|

Gold to shine as Fed shifts into low gear and king dollar tips over - TD Securities

"Following a very strong start, gold has had a disappointing year for the most part, as it printed red for 2018," note TD Securities analysts. 

Key quotes

"Although equity market weakness and a recent Fed shift toward a more dovish and pragmatic stance has provided a short covering boost, the same factors that have weighed on the yellow metal for much of the year will also serve as an impediment to prices breaking out above $1,300 in the early part of 2019. We expect choppy range-bound trading in the near-term, as the greenback remains relatively firm, Fed monetary policy continues to be ambiguous and China/EM economic and currency risks continue to manifest — a US-China trade deal will take time to negotiate and Chinese stimulus is unlikely to take hold until later in 2019.

"From our vantage point, much of the poor performance across the precious metals space has been sentiment and capital flow driven. This is a trend which is unlikely to be materially reversed in the near-term, now that US equity markets have caught a bid and data such as the December payrolls continue to beat expectations. But, as markets become convinced that the tightening cycle is done, a weaker USD and a materially slower US growth profile will once again raise equity correction risks in the latter half of 2019, prompting the yellow and white metals to jump higher again."

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

More from Eren Sengezer
Share:

Editor's Picks

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Crypto Today: Bitcoin holds the 50-day EMA as Ethereum and XRP face structural resistance

Bitcoin gradually ticks up on Friday, trading above $81,000. The Crypto King has recently defended structural support near $80,000, reinforcing the prevailing bullish outlook. Ethereum similarly edges higher above $2,400, while Ripple trades above $1.32 after testing support around $1.30.

The French bond panic is overdone. Here's what the market is misreading 

France's 10-year government bond yield has climbed above 5%, reigniting fears of a sovereign debt crisis in the Eurozone. With public debt exceeding €3.5 trillion, persistent budget deficits and a fragmented political landscape, investors are increasingly questioning the French government's ability to stabilize its finances.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.