Gold bullishness has reached extreme levels, analyst says

The cross-section of overnight precious metal returns is directly correlated with expectations of algorithmic buying activity for this session, notes Daniel Ghali, TDS Senior Commodity Strategist.

Shanghai traders sell gold positions

“Platinum continues to benefit from signs of extreme asymmetry in CTA flows, algo trend followers can buy up to +17% of their net duration this session alone. We still expect notable positive skew in the coming sessions, even a flat band that could force CTAs to fully cover their books by the middle of this week.”

“In a high bullish scenario, CTAs could even re-accumulate their effective ‘max long’ position size in the coming week, suggesting that the flow setup still aggressively favors continued bullishness. We also expect silver and palladium to benefit from modest CTA buying activity, but gold remains on note in another sign that positioning has already reached extreme levels.”

“The positioning of the macro funds remains the most vulnerable, but the window has opened for the CTA to return to bidding in the yellow metal in a large band. Interestingly, traders in Shanghai are now selling their gold positions from record highs, driven by fresh long liquidations.”