Head of Commodity Strategy
Since the mid-May mini collapse, when short-covering took the dollar sharply higher and metals lower, gold has increasingly been settling into a relatively tight range around $1,300/oz. The run-up to what is expected to be the seventh US rate hike in the current cycle has once again sapped investor confidence as well as demand for the yellow metal.
We believe, however, that the risk of another cat-out-of-the-bag rally has increased – not least considering the dollar rally showing signs of pausing following the recent run-up, US-China trade worries not going away, and rising inflation concerns keeping US real yields rangebound.
Gold traded lower ahead only to rally following most of the previous six rate hikes in this cycle, not least considering the dovish manner in which the Federal Open Market Committee presented these rate hikes.
Paper investments have faded with hedge funds' position near a two-year low while total holdings in exchange-traded funds backed by gold has dropped 34 tons to 2,206 tons from a five-year high last month. In the futures market, the aggregate open interest and the weekly trading range have both hit a six-month low.
These observations are all pointing towards an imminent move in gold and while the downside may still be in play, the low level of hedge fund participation makes us believe that the direction that could receive most momentum would be to the upside.
However, a hawkish hike later today carries the risk of sending the dollar and bond yields higher and gold lower. The key levels to look out for has remained the same for some time now: a sustained break below $1,286/oz would call into question the rally from the December low while a move above $1,308/oz, the 200-day moving average, is likely to attract renewed technical and momentum buying from funds currently underweight in gold.
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Commodity Strategy
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Chief Investment Strategist
Quarterly Outlook
Head of Fixed Income Strategy
Quarterly Outlook
Head of Commodity Strategy
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)