TD Securities has initiated a long position in gold, declaring that the time for pursuing opportunities is now underway.
The gold market is facing challenges in gaining bullish momentum following the U.S. central bank's resistance to expectations of an aggressive easing cycle starting in March. However, a Canadian bank believes this presents an opportune moment to buy, anticipating an inevitable rally.
TD Securities' commodity analysts released a note on Monday, revealing their initiation of a tactical long gold trade with expectations of significantly higher prices in the next three months. The bank entered the trade at $2,035 per ounce, aiming for prices to reach $2,250 per ounce, while implementing a stop loss at $1,910 per ounce. As of the latest data, April gold futures traded at $2,038 per ounce, registering a 0.76% decline for the day.
This bullish stance coincides with a period of considerable selling pressure on gold, as prices dipped below a crucial support/resistance level at $2,050 per ounce. Gold is grappling with challenges following Federal Reserve Chairman Powell's Sunday night interview with CBS' 60 Minutes, where he reiterated the central bank's reluctance to cut rates in March.
Powell emphasized the need for more evidence of inflation sustainably moving down to the 2% target before considering rate cuts. While a March rate cut is ruled out, the central bank still anticipates easing interest rates later in the year, which TD Securities considers the pivotal factor for gold.
According to Daniel Ghali, Senior Commodity Strategist at TD Securities, the exact timing of the rate cut is less relevant for the gold market than the total number of rate cuts expected in the next 12 months. Ghali anticipates four or five rate cuts in the year, slightly lower than the initial market expectations of around six.
Ghali points out that this scenario should attract new investors to the market, as macro traders appear under-positioned for a Fed cutting cycle. Furthermore, robust Chinese demand and the presence of traders on the sidelines provide essential long-term support, mitigating downside risks associated with fewer expected Fed cuts.
In TD Securities' 2024 outlook, analysts previously projected gold prices to average around $2,019 per ounce for the year, with a peak expected in the second quarter as prices average around $2,100 per ounce between April and June.