Gold: Any correction is seen as an opportunity to enter a long position – TD Securities

Analysts at TD Securities see gold rising over the next months and project it will hit $1,650/oz sometime in the second half of 2020

Key Quotes: 

“Gold has moved into a relatively tight range near $1,550/oz, following the failure to breakout higher after the recent surge above $1,600/oz. Similar to what has been the case for the last few months, gold has found support from technical and macroeconomic factors. The yellow metal continues to perform relatively well as many investors, including central banks who are buying the most bullion in some fifty years, see it as a form of insurance against negative real rates and potentially sharp equity market corrections.”

“We are now in a situation where gold has performed well even as the USD and equities moved higher, implying that there may be more systemic reasons to buy gold. Indeed, the pending appointment of two President Trump appointees to the Fed governing body may tilt policy toward a prolonged period of dovishness”

“Since TDS sees two more cuts to the Fed funds rate and a modest slowing trend, we have upgraded our gold forecast and see the yellow metal hit $1,700/oz into 2020-21. And, we don’t see a material correction, unless the big picture changes fundamentally.”

“While we see gold as a somewhat crowded trade, with spec long exposure still near extreme levels, it is unlikely that the yellow metal will fall sharply. Indeed, we expect firm support in a relatively narrow range between $1,515-1,550/oz owing to the fact that there is depth of recent exposure at these levels. The uncertain macroeconomic environment, strong central bank buying and somewhat lower volatility which should keep CTAs maintaining their long tilt which should also serve to prevent a rout. Since we project gold to hit $1,650/oz sometime in the second half of 2020, any correction is seen as an opportunity to enter a long position.”