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Gold (XAU/USD) plunged more than 4 percent on Friday. The yellow metal has swung wildly since the start of the new year – first surging to a high of $1,959 out of the gate in 2021, then dropping to a low of $1,828/oz. However, the bullish story may not be over yet, in the opinion of Bart Melek, Head of Commodity Strategy at TD Securities. 

Key quotes

“Given that vaccine programs in the US and through many parts of the world are very much behind schedule and the pandemic is raging, economic conditions will remain weak for a while longer. This suggests that yields may not move as high as some gold traders seem to be betting, which may be good news for gold prices.”

“The drivers that hit gold hard such as a steeper yield curve, higher yields (nominal and real), technical selling and firmer USD may not continue to trend in the upward direction for much longer. This implies that gold, after hitting support near the $1,820s may be ripe for a bounce higher.”

“Traders should keep an eye out for economic activity, vaccine program progress and Biden’s ability to sell a new aggressive stimulus agenda as drivers of the gold market. We still judge that gold has a material upside, with $2,000 in the cards over the next twelve months.”