Gold: Central banks to keep monetary support bringing investors back to the yellow metal – TDS

The fundamentals behind gold purchases have not changed and investors are expected to flock to the yellow metal again despite some headwinds in the near-term, strategists at TD Securities apprise.

Key quotes

“Risk assets are on fire amid the unprecedented scale of central bank support and global fiscal stimulus, despite still overwhelmingly negative sentiment – those selling gold in response to risk-on behavior in markets may be improperly discounting macro implications.”

“Risk-on behavior has been a significant contributor to money manager deleveraging in gold over the past weeks, but money managers have bought gold over the past few months in response to macro variables such as rates and break-evens. While this may suggest short-term headwinds for the yellow metal, it also argues that the underlying theme driving gold purchases has not changed – central banks remain committed to maintaining their monetary support for the foreseeable future.” 

“The combination of unprecedented support and firming growth will ultimately suppress real rates amid improving inflation expectations, suggesting investor interest will ultimately return to the yellow metal.”