Gold’s unprecedented rally has dealt a significant blow to one Canadian bank, TD Securities, as they have learned firsthand the risks of betting against the precious metal in an environment of falling global interest rates.
Analysts at TD Securities announced they were closing their recently opened tactical short position in gold, which they had initiated in anticipation of a price decline. The bank had warned investors that gold’s bullish speculative positioning was at extreme levels, making the market vulnerable to a correction.
The short position was opened when December gold futures were trading at around $2,533 per ounce, with TD predicting a pullback to $2,300. Their forecast was based on the expectation that the U.S. Federal Reserve would maintain a more cautiously hawkish stance on interest rates. However, this view quickly unraveled as the Federal Reserve’s decision to cut interest rates by 50 basis points last week sparked a fresh wave of capital into gold.
In a note to clients, TD Securities acknowledged the misstep: “This was undoubtedly an out-of-consensus position. While the flows over the last few sessions were not on our radar, it’s clear that the Fed’s readiness to pursue further easing, even with a reasonably healthy economy, is attracting substantial capital to gold.” The bank closed its position after December futures rose to $2,549, taking a 4.4% loss on the trade.
The gold market‘s latest surge to record highs above $2,650 per ounce comes as investors reassess the Federal Reserve’s monetary policy shift. The central bank’s new easing cycle and its projection of interest rates falling to 3% by 2026 have fueled expectations of further gains in gold. A growing number of analysts now anticipate that gold could hit $3,000 per ounce by early 2025, as the metal continues to benefit from lower interest rates and ongoing economic uncertainty.
TD Securities admitted that while extreme positioning could still present risks, the overall macroeconomic backdrop remains highly supportive of gold’s upward trajectory.
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