Is this the start of the pain trade in gold? As gold prices trade towards their pandemic-era entry levels, some traders’ complacent length is increasingly at risk for capitulation, economists at TD Securities report.

FOMC minutes to reinforce a hawkish stance

“While money manager length in gold hovering near multi-year lows, we are still anticipating a capitulation event in gold driven by the unwind of a massively bloated position held by a few proprietary trading shops and family offices.”

“The FOMC minutes today are likely to reinforce a hawkish stance, and considering the strength in financial conditions observed over the past weeks, the Jackson Hole symposium presents an additional avenue for the Fed to push back against the dovish narrative.”

“The margin of safety for trend follower short covering is rising, while Shanghai traders are also likely to join in on the offer after having accumulated nearly 14 tonnes of gold ahead amid Taiwan tensions with lockdowns and a depreciating CNY denting Chinese demand.”