Is there still room for a sell-off in gold? TDS experts warned that the window for a price decline was open, as for the first time in months, asymmetries in positioning risks were tilted to the downside, said Daniel Ghali, senior commodity strategist at TDS.
Significant liquidations reinforce the decline
“Macro trader positioning remains higher than justified by market expectations for Federal Reserve (Fed) rate cuts alone, with signs that Trump’s trade had contributed to some froth. Signs of a buyers’ strike in Asia also emerged, as highlighted by the significant deterioration in the SGE premium and by incipient signs of liquidations by major Shanghai precious metals traders.”
“Since then, significant liquidations by Shanghai Futures Exchange (SHFE) Gold and Silver traders are now reinforcing the downside price action, with over 5t and 6.6m toz of notional sold in the last session alone. After all, if precious metal holdings were a hedge against Asian currency pressures, then recent Asian currency strength is now playing into continued downside.”
“We also now estimate that deteriorating price action could trigger notable CTA trend-follower sell-offs, with a break south of $2,365/oz triggering a selling program totaling -5% of the algorithmic maximum size. And, our forward price simulations also suggest that a downtrend over the next week could lead to large-scale selling activity totaling nearly -25% of the algorithmic maximum size, while a corresponding uptrend would likely fail to catalyze any buying activity.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
