Ole S Hansen@Ole_S_Hansen
I was asked by clients whether the recent two-day slump in gold was driven by forced selling linked to margin calls on leveraged positions, or something else?
I believe, margin-driven participants such as hedge funds and CTAs have almost certainly been active on the sell side—but not primarily due to forced liquidation. Rather, the latest price action has triggered systematic position reduction, as trend signals have deteriorated.
In addition, there is some emerging speculation that governments in surplus economies—particularly in the Middle East—may be forced to raise liquidity, potentially through bond sales or even gold, as revenues come under pressure. That said, this remains a secondary consideration for now.
At this stage, the move is best explained by technically driven long liquidation following the break below USD 5,000, amplified by a repricing of rate expectations and a firmer dollar.
