Gold has come under renewed bearish pressure and hit a fresh monthly low below $1,710. Strategists at TD Securities note that any dip in the yellow metal increases the odds of a massive capitulation event in gold.
Silver prices are vulnerable
“Gold markets still feature an extremely concentrated and bloated position held by family offices and proprietary trading shops. Few traders are now holding an extremely bloated position. Further, this position does not appear to be associated with a stagflationary narrative. As prices approach this cohort's pandemic-era entry levels, the risk of a large-scale capitulation is growing. This fits well with the risk of a breakout in the broad dollar index, which could coincide with a meltdown below the $1,675 range.”
“Considering that industrial demand has also resumed its slump, after the mean-reversion in demand signals showed signs of overshooting, silver prices are also vulnerable given little exposure to the rise in supply risk premia that has supported the base metals complex.”
“While palladium also proved vulnerable to demand headwinds, a recent CTA selling program has been whipsawed, translating to modest buying support that should soon run out of steam. Unless prices break north of $2,133, we expect a CTA selling program to imminently weigh on palladium.”
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