Analysts from Toronto-Dominion Securities (TDS) have noted that short activities in Gold could be on the rise, and originating from China.
Shanghai traders selling into the safe-haven bid in Gold
As Chinese traders return to their seats following Golden Week holidays, our tracking of the largest participants in SHFE gold markets points to evidence that they have begun liquidating their bloated gold length, with 5.5k SHFE lots of net length sold over the last two trading sessions.
These liquidations represent approximately 13.5% of their total net length, and brings their net position a nudge closer to their average year-to-date position. At the same time, while the safe-haven bid may spark marginal buying activity from CTA trend followers this session, our positioning analytics argue for little risk of a large-scale buying program below the $1935/oz range.
Meanwhile, algos are unlikely to add to their shorts above the $1810/oz range, suggesting that prices are now in a no-man’s-land for CTA flows for the time being. Given ongoing Shanghai selling activity, however, the risk of subsequent CTA selling activity may be more elevated.
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