TD on gold, wary of downside risks from many directions, including an “Asian buyer strike”

Amongst concerns TD ennumerate on gold are:

• discretionary trader positioning “remains bloated” (to the long side), which means positioning risks are now asymmetrically skewed to the downside
• froth above and beyond what is consistent with expectations of Fed cuts
• Asia on a buyer’s strike
• notable long liquidations on Shanghai Futures Exchange

TD says a “a liquidity vacuum could ensue with fewer buyers to offset potential liquidations”.

As for levels TD says gold is vulnerable to a break south of US$2380/oz.

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As for that ‘buyers strike’ I noted in June the PBOC bought no gold in May. And that this continued for a second consecutive month.

• People’s Bank of China bought zero gold for a second month in a row in June

The absence of an underlying bid like this is a concern for gold bugs.

This article was written by Eamonn Sheridan at www.forexlive.com.