According to Bart Melek, head of commodity strategy at TD Securities, surging US equities, a firmer USD and increasing bond yields have prompted the already uber long specs to cut exposure to gold.
“The yellow metal dropped to slightly below $1,500/oz on Monday, and we think it may move down toward support between $1,480-50s should the Fed not deliver a very dovish signal on September 18th.”
“At this stage, the gold market believes the US central bank will deliver a neutral cut, with no unqualified commitments to cut rates aggressively. In our view, no matter what central banks do over the next several months the global economy will slide lower due to weaker trade activity in the aftermath of the US-China trade war.”
“Germany is showing weakness due to trade, China is continuing to disappoint and there are signs that the US is also slowing. Given these facts on the ground and the fact that monetary policy is not very productive, the projected declines in gold should be seen as a buying opportunity, as central banks will need to be aggressive in their monetary action to overt a sharp decline in global activity next year.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.