Gold: A net short position could still be targeted – TDS

Gold continues to be liquidated aggressively as the current gold market selloff is reminiscent of what happened during the financial crisis, as strategists at TD Securities note. XAU/USD is trading at 1504.59.

Key quotes

“As volatility remains prevalent with VIX hitting an 8-handle this morning, levered investors are being forced to sell to provide liquidity as a dash for cash takes precedence over value.” 

“While the uncertainty surrounding the virus is likely to keep volatility and liquidation risks high, the pending historic low real/nominal interest rates, liquidity injections, quantitative easing, income support programs and potential relief in the commercial paper market should reduce volatility and drive capital into gold once again when the dust settles.”

“While gold was able to close above levels that would imply a net short target, long liquidations remain underway, and a net short position could still be targeted should prices close below $1481/oz on the day.”