Gold fell nearly $100 after testing all-time highs, but sell-off ‘exhausted’ and new cycle highs ahead, says TD Securities

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(Kitco News) The sell-off in the gold market is about to end, and prices will head to all-time highs next, TD Securities said, which activated a new long gold trade at $1,994 with a target of $2,150.

“We are long gold at $1994/oz, anticipating imminent selling exhaustion in precious metals and increased appreciation interest to support the yellow metal towards all-time highs,” said Daniel Ghaly, chief commodities strategist at TD Securities.

After testing record highs two weeks ago, the gold market is down, with June Comex gold futures contract trading at $1,986.30. This is nearly $100 lower since testing those record levels at $2,085 on May 4th.

“Our positioning analyzes argue that a depleting precious metals sell-off may be imminent, prohibiting margin calls associated with the debt ceiling debacle,” Ghaly said on Tuesday. “Algorithmic filter bar in gold to pressure prices is high, while Shanghai trader length is near year-to-date lows. Moreover, dry powder analysis highlights that gold bulls’ position size remains near intermediate levels, Which indicates less pain associated with recent withdrawal.”

Evidence is that the gold bulls still have some trade flows to invest and push prices higher.

“We expect discretionary capital flows toward gold given the strong historical correlations with market expectations of a deepening Fed cutting cycle over the next year. Gold prices may be near all-time highs, but positioning setup is still inconsistent with the cycle peak,” he noted. beloved.

The new peak that TD Securities awaits is $2,150, which sees gold reach at the end of the year.

“Special traders may play a big role in helping the gold price firm, given that we expect markets to price in a deeper cutting cycle over the next 12 months,” explained Ghaly. “We expect gold to hit new cycle highs in the coming months.”

In the past week, gold has suffered from a widening gap between the market’s expectations and what the Fed’s point chart says, Bart Melek, global head of commodity strategy at TD Securities, told Kitco News.

A conflicting narrative is developing between the Fed signaling a pause in June and some Fed officials remaining optimistic.

Melek said Fed rate hike expectations may remain in limbo until the Fed’s new point chart is released at the June meeting. He noted, “There is strong support at around $1,965. We still expect $2,150, but that won’t hold until the latter part of the year when it becomes certain that the Fed will pull back.”