Gold outlook - central banks have it on a string
A couple of notes, both via TD, on gold and the influence of upcoming monetary policy meetings on it.
- the extent of stimulus announced at the ECB meeting, and how the US data impacts Fed pricing heading into next week's meeting, will be of keen importance
- positioning in precious metals is extremely skewed to the long side, any disappointment in expectations of how dovish central banks will be moving forward could spark a short term consolidation in prices near or below $1,500/oz, while meeting expectations should keep prices firm
- we think it may move down toward support between $1,480-50s should the Fed not deliver a very dovish signal on September 18th
- gold market believes the US central bank will deliver a neutral cut
- no matter what central banks do over the next several months the global economy will slide lower due to weaker trade activity in the aftermath of the US-China trade war … Germany is showing weakness due to trade, China is continuing to disappoint and there are signs that the US is also slowing. Given these facts on the ground and the fact that monetary policy is not very productive, the projected declines in gold should be seen as a buying opportunity, as central banks will need to be aggressive in their monetary action to overt a sharp decline in global activity next year.