The US central bank has significantly scaled back expectations for an aggressive easing cycle starting in March. After this, the gold price has difficulty finding upward momentum. But one Canadian bank says now is the time to buy into an inevitable rally.
TDS opened a long position, playing for the gold price rise!
Commodity analysts at TD Securities say they have initiated a tactical long gold trade. They also expect significantly higher prices in the next three months. The bank states that they entered the long gold trade at $2,035. They also note that they expect prices to reach $2,250. On the downside, the trade has a stop loss at $1,910.
cryptokoin.comAs you follow from , gold is having a hard time after Powell reiterated his stance that the central bank is not ready to cut interest rates in March in an interview with CBS’ 60 Minutes on Sunday night. Gold price declined below a key support/resistance level at $2,050. Thus, the precious metal started the week with significant selling pressure. The rise of TDS is also taking place in this environment.
Daniel Ghali: This is the most important factor for the gold price!
For now, a rate cut in March is unlikely. However, the central bank expects to lower interest rates this year. This is the most important factor for the gold price, says Daniel Ghali, Senior Commodity Strategist at TD Securities and author of the latest trading note. Ghali states that the Fed is on track to lower interest rates in May. He notes that this is TD Securities’ base case scenario. The analyst comments:
Whether it’s March or May is largely irrelevant. What the gold market cares about is the total amount of interest rate cuts priced in over the next 12 months.
How many interest rate cuts will the Fed make in 2024?
Daniel Ghali says TDS expects the Fed to cut interest rates four or five times this year. He notes that this is slightly lower than initial market expectations for around six rate cuts this year. Ghali states that four interest rate cuts will be enough to attract new investors to the market. In this regard, “The Group’s position is currently at least -40K lots below levels implied by current pricing on the Fed funds futures curve.” says. In his note, Ghali includes the following evaluation:
Macro traders historically appear poorly positioned for a Fed cut cycle. Additionally, our analysis shows that this group may now have built up a sizeable net short position in response to the latest hot data set.
A large number of traders are also ready to enter the market!
Daniel Ghali also says that there are a lot of traders sitting on the sidelines who will enter the market. It also notes that strong Chinese demand continues to provide critical long-term support. These are naturally positive catalysts for the gold price.
Last year, commodity analysts at TDS said in their 2024 outlook that they saw the gold price averaging around $2,019 for the year, peaking in the second quarter, with prices averaging around $2,100 between April and June.
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