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Strategists at TD Securities believe the yellow metal will attract investors looking for hedge against negative real rates and disagree with who are selling gold due to the risk-on environment.

Key quotes

“The gold bull is coming back. Recent weeks have placed a cloud of doubt over the sustainability of the yellow metal’s bull market. After all, it’s hard to justify buying a shiny rock when global equity indices are surging at a record pace. Risk-on behavior in markets has been the primary driver for liquidations in the past week.” 

“We reiterate that those selling gold in response to risk-on are improperly discounting the macro implications – the Fed will maintain its uber-easy policy for the foreseeable future, and may even utilize more tools (such as yield curve control) to support yields amid the forthcoming and massive Treasury issuances.” 

“Real rates will ultimately be further suppressed – and macro drivers such as this have been the primary driver for accumulation of gold over the past months. We continue to expect capital to seek shelter in gold from a prolonged period of negative real rates. Systematic trend followers are maintaining a long bias in gold, with a rising hurdle rate for liquidations.”


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