Gold Outlook: “The momentum break experienced on election day typically marks the end of such moves. But if that is the case, what can we expect from here? The melt-up has created a notable margin of safety for macro fund positions, which now hold significant paper profits on their extremely bloated length. Large scale selling activity from CTAs will only kick off below $2600/oz.”
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“Given downside momentum is only likely to accelerate below this threshold, other cohorts will have to do the heavy lifting. Overall, this suggests the most vulnerable cohorts are ETF holders, given their recent inflows and Shanghai traders, who are still holding onto their near-record length.”
“Don’t forget how significant TINA has been for this cohort — the last weeks have seen significant selling activity in Shanghai concurrently with improving Chinese sentiment. Silver, on the other hand, is more vulnerable to CTA selling activity in a continued downtape, but even a flat tape will likely lead trend following algos to reaccumulate their recently shed length.”
