TD Securities Ryan McKay and Bart Melek say Gold and broader precious metals have held firm despite higher near-term Fed hike probabilities. They stress that upcoming US inflation data will be pivotal for Fed pricing and discretionary flows, while structural supports such as Dollar-debasement themes, central bank buying and ETF demand suggest any hawkish shock may delay rather than derail the next leg higher.
Fed pricing hinges on inflation print
“Precious metals wait on inflation data.”
“Precious metals have been able to maintain strength, even as the market grapples with the near-term increase in Fed hike probabilities.”
“A stronger jobs report initially weighed on gold, but less hawkish Fedspeak and currency interventions then cooled the narrative, highlighting the market has an elevated sensitivity to incoming data and headlines.”
“Inflation data is the next big catalyst, and an upside surprise would embolden Fed pricing and weigh on the yellow metal, while less worrisome inflation could ultimately be the first catalyst to see the next wave of discretionary positioning start to enter the market.”
“With the precious metal landscape still broadly supported by the renewed dollar-debasement theme, elevated central bank buying and renewed ETF accumulation, a hawkish Fed may only postpone the timing of the next leg higher rather than catalyze material downside.”