versus loco London spot pricing. This has been as high as $15 an ounce lately. “The November drop in spot gold prices has clearly sparked Chinese physical traders to step up their buying,” TDS says. TDS later concludes “So, while we think that $1,200/oz is very strong support for gold, any dip below should be bought (just as the Chinese are doing) for better times in 2017.”

By Allen Sykora of Kitco News; asykora@kitco.com