The cards were set well before election night, with evidence overwhelmingly suggesting the melt-up in Gold was underscored by a liquidity vacuum, with the US election being the focal point, TDS’ Senior Commodity Strategist Daniel Ghali notes.

Significantly deeper-than-normal Gold consolidation

“The event risk has unleashed pent-up selling activity, and while price action may screen oversold, liquidations thus far have not been extreme. CTAs have shed only 10% of their max size and could be set to sell an additional -15% of their max size over the coming sessions in a continued downtape.”

“Given simultaneously extreme positioning cues from macro funds (Earth to macro funds!) and Shanghai traders — who are also now selling at their fastest clip in years, clocking in at more than 35t of notional Gold sold into a seasonal demand upswing over the last month — and still lackluster buying activity in physical markets, we expect continued pressure on Gold prices and a significantly deeper-than-normal consolidation.”

“While price action in Silver has remained relatively contained, given its cleaner positioning set-up, the outlook for CTA flows has now notably deteriorated, with our simulations now suggesting incoming selling activity in nearly every scenario for market prices over the coming week, barring a big uptape. Silver might catch-down to Gold before precious metals find a floor.”