TD Securities’ Senior Commodity Strategist Daniel Ghali argues that Gold’s bull market has been driven by successive capital pools, from central banks to institutional and retail investors, effectively mimicking a carry trade. With Middle Eastern USD surpluses now pressured by higher energy costs and the Iran conflict, he sees Gold’s long-term outlook as healthy but the medium-term constrained, with Commodity Trading Advisors (CTAs) at risk of fully exiting longs.

Bull trend strained by conflict dynamics

"USD surpluses were increasingly being recycled into gold. This fueled a bull market which attracted a cascading pool of participating capital, mechanically resembling a carry trade."

"Now, Middle Eastern nations' are facing deep economic pain, and energy importers will struggle to keep this trend alive as their USDs are being spent on elevated energy costs."

"Gold's long-term outlook still look healthy, but medium-term remains challenged by the conflict."

"The drawdown in gold already looks extreme, but the short term outlook still remains vulnerable nonetheless, ahead of the Supreme Court's upcoming decision on the Lisa Cook trial."

"A big downtape over the coming week could push CTAs to completely exit their remaining gold longs, resulting in a flat position for the first time in more than two years."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)