The US CPI data delivered the first sign of peak inflation. Gold hit the highest level in over a month at $1,808 in a knee-jerk reaction to the data. In the view of strategists at TD Securities, a massive CTA buying program may exacerbate the rally in gold. 

Chinese bid in gold continues to unwind

“The downside miss on the highly anticipated US inflation data may catalyze a substantial buying program in gold, bringing the margin of safety for trend signals to razor-thin levels.” 

“The Chinese bid in gold continues to unwind. This has likely exacerbated price action amid a short covering rally. However, with the associated geopolitical risk receding, the cohort is now selling their recently added gold length, but additional CTA purchases would likely overwhelm this selling pressure.” 

“The pain trade remains to the downside, but prices may be able to trade higher before macro headwinds weigh on the yellow metal once more.”