TD is wary of gold, saying that their data on macro positioning data in gold appears to be flashing warning signs.
- model suggests gold positioning is statistically consistent with 370bps of Fed rate cuts, a fairly extreme level
- Commodity trading advisors (CTAs) are "max long" gold, and positioning in Shanghai has reverted to record highs
- dearth of visible shorts in the market is also a concern
- positioning cues suggest the market may be overly positioned for bullish gold narratives at the moment
TD says that fundamental factors for gold remain strong, but also say that narratives often end up chasing prices rather than driving them:
- risk is of washout in gold positioning, potentially triggered by key events like the Jackson Hole symposium or the next nonfarm payrolls report
- downside risks appear to be growing, even if the timing of any potential correction is uncertain
- the data implies the gold market may be vulnerable to a sharp pullback from current levels if positioning needs to be unwound
Its been a freight train higher:
