Commodity Trading Advisors (CTAs) are making a return to gold markets, as noted by TDS senior commodity strategist Daniel Ghali.
Despite the recent rally in gold prices, Asia is still not engaging actively in buying. Ghali predicts that systematic trend-following traders could reduce their maximum positions by up to 15% in today’s session alone, which could exert downward pressure on gold prices. This adjustment may be linked to a potential round of deleveraging and could be intensified by worsening trend indicators.
Ghali also highlights that CTA positions in gold are now highly susceptible to significant declines. In the worst-case scenario, algorithmic trading systems might liquidate up to 60% of their long positions over the coming week.
Additionally, macro funds are facing vulnerabilities due to overextended positions, and Shanghai traders have resumed selling despite recent shifts in Asian currency markets. With Asia remaining largely inactive as buyers, the current market conditions for gold could lead to substantial selling in a low-liquidity environment.
