Growing confidence in the global recovery, especially in the US, is leading to speculation over when the Fed might take its foot off the accelerator and buy fewer Treasuries and Agencies. Any tapering suggestion would put further pressure on gold, strategists at ING Bank report.
“The rise that we have already seen in Treasury yields so far this year has put a fair amount of pressure on gold, with it increasing the opportunity cost of holding it. Any suggestion of tapering would likely put only further selling pressure on the yellow metal.”
“There is an abundance of speculative money in commodities at the moment, and tapering should be enough to flush out a sizable amount of these longs from most markets. This is particularly the case when looking at the metals and agriculture space, where the dollar value of speculative positions is at multiyear highs.”
“While we believe oil would also come under pressure, it is better placed in terms of its fundamental outlook. Expectations of a strong demand recovery over the course of the next year, along with OPEC+ supply policy should mean it is relatively better supported.”
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