The upcoming Federal Open Market Committee (FOMC) meeting is anticipated to be highly debated, but according to TDS commodity analyst Daniel Ghali, the Gold market is poised for a different kind of volatility.
Ghali highlights that the prevailing sentiment in the Gold market is overwhelmingly bullish. Market positions are notably extreme, with macro funds and leveraged participants holding unusually large positions. This positioning trend, he notes, is not just about the number of traders but the substantial size of their positions, which historically tends to signal local peaks.
Recent data from Comex indicates that while traders have amassed large positions, this has not been matched by an equivalent increase in the number of traders. Such extreme positioning often precedes significant market corrections, particularly if the Fed‘s stance turns out to be more hawkish than anticipated.
In addition, Shanghai traders have recently reduced their long positions from all-time highs, and physical gold markets in Asia are currently seeing less activity. Central bank purchases, though ongoing, have diminished significantly, reaching their lowest levels in five years when averaged over six months. This combination of factors suggests that the Gold market may face downward pressure in the near term.
