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Investing.com - Gold prices fell Monday as Bank of America warned that further declines could trigger significant stop-loss selling from commodity trading advisors (CTAs). The precious metal has experienced downward pressure throughout the past week, approaching levels that might force automated trading programs to unwind positions.
Bank of America’s analysis indicates that medium to longer-term trend followers likely maintain near-maximum long positions in gold. According to the bank’s models, an additional 1% to 3.5% decline in gold futures prices could accelerate stop-loss selling as these algorithmic traders exit positions to limit losses.
The bank’s commodity outlook extends beyond gold, noting that CME copper futures may see further buying from longer-term trend followers, while London Metal Exchange copper contracts face selling pressure. This divergence highlights regional differences in commodity trading patterns and sentiment.
In agricultural markets, Bank of America identified extreme positioning in soybean derivatives, with soybean oil described as "stretched long" while soybean meal positions are "stretched short." This positioning disparity creates potential volatility in these related markets.
The bank specifically flagged soybean meal as a market that could experience a "significant move higher" if a bullish reversal occurs, driven by CTA position unwinding as algorithmic traders cover short positions.
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