Gold: Declining real rates to lift the yellow metal above $1800 – TDS

Gold’s attempt to surpass the $1800 mark was disrupted by renewed coronavirus concerns. Nevertheless, strategists at TD Securities expect the yellow metal to trade above $1800 due to long-term inflation expectations.

Key quotes

“Covid fears have interrupted, but not canceled gold's imminent breakout. Indeed, the yellow metal's third attempt to break-out into the $1800s was interrupted by renewed virus concerns, which have paused the rise in long-term inflation expectations that we have seen over the past few trading sessions. Nonetheless, we expect that growing confidence in the economic recovery, amid extremely low rates volatility, will help long-term inflation expectations continue to rise. In this context, declining real rates will support gold prices into the $1800s.” 

“The world-war era fiscal and central bank stimulus, the change in the central bank template that will incorporate 'symmetric inflation targets' and unwinding globalization, also suggest that inflation-hedge assets may grow in popularity. In this context, fading the reversal of safe-haven flows will continue to be a profitable trade.”