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Market participants need look no further than the price action in gold, to observe how the Fed’s asymmetric reaction function is translating in markets, according to strategists at TD Securities.

Key quotes

“While the market may be expecting global reflation, albeit delayed by the coronavirus, global central banks have a particularly low bar to cut rates as the Fed, in particular, is aggressively trying to stimulate inflation.” 

“This real rate suppression is behind the structural bid in gold — and, the market is catching on, with ETF holdings breaking new ground and money manager positioning still extended.” 

“We reiterate that this theme will remain a driver of asset prices in 2020, suggesting that gold’s bull market is still young.”