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Bloated positioning in gold could set off a deeper price pullback: TD Securities

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(Kitco News) Precious metals are seeing a price pullback across the board on Tuesday, says TD Securities, warning that gold’s bloated positioning could trigger an even deeper price decline. “In precious metals, the stage is set for a positioning squeeze. Gold bulls are feeling the heat as a pullback persists across precious metals. It is worth recalling that, in contrast to prior months, positioning is now bloated, which could lead to a deeper pullback,” write TD Securities strategists. “In fact, the bullish gold narrative has used up much of the dry-powder for the bulls, and while in aggregate positioning is not yet extreme, position sizes are bloated.” There are also signs that retail interest in gold is slowing, which could hurt the bullish sentiment in the future. Real rates are also breaking their downtrend-channel. “The macro themes that have supported gold length over the past few months are ebbing. Further, gold's reaction function to real rates has shifted from a linear to a convex relationship, which could add to the pain as real rates ebb higher,” the strategists add. Silver’s price pullback, on the other hand, represents a good opportunity to buy. “Considering silver's clean positioning slate, strong investment flows and robust industrial demand, combined with a microstructure that creates a disincentive for silver bullion traders to sell, buying silver on a pullback is an attractive opportunity,” the strategists notes. 

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