Precious metals to fall further as restrictive rates regime is set to last for longer – TDS

A stronger dollar and rates continue to weigh on the precious metal complex. Strategists at TD Securities believe that there is more room on the downside.

Aggressive Fed to hike rates by 200 bps before year-end

“The persistence of inflation continues to support an aggressive effort by the Fed, and we now expect the FOMC to raise the target rate by 75 bps at its meeting next week, deliver another 75 bps hike in November, and hike a further 50 bps in December. In this context, while prices are certainly weak, precious metals' price action could still have further to fall as the restrictive rates regime is set to last for longer.” 

“Gold and silver prices have tended to display a systematic underperformance when markets expect the real level of the Fed funds rate to rise above the neutral rate, as estimated by Laubach-Williams.”