According to Bart Melek, head of commodity strategy at TD Securities, surging US equities, a firmer USD and increasing bond yields have prompted the already uber long specs to cut exposure to gold.
“The yellow metal dropped to slightly below $1,500/oz on Monday, and we think it may move down toward support between $1,480-50s should the Fed not deliver a very dovish signal on September 18th.”
“At this stage, the gold market believes the US central bank will deliver a neutral cut, with no unqualified commitments to cut rates aggressively. In our view, no matter what central banks do over the next several months the global economy will slide lower due to weaker trade activity in the aftermath of the US-China trade war.”
“Germany is showing weakness due to trade, China is continuing to disappoint and there are signs that the US is also slowing. Given these facts on the ground and the fact that monetary policy is not very productive, the projected declines in gold should be seen as a buying opportunity, as central banks will need to be aggressive in their monetary action to overt a sharp decline in global activity next year.”