Does the rally in Gold still have room to run? – TDS
18.07.2024, 14:40

Does the rally in Gold still have room to run? – TDS

The top ten participants trading in Shanghai Futures Exchange (SHFE) Gold continue to add to their Gold positions, growing their net length towards its highest levels on record, TDS senior commodity strategist Daniel Ghali note.

Trump trade contributes to recent gains

“Discretionary traders in Comex Gold have also been on the bid in recent weeks, with signs that the Trump trade has contributed to recent gains. And of course, Commodity Trading Advisors (CTAs) have contributed to the upside in price action over the last week. Looking forward, however, we see signs that upside momentum could be running out of steam in the near-term.”

“Nascent signs of a buyer's strike in Asia are emerging, with SGE Gold now trading at a slight discount. Chinese Gold ETFs have also recently shown signs of disinvestment, suggesting retail appetite in the nation is drying up at these higher prices. Discretionary trader positioning in Gold is also somewhat larger than is warranted by the market's expectations for Fed cuts over the next twelve months, pointing to some signs of froth.”

“And, for the first time in months, we now see downside asymmetry in CTA positioning risks as algo trend followers are now set to liquidate some length in nearly every scenario over the coming week. In fact, a continued melt-up in prices is now detrimental to CTA long positioning, given the funds' typical vol-targeting risk management frameworks.”

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