CTAs poised to rebuild Gold longs – TDS

Gold appears to have entered a consolidation phase following a period of heavy selling. With CTAs now skewed toward buying, ETF outflows reversing, and macro funds still short, the market setup favors a renewed uptrend in the near term, TDS' Senior Commodity Strategist Daniel Ghali notes.

Selling exhaustion signals upside risk in Gold

"What happens after selling exhaustion in Gold? For the first time in months, CTAs are now extremely skewed towards buying. Range-bound trading activity is akin to time decay for trend following systems, lowering the bar for selling programs to hit the tapes, which ultimately weighed on prices over the last week."

"Remaining CTA longs have a large margin of safety before the next selling program kicks in below $3130/oz. Looking forward, in nearly every scenario for prices, CTAs will reacquire their recently shed Gold length over the coming week."

"Chinese Gold ETF outflows have fully subsided, with healthy inflows now resuming. Macro funds remain short in Gold, likely owing to a tactical USD view."