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Gold Looks Ready To Challenge $1,366 - TD Securities


(Kitco News) - The gold market is finally due for some excitement as the yellow metal is looking ready to break out of its narrow trading range and challenge January’s high of $1,366 an ounce, said TD Securities in a report.

“After being locked in a fairly tight range between $1,302-1,340/oz for many weeks, traders took the yellow metal higher into a position to challenge the high of $1,366/oz present in late-January,” analysts at TD Securities said in the Commodities Weekly report published on Monday.

Federal Reserve’s dovish rate hike last week and more trade drama between the U.S. and China have helped gold break out on the upside, wrote the bank’s head of commodity strategy Bart Melek and commodity strategist Ryan McKay.

“Gold broke through resistance into the upper bound of the range, after US sanction proposals prompted traders to question the sustainability of the current synchronized growth regime, while the Fed was not as hawkish as expected and the USD and yields eased lower,” the report said.

The main reason markets didn’t interpret the Fed’s announcement as hawkish was because the new central bank’s chair Jerome Powell didn’t take a more aggressive approach as was feared by some analysts.

“The new Chair seemed to be pragmatic and less focused on theoretical assessments. The FOMC membership continued to message three hikes for this year and Mr. Powell messaged that he is unlikely to get overly restrictive unless inflation actually materializes,” analysts noted.

This kind of rhetoric from the Fed has been working in favor of higher gold prices.

“Given that geopolitical risks sent stocks sharply lower, while bonds and the Japanese yen received a bid as short positions were pared back, it is likely that investors may want to buy gold and silver as a hedge,” Melek and McKay said. “While the US-China economic growth threatening rhetoric will not materialize into a full-blown trade war, tensions will likely remain for a while yet.”

Silver is also looking to benefit from all of this, according to TD Securities. The precious metal has been performing well, moving towards the resistance level of $16.70 an ounce.

“The record net short positioning and possible strong short-covering activity could make silver a particularly strong performer if the precious metals catch another bid,” analysts wrote.

Gold prices edged down in Asian trading on Tuesday, with April Comex gold futures last at $1,351.20, down 0.28% on the day, while spot gold on Kitco.com was at $1,351.20, down 0.18% on the day.

Some of the key events to keep an eye on this week are the third reading of the U.S. Q4 GDP report, further trade policy developments, and equity prices, the report added.

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