By Bernd Debusmann Jr
Saxo Bank's head of commodity strategy said he believes that the gold market's reaction to a potential US-China deal may end up not being justified
Gold continues to show resilience relative to other commodities, according to Ole Hansen, head of commodity strategy at Danish investment bank Saxo Bank.
Gold prices dipped last week in response to news of an imminent trade deal. On Saturday, US President Donald Trump said that talks were moving along “very nicely,” but that a deal would only be reached if it were right for America.
“It [gold] still trades above the October 1 law despite US stocks trading at record levels and the recent jump in bond yields around the world,” Hansen said in a statement. “It was the big yield drop in US and other major bond markets that helped trigger the gold surge back in June.”
Hansen added that he remains skeptical of the substance of a US-China deal and believes the market reaction so far ”may end up not being justified”.
“From a longer-term prospective, the bullish gold case remains alive above $1,380 and after being range-bound for several months it needed a bigger challenge than the one seen so far,” he added.
Additionally, Hansen said that a recent reduction in speculative longs held by hedge funds reduced one of the main obstacles for a renewed push to the upside for gold.
Hansen, however, does not expect that to happen before the end of the year.
”We are entering the annual period of window dresisng where gains are being defended while decisions about new positions are being postponed,” he added. ”Unless a strong signal emerges like last year’s December stock market sell off.”