Gold to guard negative interest rates – TDS

Investors liquidated gold positions last week as they have some concerns regarding the recent bull market. Nonetheless, strategists at TD Securities believe a long period of negative rates is here to stay and, therefore, the yellow metal should offer hedge for the investment.

Key quotes

“Money managers further liquidated their gold length and added some shorts, as concerns emerged over the sustainability of the yellow metal’s bull market. After all, global equity indices are surging at a record pace, leading to a reversal of safe-haven flows and dampening appetite for gold.”

“Breaking down the drivers of money manager length, we find that risk-on behavior in markets has been the primary driver for liquidations in the past week. However, we reiterate that those selling gold in response to risk-on are improperly discounting the macro implications — the Fed will maintain its uber-easy policy for the foreseeable future and may even utilize more tools to support yields amid a massive supply of Treasuries.”

“We continue to expect that money managers will seek to shelter their capital from a prolonged period of negative real rates in gold.”



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