Gold: Data risks and CTA selling – TD Securities

TD Securities analysts Ryan McKay and Bart Melek stress that upcoming U.S. Non-farm Payrolls data and a more hawkish Federal Reserve will greatly impact gold prices, with the metal hovering near Commodity Trading Advisors (CTA) selling thresholds around $4,300 per ounce. Simulations indicate that a further decline to $4,200-$4,100 per ounce could result in CTA positioning nearing flat, although long-term downside appears limited due to improving precious metals prospects.

With economic data playing a crucial role for precious metals, gold is particularly vulnerable to CTA selling. The next economic data point, the Non-farm payrolls report this Friday, is eagerly awaited, especially given the renewed hawkish tone from the Federal Reserve and escalating energy market tensions. Gold's price reaction may be more sensitive to downside risks if data beats are realized, potentially driving gold towards the CTA selling levels, with simulations suggesting positioning could return to near flat within the following week.

Hike expectations have increased to two in 2027, and the analysts argue that the recent gold rally was premature due to lingering inflation concerns. However, they remain optimistic about gold's future, anticipating limited downside as the backdrop for precious metals improves, fueled by a renewed theme of dollar debasement, while Federal Reserve hikes remain uncertain.