Gold Prices Face Local Peak, Silver Is The Better Set-Up Now

(November 25, 2024 - Ernest Hoffman)

(Kitco News) – Gold buyers are looking exhausted, signaling that a near-term price top for the yellow metal is likely in, and silver is now looking better-positioned for further gains, according to TD Securities’ Senior Commodity Strategist Daniel Ghali.

In a research note, Ghali pointed out that the recent downturn in gold prices highlighted by sharp liquidations from macro funds aligns very well with historical patterns of previous drawdowns associated with macro fund liquidations from extreme levels which averaged between 7% and 10% over the last ten years.

“However, the strong price action since was less typical — featuring a concurrent decline in open interest in Comex Gold,” he said, “with few directional money manager shorts after accounting for EFPs, continued divestment from ETFs in the West and in China, alongside a notable change in trading behavior from Shanghai traders over the last weeks.”

“We now expect imminent buying exhaustion,” Ghali warned. “Safe-haven demand associated with Russia's ballistic missile launch has hit the tapes supporting prices further than would otherwise be the case, but will likely have to reverse in the near-term.”

“From a macro perspective, the Fed's discounted path is no longer likely to lead to an 'overly easy' policy stance, suggesting that macro fund interest is unlikely to return towards extreme levels,” he added.

“Price action has finally been sufficiently strong to force CTAs back into an effective 'max long' position size, suggesting that every single trend signal on our radar is already pointing long, which will in turn cap subsequent algo buying activity,” Ghali noted. “And, the TINA trade is still reversing in China, suggesting that Asian demand won't save the day.”

“The set-up for flows in Silver is notably superior,” he concluded.

Gold has sold off steadily throughout Monday’s trading session. Since opening above $2,711 per ounce, spot gold lost nearly $100 on its way to the $2,615,67 low set at 1:23 pm EST. It last traded at $2,623.02 per ounce for a loss of 2.44% on the daily chart.