Gold is currently trading similarly to Bitcoin according to TDS’ Senior Commodity Strategist Daniel Ghali, but a comprehensive flows-based approach does not support the recent surge in prices. Ghali notes that downside momentum is likely to accelerate below the $2580 per ounce threshold. The momentum break seen on election day typically signifies the end of such moves, but the question now is what can be expected next. The uptrend has provided a safety margin for macro fund positions, who now hold substantial paper profits on their over-extended positions.
If large-scale selling activity from CTAs begins below $2580/oz, it is likely to accelerate the downside momentum. Other vulnerable cohorts in the market include ETF holders, who have seen recent inflows, and Shanghai traders who are holding onto their near-record length positions. The significance of TINA (There Is No Alternative) for this cohort is highlighted, with recent selling activity in Shanghai coinciding with an improvement in Chinese sentiment. Silver is also vulnerable to CTA selling activity in a continued downtrend, but even a flat market will likely see trend-following algorithms reaccumulating their recently shed positions.
In light of the current market conditions, it is important to monitor the movements in gold prices and the potential impact on various market cohorts. With a comprehensive flows-based approach, investors can better understand the dynamics at play and make informed decisions about their positions. As the market continues to evolve, it will be crucial to watch for large-scale selling activity from CTAs and the response from other cohorts such as ETF holders and Shanghai traders.
The recent surge in gold prices has created a notable margin of safety for macro fund positions, which now hold significant paper profits on their over-extended positions. However, the momentum break seen on election day typically signals the end of such moves, raising questions about the future direction of prices. With downside momentum expected to accelerate below $2580 per ounce, investors should be prepared for potential large-scale selling activity from CTAs and the impact on other market cohorts.
ETF holders, who have seen recent inflows, and Shanghai traders holding near-record length positions are among the most vulnerable cohorts in the current market environment. The significance of TINA for these cohorts is evident, with recent selling activity in Shanghai coinciding with an improvement in Chinese sentiment. While silver is also susceptible to CTA selling activity in a continued downtrend, trend-following algorithms are likely to reaccumulate their positions even in a flat market.
Overall, monitoring gold prices and understanding the movements of different market cohorts is crucial in navigating the current market conditions. By taking a comprehensive flows-based approach, investors can better assess the risks and opportunities in the market. With the potential for large-scale selling activity and vulnerable cohorts in the market, it will be important to stay informed and adapt to changing conditions to make strategic investment decisions.
