Gold open interest hits historic lows despite bullish macro – TDS
|This is one of those moments where Gold markets are offering a gift, TDS' Senior Commodity Strategist Daniel Ghali notes.
Gold is 'overbought but underowned' in market perception
"Aggregate open interest in CME Gold is now approaching extreme lows (425k) that have historically marked lows in Gold prices—despite a compelling macro case for Gold. This underscores our view that Gold is perceived as a crowded trade, but is in fact under-owned. This is particularly surprising amid the ongoing megatheme-Gold's rally is associated with the USD partly losing its store of value function."
"Gold's rally isn't about demand, it's about trust. We expect aggregate futures open interest will imminently rise, as a function of market plumbing. CTAs will buy Gold in any scenario this coming week, with continued algo buying activity expected this session (+4% of max size). We expect this flow to persist and in fact to accelerate into next week's NFP report, potentially tallying up to a massive +30% of algos' max size."
"With macro funds largely flat in Gold post-liberation day, signs of selling exhaustion from ETF holders, incoming CTA flows, and historically strong forward returns from such low levels of aggregate open interest, prices are likely to be bolstered by positioning alone. Yet another about-face on trade could catalyze the next buying impulse by this summer."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.