Commodity Trading Advisors (CTAs) are finally returning to the offer in Gold markets, TDS senior commodity strategist Daniel Ghali notes.

Asia remains on a buyer's strike

“We expect systematic trend followers to shed up to -15% of their max size in today's session alone, which should weigh on prices despite the overnight rally in the Yellow Metal. This is partly related to the start of a potential round of deleveraging, but may be further exacerbated by deteriorating trend signals.”

“CTA positioning in the Yellow Metal is now significantly vulnerable to a large downtape, with algos potentially selling up to 60% of their current long position over the coming week in this scenario.”

“At the same time, additional vulnerabilities from macro funds' positions, which we still estimate as not only bloated but likely tapped out, and Shanghai traders who have now returned to the offer despite the reversal in Asian currency markets. Asia remains on a buyer's strike. Overall, the set-up in Gold may result in substantial selling activity in a liquidity vacuum.”