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TD Securities' tactical short pays off after gold-market washout

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(Kitco News) - Commodity analysts at TD Securities announced that they took profits in their tactical gold short trade.

The Canadian bank was targeting $1,730 an ounce as they were expecting the precious metal to break below support at $1,750 an ounce. The analysts said Sunday evening that they closed out their short position at $1,707 an ounce.

“Vulnerabilities in gold's microstructure helped us argue that the bar for a deeper pullback in precious metals was razor thin. In turn, the strong jobs data helped catalyze significant liquidations as the Fed's dual focus on inflation and jobs places additional attention on employment data, with global markets attempting to gauge the taper clock and to set a timer for the Fed's first hike. In turn, gold prices broke below their bull-market defining trendline since 2019, fueling significant stop-outs and melting gold's prices,” the analysts said in their updated note.

Better-than-expected employment data sparked Sunday's washout in gold. Friday, the U.S. Labor Department said that 943,000 jobs were created in July, handily beating consensus expectations of 870,000 jobs. At the same time, the unemployment rate fell to 5.4%, down from 5.9% in June. Wages also rose more than expected in July.

The bank announced its short position two weeks ago and was expecting to hold it for the month of August.

Gold prices dropped sharply at the start of the Asian trading session falling to a new low for the year at $1,677.90 an ounce. Although gold prices are well off their session lows they are still under significant pressure.

December gold futures last traded at $1,738.80 an ounce, down 1.38% on the day.


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