To The Moon

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Key Takeaway

• Algorithms are set to buy stocks, bonds, and gold into early February, driven by CTAs re-leveraging amid market calm.

• CTAs will likely continue purchasing across asset classes in nearly all scenarios except a major Treasury market shock.

• Gold $Gold - main 2404(GCmain)$ is poised for significant algorithmic buying even at $2,000 per ounce as macro traders adjust for a potential rate-cutting cycle.

Algorithmic Trading Strategies to Drive Market Activity

Automated trading strategies are set to dominate market activity in the coming weeks, with professional investment managers expected to re-leverage their positions amidst a calmer financial market environment.

Daniel Ghali, a senior commodity strategist for TD Securities, anticipates that regardless of the outcome of key events such as the Federal Reserve policy decision and Treasury auction details this week, algorithmic trading strategies will drive buying across stock indexes, bonds, and gold.

CTAs Poised to Buy Across Asset Classes

Commodity trading advisers (CTAs) are positioned to buy stocks, bonds, and gold in nearly every scenario. Even in situations where asset prices are falling or rising, CTAs are likely to engage in substantial buying activity. Ghali notes that every trend signal points towards upside potential in U.S. and EU equity indices. Additionally, CTAs are expected to buy bonds across various scenarios but do not entirely rule out the possibility of significant forced selling activity impacting the U.S. government-debt market.

Gold Demand Driven by Algorithmic Buying

Amidst macro traders historically underpositioned in gold for a rate-cutting cycle, algorithmic-driven buying is anticipated across all price levels for gold futures contracts. Even with front-month prices currently around $2,000 per ounce, notable algorithmic-driven buying is expected as macro traders adjust their positions based on historical trends.

Investors await further clues from the Federal Reserve's rate decision and Treasury's upcoming auction sizes while keeping an eye on Friday’s nonfarm payrolls report for January which is expected to show a gain of 185,000 jobs according to economists polled by The Wall Street Journal.