11 Jul 2014
Recent old gold rally likely not the beginning of another bull run - TD Securities
FXStreet (Łodź) - TD Securities Commodity Strategists Bart Melek and Mike Dragosits believe that the current six week old gold rally which has taken gold from a low of about $1,240/oz in early-June to slightly north of $1,345/oz on Thursday, may get extended to as high as $1,375/oz in the not too distant future, this is likely not the beginning of another bull run.
Key quotes
"In fact, prices are likely to trend down towards $1,200/oz as we approach 2015."
"While it may be true that there has been a substantial increase in gold spec net-long positioning lately, this has been driven primarily by short covering with longs at levels not implying a meaningful amount of market conviction, when compared to a time when the gold bull market was
building a serious head of steam back in the summer of 2011 and during part of 2012."
"Similarly, the increase in investor interest in gold ETFs has been quite minimal and does not signal to us a significant jump in upside conviction."
"China physical imports have been slumping, with the Shanghai-London premium suggesting a turnaround in interest is not jumping higher any time soon."
"Finally and perhaps most importantly, US rates are very likely to move higher in the coming months as the US economy continues to strengthen, the labour environment improves and the Fed no longer sees the need to overtly push a dovish sounding monetary policy tone."
"Plus, with the end of the current quantitative easing-inspired asset purchase program set to end in October, it will be easier to borrow Treasuries for short positioning."
Key quotes
"In fact, prices are likely to trend down towards $1,200/oz as we approach 2015."
"While it may be true that there has been a substantial increase in gold spec net-long positioning lately, this has been driven primarily by short covering with longs at levels not implying a meaningful amount of market conviction, when compared to a time when the gold bull market was
building a serious head of steam back in the summer of 2011 and during part of 2012."
"Similarly, the increase in investor interest in gold ETFs has been quite minimal and does not signal to us a significant jump in upside conviction."
"China physical imports have been slumping, with the Shanghai-London premium suggesting a turnaround in interest is not jumping higher any time soon."
"Finally and perhaps most importantly, US rates are very likely to move higher in the coming months as the US economy continues to strengthen, the labour environment improves and the Fed no longer sees the need to overtly push a dovish sounding monetary policy tone."
"Plus, with the end of the current quantitative easing-inspired asset purchase program set to end in October, it will be easier to borrow Treasuries for short positioning."