Gold Price Forecast: Two reaons keeping XAUUSD elevated – TDS
07.06.2022, 13:11

Gold Price Forecast: Two reaons keeping XAUUSD elevated – TDS

What's driving that gap between gold and real rates? The DKW model helps to address this question. Strategists at TD Securities conclude that the gap between gold and real rates may be attributed to an undue rise in real rates given quantitative tightening and the still-massive amount of complacent length being held in gold.

Residual rise in real rates could be partially attributable to quantitative tightening

“The DKW model highlights that TIPS liquidity premium may have overwhelmingly driven real rates over the past months, as quantitative easing likely created a scarcity of these assets. Today, quantitative tightening is now weighing on this liquidity premia as the market is left to absorb additional supply. In turn, the residual rise in real rates above what would otherwise be expected given gold prices could be partially attributable to quantitative tightening.” 

“We see evidence that gold markets are hosting a massive amount of complacent length. While the war in Ukraine helped to send the bears packing, the fading of geopolitical risk premia across global assets hasn't seen this cohort of discretionary traders liquidate their length.”

“The gap between gold and real rates may be attributed to both an undue rise in real rates given quantitative tightening, and to the still-massive amount of complacent length being held in gold, keeping the yellow metal's prices elevated.”

 

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