TD Securities Analyst Says Gold Sell-off May Not Be Over — Carry and Opportunity Cost Could ‘Drive Capital Away’

Precious metals markets continue to flounder this week as gold’s value per troy ounce has slid by 6.53% in value against the U.S. dollar during the last month, while silver has shed 2.34% in 30 days. Amid the raging inflation worldwide and the hawkish central banks, gold and silver prices have struggled in 2022 and investors expected quite the opposite to happen.

Precious Metals Continue to Tank in Value

The nominal U.S. dollar value per troy ounce of gold (Au) and silver (Ag) has dropped between 0.18% (Au) and 0.27% (Ag) during the last 24 hours. Over the last 30 days, the price of gold slipped 6.531% lower against the U.S. dollar, and silver lost 2.34% against the greenback during the same time frame.

The losses precious metals have been dealing with are occurring while global inflation has run rampant and the world economy faces turbulent markets. Furthermore, the U.S. Federal Reserve hiked the benchmark bank rate by 75 basis points (bps) last Wednesday, and the U.S. Dollar Currency Index (DXY) soared to a 20-year high the following Friday.

TD Securities global head of commodity markets strategy, Bart Melek, told Kitco News on Friday that the recent Fed rate hike has been a net negative for gold.

“We’ve seen significant increases in the markets’ estimates of what the federal funds rate will do over the next year. It is quite a big difference from a month ago, and it is in line with the Fed being more aggressive,” Melek said. The TD Securities commodity markets strategist added:

The real rates are rising. That’s negative for gold. High cost of carry and high opportunity cost will probably drive capital away.

Silver and Gold Daily Moving Averages Signal ‘Bearish’ Sentiment, Analyst Believes Gold Will ‘Rebound Next Year’

RM Capital Analytics strategist Rashad Hajiyev believes gold’s price should be higher. Last week, the analyst expected a rebound following gold’s downtrend against the U.S. dollar.

“Gold should be trading above $1,690 within 1-2 days if the recent sell-off is a breakdown,” Hajiyev tweeted last Tuesday. “Gold holding around key support & GDX adding 1.75% yesterday on a flat gold price suggests that the metal is on the cusp of a major move higher.” Six days after Hajiyev’s tweet, gold has not seen a significant move higher.

While the US kept the gold price artificially low at $35/oz, gold reserves declined from 20,000 tonnes to 8,000 as European govts converted their dollars to gold.

The same is happening now with gold and silver moving to China & India as Comex & LBMA keep prices artificially low. pic.twitter.com/wgr3zJTh5J

— Wall Street Silver (@WallStreetSilv) September 18, 2022

Financial advisor Renuka Jain told her 61,300 followers on Twitter that her firm expects gold’s value to rebound next year. The advisor further expects the U.S. central bank to cut rates in 2023.

“For 2023, the gold price outlook is more positive,” Jain detailed. “Not only do we expect the U.S. dollar to weaken, but we also expect the Fed to start cutting rates in 2023. On top of that, we expect lower U.S. real yields. As a result, gold prices are likely to rebound next year or even earlier.”

A Sunday price analysis that covers both gold and silver prices on schiffgold.com explains that the daily moving averages (DMA) for both precious metals show bearish signals. The analysis notes that silver has held up better than gold but the precious metal has “real resistance” at 22 nominal U.S. dollars per troy ounce.

“[For gold] it’s bearish that the 50 DMA ($1743) is well below the 200 DMA ($1831); however, the market rarely goes in one direction without a pause,” the analyst writes. “Expect a short-term bounce. The bounce cannot be trusted until the current price ($1655) at least breaches the 50 DMA and more likely the 50 DMA needs to break the 200 DMA to confirm a new bullish trend.”

What do you think about the recent market performances of gold and silver? Do you expect precious metals to go up from here or is there more decline on the horizon? Let us know what you think in the comments section below.