TD securities think that gold will still shine this year

NEW YORK ( Apr 4)  Bart Melek, Head of Commodity Strategy at TD Securities says the Fed has fallen behind the curve, and real interest rates are a driver for gold. He said the market believes that inflation could be higher for longer and the Fed has reacted too slowly. He noted that "the Fed was late to the party for tightening monetary policy".

Melek said for the first quarter gold performed well and the next three months should be "pretty decent" as well. When speaking about the Fed again he said even if they go through with the dot plot scenarios inflation is too high and whatever the Fed does in the next few months is not going to be enough. The Fed won't be aggressive enough.

Melek said over $2000/oz again is possible and there is comfort in the gold trade being a hedge against inflation. Gold has done very well vs equities markets and it does not look like any adjustments down will be material. If there are some Fed rate hikes it looks like it could affect equities more than the yellow metal. Gold has also outperformed some of the traditional hedges including fixed income.

Gold is trading just above flat in the European session on Monday. The price is stuck in a consolidation range with the low holding at around the $1900/oz area.

KITCO