Gold is seen extending its defensive trading around $1,850. Economists at TD Securities highlight that the yellow metal is close to entering a bear market trading regime.

Will proprietary traders’ gold length collapse in a post-pandemic world?

“Proprietary traders are holding onto this complacent length, as price action related to the war in Ukraine likely saved the consensus longs from additional liquidations in the face of a hawkish Fed. This cohort represents the greatest risk for a liquidation vacuum in the yellow metal, but with the next few hikes set in stone, traders might have to rely on Fed pricing post-September to catalyze a positioning squeeze.”

“The margin of safety for gold to hold onto its uptrend continues to subside, which only leaves a narrow window for the metal to avoid entering into a bear market trading regime. Notwithstanding, mean-reversion signals are now outperforming in both gold and silver, pointing to additional downside on the horizon.”