Gold traders will likely remain bullish no matter what the Fed decides on rates

The upcoming FOMC meeting will be quite controversial, but not for the gold market, notes TDS commodities analyst Daniel Ghali.

Trading in pain is at a disadvantage

“Rates traders are divided on the outlook for Fed tapering for the next few meetings. A market where we don’t see such a division: Gold. The consensus is unanimously optimistic, macro fund positions are at extremes, and leveraged participants barely held this inflated position.”

“A dry powder analysis of Comex non-trade positioning suggests that this froth is not associated with the breadth of traders, but rather with the size of the position held by these traders. And given that the magnitude of macro fund positioning has reached extreme levels that have historically marked local peaks, inflated position sizes argue for additional pain for a steep disappointment.

“Shanghai traders have retreated in recent weeks from record highs, and Asian physical markets remain on a buyers’ strike. Central banks are still buying, but the pace has slowed significantly and the latest data suggests they are now at five-year lows on a 6-month moving average. Hate it or love it, trading in pain is at a disadvantage.”