13 Dec 2013
Flash: Lower gold, but collapse not likely - TDS
FXstreet.com (Bali) - According to Bart Melek, Strategist at TDS, Gold should average about $1,195/oz over the next three months, with prices getting progressively lower as we approach mid-2014.
Key Quotes
"After that, gold should firm due to the Fed’s zero-bound policy. Indeed, it was the market’s consideration of the upcoming near-zero policy rates for longer (possibly stretching well into 2016) from the Fed, that is likely responsible for the recent short covering rally. Prices moved up from lows of just above $1,212/oz to a high of almost $1,268/oz."
"This shall be the broad theme driving the yellow metal in the period following the start of the QE taper, as the speed
and magnitude of any reduction of asset purchases is surely to be geared to the performance of the US economy."
"Conversely, the market will be guided to expect low short term interest rates for a prolonged period. This in time should reduce real yield increases and keep the opportunity cost from rising too sharply, as both inflation should respond positively and nominal yields on the short end of the curve should be suppressed. So, lower gold after the taper, but a collapse is not likely. For the sake of gold, let’s hope the FOMC and the Fed deliver the message as we have described."
Key Quotes
"After that, gold should firm due to the Fed’s zero-bound policy. Indeed, it was the market’s consideration of the upcoming near-zero policy rates for longer (possibly stretching well into 2016) from the Fed, that is likely responsible for the recent short covering rally. Prices moved up from lows of just above $1,212/oz to a high of almost $1,268/oz."
"This shall be the broad theme driving the yellow metal in the period following the start of the QE taper, as the speed
and magnitude of any reduction of asset purchases is surely to be geared to the performance of the US economy."
"Conversely, the market will be guided to expect low short term interest rates for a prolonged period. This in time should reduce real yield increases and keep the opportunity cost from rising too sharply, as both inflation should respond positively and nominal yields on the short end of the curve should be suppressed. So, lower gold after the taper, but a collapse is not likely. For the sake of gold, let’s hope the FOMC and the Fed deliver the message as we have described."