LIVE MARKETS-Gold - overbought but under-owned - looks primed to keep rallying

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GOLD – OVERBOUGHT BUT UNDER-OWNED – LOOKS PRIMED TO KEEP RALLYING

Gold prices have backed off from a record high, but market positioning isn’t yet pointing towards weakness in the sector, which may mean still higher prices from here, according to TD Securities.

“Liquidations in gold have already ground to a halt,” TD commodity strategists Daniel Ghali, Bart Melek and Ryan McKay said in a report on Thursday. Spot gold prices XAU= rose to $3,367.04 on Thursday, but are holding below a record $3,500.05 reached on Tuesday.

Leveraged speculators in Shanghai kept their positions unchanged overnight and now hold their smallest position size in the last year, western macro funds are also net flat, while commodity trading advisors won’t liquidate without a severe drawdown, TD said.

Chinese exchange traded fund inflows, meanwhile, continued to jump, “suggesting this cohort opted to buy the dip,” while global ETF selling was limited.

“Yes, gold is overbought — but it's under-owned. We expect surprisingly limited liquidations from here, which in turn suggests the balance of risks has already shifted to the upside, given odds of an about-face on the apparent détente in trade. Embrace the melt-up,” TD concludes.

(Karen Brettell)

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