Gold: Investors extend longs but hedge risks – TD Securities

TD Securities strategists note that money managers sharply increased long Gold exposure as modest inflation, soft United States (US) employment data and expectations that the Federal Reserve (Fed) will not hike rates this year weigh on the US Dollar (USD). Some investors still added shorts as protection, reflecting concern that higher Oil prices and interest rates remain possible given Persian Gulf geopolitical risks.

Specs boost longs on Fed pause hopes

"Speculation the Fed will not pull the trigger on higher interest rates and continued Middle East instability prompted investors to add gold and oil exposure."

"The combination of modest inflation, a lackluster U.S. employment environment, little market concern that oil will have another major rally, along with prices moving convincingly into a higher trading range prompted money managers to aggressively increase their long gold exposure."

"Traders are hypothesizing that the Fed will not pull the trigger on rate hikes this year, which has subdued interest rates on the short end of the curve and convinced specs that the USD is headed lower."

"Still, a small portion of money managers added to their short positions to protect against a move lower in gold prices, as they fear that higher oil andinterest rates are still a strong possibility considering the geopolitical instability in the PersianGulf region."