11 Apr 2014
AUD and Gold: Risk lies to the upside - TDS
FXStreet (Bali) - Annette Beacher and Prash Newnaha, FX Strategists at TD Securities, remain bullish on the prices of gold and the Australian Dollar, expecting both to extend gains in the weeks ahead.
Key Quotes
"Current sentiment and historic price action in the gold market suggests the risks lie to the upside and even above what the forwards market is pricing. Our analysis suggests gold could reach USD1375-US$1400 in the months ahead and the AUD could reach USD0.9680."
"For gold, we analyzed how the metal has moved after Bloomberg’s Bullish Gold Consensus Sentiment Index breaches 25% bullishness (CMSEGCBL Index). We set the trigger level at 25%, as it is near the historical lows for this index."
"Since 2004, there have been 6 instances that Bullish Gold sentiment has breached 25%. The most recent break, the 6th, was on March 21st, when the index hit its 2nd lowest reading ever, at 22.79%. The only reading lower than this, was in July 2009, when the index hit its absolute low at 22. Regardless of whether we look at average historical price gains over 1mth, 2mths or 3mths or historical probability
weighted gains, the gold price is projected to trade between USD1375-1400oz in the months ahead."
"Using the 0.72 correlation between the gold price and the AUD (weekly data back to 2006) the AUD could overshoot to USD0.9680 in the near term. If this occurs we recommend fading the move as this is likely to be the peak for the current cycle."
Key Quotes
"Current sentiment and historic price action in the gold market suggests the risks lie to the upside and even above what the forwards market is pricing. Our analysis suggests gold could reach USD1375-US$1400 in the months ahead and the AUD could reach USD0.9680."
"For gold, we analyzed how the metal has moved after Bloomberg’s Bullish Gold Consensus Sentiment Index breaches 25% bullishness (CMSEGCBL Index). We set the trigger level at 25%, as it is near the historical lows for this index."
"Since 2004, there have been 6 instances that Bullish Gold sentiment has breached 25%. The most recent break, the 6th, was on March 21st, when the index hit its 2nd lowest reading ever, at 22.79%. The only reading lower than this, was in July 2009, when the index hit its absolute low at 22. Regardless of whether we look at average historical price gains over 1mth, 2mths or 3mths or historical probability
weighted gains, the gold price is projected to trade between USD1375-1400oz in the months ahead."
"Using the 0.72 correlation between the gold price and the AUD (weekly data back to 2006) the AUD could overshoot to USD0.9680 in the near term. If this occurs we recommend fading the move as this is likely to be the peak for the current cycle."