The gold market continues to struggle to attract any consistent bullish momentum. Meanwhile, gold price retested the support at $1,700. That’s why a bank sees the precious metal close to a capitulation sale.
“Precious metals stand on the threshold”
cryptocoin.comAs you follow, the Federal Reserve pointed to more aggressive monetary policy action with further rate hikes and quantitative tightening. Commodities analysts at TD Securities reiterated their bearish outlook for gold, saying the outlook is ‘gloomy’. In this context, analysts make the following assessment:
Precious metals stand on the threshold. With each drop in gold prices, the probability of a major capitulation event increases. This could also coincide with a break below a ten-year uptrend in the yellow metal around $1,675.
“Speculative positions should be followed for gold price”
TDS says investors should continue to monitor speculative positions in the gold market. Because speculative positions continue to be the critical factor for capitulation sales. Speculative positions in the Comex futures markets have fallen sharply since March. But analysts say there is room for sentiment and positioning for further declines. Analysts make the following statement:
The Falcon Fed narrative has slashed the money manager position to several-year lows. While this is happening, the gold markets still have a highly concentrated and bulging position held by a small number of family offices and proprietary trade shops. It also does not appear to be associated with a stagflationary Fed narrative. But given its buildup in 2020, we see the risks of this position being somewhat complacent.
TD Securities is tactically short under
The bearish outlook comes as markets solidify expectations that the Fed will raise interest rates by 75 basis points in September. Last week, Fed Chairman Jerome Powell also warned markets that interest rates could stay high for longer to keep inflation well-fixed.
TD Securities has been tactically short of gold since the end of July. While TDS is bearish on precious metals, it also highlights some positive points in the market.
“Gold price goes below $1,700”
In a separate note on Thursday, the bank said the gold market continues to see solid demand from China. At this point, analysts note:
Top players in Shanghai markets continue to increase their gold despite the depreciating CNY. These flows, along with central bank demand, likely prevented gold from melting into the liquidity gap amid a hawkish Fed narrative.
China’s gold demand has been interrupted for two years due to the global Covid-19 pandemic. It has recently garnered new attention as the nation re-enters the market after that. Trade data from Switzerland last month showed that gold exports to China rose 150% in July. The data shows that 80.1 tonnes of gold were shipped to mainland China, the largest monthly shipment since December 2016.
However, despite growing physical demand in Asia and strong appetites from central banks, TDS analysts say this will not be enough to stop gold from falling below $1,700.
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