Wednesday 17 August 2011

Gold correction to continue near term but $2,000/oz "a real possibility in 2012"

Maklumat yang terkandung di sini telah diperolehi daripada sumber-sumber yang dipercayai boleh dipercayai, tetapi tidak ada jaminan kepada kesempurnaan atau ketepatan. Setiap pendapat yang dinyatakan di sini adalah kenyataan pertimbangan kami pada tarikh ini dan tertakluk kepada perubahan tanpa notis.

-TDS's Bart Melek
TD Securities expects gold prices "to come within $2,000/oz territory in the coming months", but warns of lower industrial minerals prices.

RENO, NV -



TD Securities Bark Melek warns investors that "gold is set to continue its short-term correction after its stellar performance."

In recently published Commodities Trade Strategy research, Melek, TD's head of commodity strategy, writes, "Despite the very gold-favorable macroeconomic fundamentals and the bullish sentiment toward the yellow metal (especially retail investors), TDS expects the current correction to continue in the near-term."

"Reminiscent of silver after its parabolic rise, gold is set to continue its short term correction after its stellar performance-higher spec margins, a sharp jump in implied volatilities and more risk appetite the key catalysts," he predicted.

Melek observed that gold is down some $80/oz from recent highs and an additional $40-$60/oz downside move "is very possible given the recent trading history." Nonetheless, he remains "bullish on the yellow metal longer term, with prices expected to come within $2,000/oz territory in the coming months."

In his analysis, Melek noted the Chicago Mercantile Exchange has lifted margins on gold contracts "by a hefty 22% overnight."

"Higher margins mean that some investors will need higher cash positions, causing them to sell gold in order to comply with the new standard," he suggested. "At the very least, this is cooling off some of the gold euphoria in the market and could prompt some traders to take profits, just because they can."

"Memories of developments in the silver market earlier this year should also motivate profit taking," he added.

Meanwhile, Melek advised higher volumes could also prompt addition gold corrections. "Better equity markets and more risk appetite are also helping to move gold lower."

In his analysis, Melek suggested there are strong parallels to the silver market development of last April and today's gold situation. "The silver rally was almost entirely speculatively driven, and we saw a near doubling in silver initial margins, while silver cols moved much more. At the same time, the silver rally was much more pronounced in relative terms."

"The gold market is much more liquid and more widely held than silver," he noted. "It also has very favorable supply/demand fundamentals, which was not the case for silver at the time."

"As such, we do not expect an overly brutal correction in gold."

Meanwhile, with a quite poor economic outlook and no room to maneuver on the fiscal side, Melek advised "gold investors are starting to speculate that western world central banks may need to resort to ‘heroic' monetary actions to get their economies moving, including some form of monetization of government debt."

In light of the Fed's explicit statements that it will maintain low rates through mid-2012, coupled with the likelihood of further monetary stimulus now higher than previous thought, TDS is revising its gold forecast higher.

"This adjustment reflects our view that gold will act both as a safe haven asset and a story of value to offset the inflationary aspects of further easing," Melek explained. "Rising mining cost promoted us to lift the long-term gold price projection."

However, Melek cautioned that more industrial metals "should react in the opposite manner with the soft patch getting stickier as economic data flows continue to disappoint and push the global economy to the brink of a possible recession."

"Demand growth for industry metals will be slightly less robust under this scenario, pressuring prices slightly lower across the sector, leading us to revise our forecasts lower to reflect these developments," he advised.

No comments:

Post a Comment