The gold price turned positive yesterday after initial losses. The oil price shock unsettled investors on Wall Street and once again reminded them that the yellow metal served as a safe haven. Negative oil prices, a scenario that was actually unthinkable for many, shows how twisted the financial markets are now. Gold seems to be the anchor for many investors here. TD Securities obviously sees it that way too. Analysts are advising to buy gold and see the path paved towards $ 1,900.
“We buy gold at $ 1,710 an ounce and expect it to rise to $ 1,900 an ounce to play the continued growth in investment demand in the face of massive and sustained unconventional central bank incentives,” said the latest released by TD Securities.
The idea behind the trade is that the market is currently undervaluing the yellow metal considering long-term inflation expectations and the extent of global quantitative easing, said Bart Melek, head of global strategy at TD Securities, and Daniel Ghali, commodity strategist.
“The Fed’s latest QE program is now the largest ever. Of course, there is a known link between QE and lower real interest rates, so it ultimately squeezes real interest rates by raising inflation expectations faster than raising nominal rates.