The dynamics of overnight precious metals returns are closely linked to anticipated algorithmic trading activity, according to Daniel Ghali, Senior Commodity Strategist at TD Securities (TDS).
Shanghai Traders Sell Gold Positions
Ghali highlights that platinum is currently benefiting from significant shifts in Commodity Trading Advisor (CTA) flows. Algorithmic trend followers are poised to increase their net long positions in platinum by up to 17% during this session. This trend suggests potential for considerable upside in the coming days. Even if market conditions remain stable, CTAs may be compelled to fully cover their short positions by midweek.
In a scenario where prices surge, CTAs might reaccumulate to their maximum long positions over the next week, indicating a strong bias towards further upside movement. Silver and palladium are also expected to see some benefit from modest CTA buying, though gold is notably standing out as positioning in the yellow metal has reached extreme levels.
Ghali notes that macro fund positioning remains particularly vulnerable, but the opportunity for CTAs to return to selling gold in a downtrend has opened up. Notably, Shanghai traders are currently offloading gold positions from record highs, driven by recent long liquidations.
