Gold: Likelihood of outright spot purchases is rising by the day - TDS

Silver's breakout last session fueled strong price action (+3.5% close/close in SIH5) associated with several consecutive CTA buying programs that ultimately increased their net length by 70%, which is only equivalent to +13% of CTAs' max size given repeated whipsaws have diminished trend signals' strength, TDS' Senior Commodity Strategist Daniel Ghali notes.

XAU/XAG ratio remains at elevated level

"Nonetheless, we expect this strength in prices to attract subsequent discretionary trader interest, given this cohort remained nearly flat as of last week, with gold printing new all-time highs and the XAU/XAG ratio remaining at elevated levels. Interestingly, under the hood, the cross-section of the broad commodity complex continues to point to a resilient demand environment, with our real-time gauge of commodity demand expectations still not showing any notable sign of weakness."

"Historically, this has been associated with a strengthening in the relative value in silver to gold. Ultimately, CTAs will not sell silver in any scenario for prices other than a big downtape over the coming week, suggesting limited scope for the breakout to fail."

"Whether tariffs are announced this weekend or not, we expect continued pressure on the EFPs, which will ultimately continue to tighten London forwards and drain inventories towards levels that can challenge the market's structure. With lease rates remaining elevated, the likelihood of outright spot purchases may be rising by the day. With liquidity critically challenged, such purchases would have a non-linear impact on flat prices."