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According to analysts from TD Securities, several developments could help Gold (XAU/USD) move toward $1,600/oz. They see fundamentals point to firming Gold.

Key Quotes:  

“The combination of statements from the Federal Reserve, the US President and economic data has driven gold from a summer low of $1,385/oz to as high as $1,557/oz in early-September. The US dollar strength and positive US data surprises, which usually tend to be very powerful agents shaping this market, did not seem to be the drivers of the yellow metal throughout the summer, as traders focused on interpretations of official US monetary and trade policy instead.”

“Once the media noise is out of the way the market should again focus on the facts on the ground. And, the fundamentals point to firming gold. Some fifteen trillion dollars worth of investment-grade paper is yielding negatively and there is downside pressure on US rates as investors aggressively seek yield. In contrast, gold is in contango and offers positive yield.”

“This short-term repo market turmoil prompted the US central bank to inject just over $140 billion worth of liquidity into the market with a promise of more. The associated volatility before the intervention and the resulting speculation of systemic issues that may make it necessary to permanently expand the Fed’s balance sheet, should also help to keep gold bid. Indeed, The New York Fed announced that they would increase their daily repo transactions from the previously announced $75 billion to $100 billion through October 10th, and also offer two-week repo trades as well, which they increased from $30 billion to $60 billion, which should all help gold move into $1,600/oz territory.”