According to TD Securities' commodity strategists, gold prices are maintaining recent gains following weaker US jobs data, which has reduced market expectations for further Federal Reserve interest rate hikes [1]. Despite this supportive backdrop, Commodity Trading Advisors (CTAs) are actively unwinding their long positions in gold, limiting the metal's upside potential below $4,400 per ounce [1].
The report highlights that while rising energy prices could contribute to a stagflation narrative, this theme would need to become more pronounced for gold to experience a significant rally [1]. Currently, support for gold is coming from strong Asian demand, particularly from top traders on the Shanghai Futures Exchange (SHFE), as well as continued inflows into gold-backed Exchange Traded Funds (ETFs) [1].
TD Securities notes that for CTAs to re-enter the market and add to their long positions, gold prices would need to exceed the $4,400 per ounce threshold [1]. Until then, the unwinding of CTA positions is expected to cap further upside in the gold market [1].
CONCLUSION
Gold is currently supported by weaker US jobs data, Asian demand, and ETF inflows, but CTA selling is limiting further gains. A more robust stagflation narrative and a price move above $4,400/oz are needed for CTAs to re-add length and for gold to rally further.