Commodity Trading Advisors (CTAs) have unwound their recent purchases of gold, yet the metal remains well-supported by discretionary investors, according to TD Securities commodity strategists. The bank notes that gold has shown resilience after a hawkish interest-rate hike from the Federal Reserve, and it expects any near-term weakness to be contained and to present renewed buying opportunities.
CTA selling and discretionary support
CTAs, which are systematic funds that follow trend signals, had been buying gold in recent weeks but have now reversed those positions. TD Securities strategists highlighted that this reversal was anticipated, given how quickly CTA buying can be unwound. However, they emphasise that the broader market is still underpinned by discretionary investors — fund managers and individual investors who make active decisions based on fundamentals rather than automated signals. This underlying appetite has helped gold hold above key support levels despite the selling from CTAs.
Hawkish FOMC and favourable backdrop
The Federal Reserve delivered a hawkish rate hike at its latest meeting, which typically pressures gold by strengthening the US dollar and raising the opportunity cost of holding non-yielding assets. Yet gold has remained “extremely strong” in the aftermath, according to TD Securities. The strategists point to a broadly favourable precious-metals landscape, noting that a hiking cycle is already priced into the market. In addition, easing energy prices have provided near-term support, reducing inflationary pressures and improving the outlook for economic growth.
Near-term weakness seen as buying opportunity
TD Securities expects any further weakness in the precious metals market to be limited to modest CTA selling. They argue that such dips would increasingly be viewed as buying opportunities for gold. This view is based on the resilience of discretionary demand and the overall constructive environment for precious metals. As of Monday, gold was trading near $4,350 per troy ounce, with the US dollar firm and US Treasury yields declining across the curve.
Key takeaways
- Commodity Trading Advisors have reversed recent gold buying, but discretionary investors continue to support the market.
- Gold has held up well after the Federal Reserve’s hawkish rate hike, with a favourable precious-metals backdrop.
- TD Securities expects any near-term weakness to be limited and to present buying opportunities.
- Easing energy prices and a priced-in hiking cycle are supporting gold in the immediate term.
Common questions
What are Commodity Trading Advisors (CTAs)?
CTAs are professional money managers who use systematic, trend-following strategies to trade futures and options in commodities, currencies, and other markets. Their buying and selling is driven by price momentum rather than fundamental analysis, which can lead to rapid reversals when trends change.
For the latest price, check the live gold price.
In summary, while CTAs have pulled back from gold, the metal’s support from discretionary investors and a broadly favourable environment suggest that any dips are likely to be shallow and temporary, according to TD Securities.