Gold is stuck between dovish fed and risk-on sentiment
NEW YORK (Scrap Register): The outlook for gold going forward remains neutral for the world’s largest bank, which sees the yellow metal as stuck between a dovish Federal Reserve and a risk-on investor sentiment.
“We remain short-term neutral, expecting it to continue trading within its recent range. In essence, this mirrors our relatively neutral US Dollar view,” ICBC Standard Bank said in a report. “Gold prices have been stuck between a dovish FOMC and relatively firm risk asset performance.”
On Thursday, gold tumbled down 1.5%, with June Comex gold futures falling from $1,311.90 to $1,293.40 an ounce and last trading at $1,296.80.
Gold’s relation with real U.S. yields has broken down for the short-term, ICBC explained, noting that the U.S. dollar, equities and bond markets are pulling gold in different directions.
“Accordingly, shorts have been covered but only tentative length added. Momentum driven positioning is also likely to be around neutral,” the report said.
Silver also suffered significant losses on Thursday, falling 2% on the day, with May silver futures falling below $15 and last trading at $14.93.
ICBC sees great opportunity in silver as the gold/silver ratio continues to widen.
“Silver’s lacklustre performance is again seeing shorts added, with momentum funds also likely to have turned sellers. In the short-term, we see few fundamental reasons why this cannot continue but, with the gold/silver ratio around historic wides, there could be a contrarian opportunity if silver positioning becomes stretched,” the bank stated.