TD Securities sees gold risk to 4200 near term, 5350 target by 2027
TD's framing effectively separates two forces that are usually treated as moving together, dollar weakness and gold strength, and argues they've decoupled for now, since the more dominant driver is the market's reassessment of Fed policy following Warsh's tone.
That's a meaningful distinction for traders who might otherwise assume a softer dollar automatically puts a floor under gold, TD's view suggests the rate expectations channel is currently overriding the currency channel entirely. The reference to Treasury intervention at the long end of the bond market easing financial conditions, while insufficient to offset front end rate pressure, also points to a more granular read of the yield curve than a simple dollar index correlation would provide. For gold positioning, the practical takeaway is a two-speed outlook, near term vulnerability toward the lower end of the 4200 to 4700 dollar range, against a maintained long term bullish target of 5350 dollars by the third quarter of 2027, meaning the near term weakness is being framed as a repricing phase rather than a reversal of the structural bull case.
--- TD Securities says gold's near term pain is real, but it isn't the end of the long term bull case, and a weaker dollar alone won't be enough to stop the slide.
Summary:
- TD Securities said Fed Chair Kevin Warsh's Jackson Hole speech was clearly hawkish, reaffirming the Fed's commitment to bringing inflation back to its 2% target and describing current financial conditions as not restrictive
- TD said markets have repriced higher odds of Fed rate hikes in both September and December following the speech, lifting short end rates and the US dollar, which pulled gold back to around 4,450 dollars an ounce.
- Said that even though the dollar has faced some pressure recently, the Fed's firm restatement of its price stability commitment means the dollar debasement trade narrative is likely to be sidelined by markets in the near term, meaning a softer dollar alone is unlikely to meaningfully support gold.
- TD noted gold's recent strength had been partly supported by US Treasury intervention at the long end of the bond market, which eased financial conditions somewhat, but said this cannot fully offset pressure from rising front end rates.
- Sees gold potentially drifting toward the lower end of its recent 4,200 to 4,700 dollar per ounce trading range by year end, while maintaining a longer term bullish target of 5,350 dollars an ounce by the third quarter of 2027.
- Said the longer term bullish case depends on inflation stabilising alongside a more balanced oil market and softer demand, which would give the Fed room to reverse some tightening in pursuit of its employment mandate, with central banks, institutional investors and physical retail buyers cited as the demand base that would drive gold higher in that scenario.
TD Securities says gold still faces further downside risk in the short term, and that recent softness in the US dollar is unlikely to provide an effective offsetting boost.
The TD view centres on Federal Reserve Chair Kevin Warsh's speech at Jackson Hole, which he characterised as clearly hawkish. Warsh reaffirmed the central bank's commitment to returning inflation to its 2% target, said inflation had not convincingly slowed, and argued current financial conditions were not restrictive. Markets responded by repricing higher odds of rate hikes at both the September and December Fed meetings, a shift from expectations prior to the speech, which in turn lifted short end interest rates and the dollar. That combination pulled gold back to trade around 4,450 dollars an ounce.
TD argued that despite recent dollar softness, gold's short term downside risk remains intact, because the Fed's firm reassertion of its price stability mandate, and its position that monetary policy remains the most effective tool for achieving it, means the market is likely to sideline the dollar debasement trade narrative for now. In practice, this means a weaker dollar on its own is unlikely to meaningfully support gold prices while rate hike expectations are rising. Also pointed to the role of US Treasury intervention at the long end of the bond market, which has eased financial conditions somewhat and had contributed to gold's recent strength, but said this improvement cannot fully offset the pressure coming from higher front end rates. As a result, TD Securities expects gold could drift toward the lower end of its recent trading range, roughly 4,200 to 4,700 dollars an ounce, by the end of the year.
TD noted that while Warsh's hawkish tone has hardened somewhat compared with his stance in July, it has not changed gold's medium to long term logic. He said the economy remains relatively resilient and inflation remains above target, with markets now pricing in Fed funds rate increases for both September and December. However, he argued that once inflation stabilises against a more balanced oil market and higher rates begin to weigh on aggregate demand, the Fed would gain more confidence to reverse part of its tightening in order to fulfil its maximum employment mandate, a shift that would provide support for gold prices.
Under that scenario, TD Securities maintains its longer term bullish call on gold, forecasting prices could reach 5,350 dollars an ounce by the third quarter of 2027. Added that central banks, institutional investors and physical retail buyers are all likely to act as drivers of that move, continuing to view gold as an attractive portfolio diversification tool and potentially re-entering the market at more favourable entry points. Overall, TD Securities frames the current phase not as a loss of gold's upward logic, but as a repricing period dominated by shifting policy expectations, with the Fed's September and December meetings, inflation data, and further dollar and real rate movements set to determine whether gold holds within its 4,200 to 4,700 dollar range.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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