Gold (XAU/USD) could trade well above the $2,300 level next quarter, strategists at TD Securities say.
Position, fear of Fed credibility are catalysts for gold to rise
Lower base rates are set to send real rates, carry and opportunity costs significantly lower, which should bring speculative and ETF investors back. This will work very much in tandem with physical markets and relative positioning that is biased towards the short end. push gold above $2,300 for some time later in the year.
The high likelihood that U.S. monetary policymakers will start tightening before inflation reaches desired levels suggests that long-term investors interested in preserving wealth may increase their weighting of gold in their portfolios.
A rate cut before reaching the 2 percent inflation target may convince many in the gold market to hedge their long-term purchasing power. They may question the credibility of the Fed’s commitment to the current inflation target. The potential for a US election result that elects politicians who want to cut taxes while increasing spending may also be why investors and central banks continue to buy physical gold.