Systematic flows in Gold markets have remained relatively muted, in contrast to the large-scale selling activity that has hit the tapes in the remainder of the commodities complex, TDS Senior Commodity Strategist Daniel Ghali notes.
“However, a revisit of the $2400/oz range could spark the first notable selling program from CTAs, the impact of which could potentially be exacerbated by a liquidity vacuum. We see few offsets to downside flows in the Yellow Metal for the time being, amid evidence that macro fund positioning is not only bloated but is now tapped out.”
“Shanghai traders have finally begun to notably liquidate their length from near-record levels and Asia remains on a buyer's strike in physical markets. After all, Shanghai trader positioning was likely related to a currency-depreciation hedge, the driver of which has significantly deteriorated with Asian currencies notably strengthening over the last weeks.”
“The implications of a deleveraging event could be significant in Gold markets, which places our attention on a potential bounce in yields as a possible catalyst for large-scale mechanical selling activity from risk parity and vol-control funds, CTAs, macro funds and Shanghai traders.”
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