15 Nov 2013
Flash: Expect specs, ETFs to keep selling Gold - TDS
FXstreet.com (Barcelona) - With gold prices down 24% on year, many wonder how long the rout will last as not even strong Chinese/Asian physical demand and taper delays have produced much of a rebound.
According to Bart Melek from TDS Securites: "This sort of dynamic will likely continue to be the state of affairs for the next several quarters, amid expectations that the Fed will taper and as markets try to figure out what trajectory real Treasury rates are likely to take. TD Securities sees nominal rates rise, while inflation stays stuck near current low levels."
Other key quotes
"With that, specs and ETP gold investors will likely again dominate price actions, as they reduce positions and take gold to an average of $1,150/oz in Q2-2014. While considerable declines are expected, we do not see a rout owing to the stronger fabrication demand in response to relatively low prices and risks associated with uber easy monetary policy" Melek adds.
"Based on our analysis, it seems that speculative expectations of what real interest rates are likely to be in the future are the key initial trigger and driver of gold prices. The events of the recent year also show that investor ETF positioning acts as a secondary gold price catalyst, after the initial spec-driven move. Physical demand, which includes jewelry, bullion/small bars and coins has generated the least price response. We judge these relationships, for the most part, to be in tact over the next few quarters."
"While we do see specs and ETF investors reduce holdings, the declines are unlikely to be as aggressive as they were in late-2012 and early-2013, when holdings were much higher. This implies that there will not be an outright rout."
According to Bart Melek from TDS Securites: "This sort of dynamic will likely continue to be the state of affairs for the next several quarters, amid expectations that the Fed will taper and as markets try to figure out what trajectory real Treasury rates are likely to take. TD Securities sees nominal rates rise, while inflation stays stuck near current low levels."
Other key quotes
"With that, specs and ETP gold investors will likely again dominate price actions, as they reduce positions and take gold to an average of $1,150/oz in Q2-2014. While considerable declines are expected, we do not see a rout owing to the stronger fabrication demand in response to relatively low prices and risks associated with uber easy monetary policy" Melek adds.
"Based on our analysis, it seems that speculative expectations of what real interest rates are likely to be in the future are the key initial trigger and driver of gold prices. The events of the recent year also show that investor ETF positioning acts as a secondary gold price catalyst, after the initial spec-driven move. Physical demand, which includes jewelry, bullion/small bars and coins has generated the least price response. We judge these relationships, for the most part, to be in tact over the next few quarters."
"While we do see specs and ETF investors reduce holdings, the declines are unlikely to be as aggressive as they were in late-2012 and early-2013, when holdings were much higher. This implies that there will not be an outright rout."