Is the Chinese bid in gold running on fumes? Economists at TD Securities expect the yellow metal’s rally to run out of steam.

Global macro points to potential exhaustion of the rally

“Shanghai traders have contributed to the rally in precious metals, adding nearly 12.3k SHFE lots of gold and 11.2k SHFE lots of silver in the last two weeks alone. This has likely exacerbated price action amid a short covering rally. Notwithstanding, price action across global macro points to potential exhaustion of this move, with duration-sensitive assets approaching their trendline resistance once again.” 

“We see signs that the Chinese bid in gold is exhausted, with Shanghai traders starting to liquidate some of their recently added length. In this context, gold prices are flirting with the threshold for CTA short covering, but have thus far failed to sustainably break through key trigger levels associated with a significant buying program, which could point to informed participants on the offer.”