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"Traders and investors are using gold like an ATM machine as the week winds down, selling to generate cash as they book profits or need to raise money to meet margin calls and offset losses in other markets. Some market participants are selling to their gold positions because they “need to be in cash, for now, to meet margin calls elsewhere,” said George Gero, managing director with RBC Wealth Management.
Others expressed similar sentiments.
“Despite the turmoil in markets, and the worst week for equity markets since the financial crisis, gold and its precious-metal peers have joined the selling party,” said a research note from TD Securities. “We believe this is due to extremely stretched positioning, as both the number of long positions and the number of traders long [bullish] are at record levels, which elevated the risk of a meaningful pullback off the highs. Further, as observed in previous episodes of market turmoil, gold will often be sold to generate liquidity and cover margins.”
Like others,
Wyckoff also cited selling of gold to meet margin calls.
“When markets get volatile and price moves are bigger and faster, margin calls in futures markets can come, forcing a trader to come up with cash or liquidate his losing position,” Wyckoff said. “That’s when the old trading adage comes in: when markets get wild and trader tensions are high, you don’t sell what you want, you sell what you can. Gold was likely a victim of this scenario this week.”
"Traders and investors are using gold like an ATM machine as the week winds down, selling to generate cash as they book profits or need to raise money to meet margin calls and offset losses in other markets. Some market participants are selling to their gold positions because they “need to be in cash, for now, to meet margin calls elsewhere,” said George Gero, managing director with RBC Wealth Management.
Others expressed similar sentiments.
“Despite the turmoil in markets, and the worst week for equity markets since the financial crisis, gold and its precious-metal peers have joined the selling party,” said a research note from TD Securities. “We believe this is due to extremely stretched positioning, as both the number of long positions and the number of traders long [bullish] are at record levels, which elevated the risk of a meaningful pullback off the highs. Further, as observed in previous episodes of market turmoil, gold will often be sold to generate liquidity and cover margins.”
Like others,
Wyckoff also cited selling of gold to meet margin calls.
“When markets get volatile and price moves are bigger and faster, margin calls in futures markets can come, forcing a trader to come up with cash or liquidate his losing position,” Wyckoff said. “That’s when the old trading adage comes in: when markets get wild and trader tensions are high, you don’t sell what you want, you sell what you can. Gold was likely a victim of this scenario this week.”
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