Gold: Uptrend remains intact – TD Securities

According to analysts from TD Securities,  it seems that there was long liquidation of recently accumulated relatively "weak" positions near $1,500-1475/oz and they see that there are no broad changes in hedging activity or speculative activity, suggesting that current price dynamics may not be sustainable.

Key Quotes: 

“Despite little change in the macroeconomic narrative, gold has come under pressure as prices broke through key technical levels, including the uptrend channel formed from the summer lows and more recently as prices broke through $1480/oz support.”

“The combination of some 75 technical analysis trading signals suggests that 43% of signals are still tilted towards the long side in gold. In fact, chart signals in gold present the most compelling case in the cross-asset basket of securities tracked herein, with the yellow metal holding the crown for the highest absolute percentage of signals pointing long on a 60d moving average basis.”

“This lens suggests that prices are being pressured by extremely skewed positioning as the marginal chart signal prompts a herd of gold bulls to reduce their net length. However, our positioning analytics suggest that the weakness in prices is more likely to be driven by a minor shakeout in length than any major changes in positioning, given that most length is still comfortably sitting on hefty profits.”

“Overall, this suggests that these liquidations are unlikely to represent a substantial portion of the net length accumulated throughout the last year, as we estimate that the weighted average entry price for gold longs stands around $1420/oz, which remains well below current prices and is a robust support level.”