Significant inflows into Gold markets might be about to reverse – TDS

High deficits, slowing growth, fears of sticky inflation, currency devaluation, and an imminent cutting cycle worldwide are all reasons to explain the current spike in Gold prices. But traders might be going too far, TDS Senior Commodity Strategist Daniel Ghali notes.

Downside risks have grown got Gold

“What if we argued these narratives had already attracted significant inflows into Gold markets? Our gauge of macro fund positioning in Gold has scarcely been higher than it is today. In fact, it is statistically consistent with 370bps of Fed cuts.”

“Commodity Trading Advisors (CTAs) are 'max long', and Shanghai trader positioning has reverted to record highs. Few visible shorts remain in the market. Positioning cues are flashing red in Gold markets. And while the fundamental narratives that drive Gold are bullish, narratives ultimately chase prices.”

“Downside risks have grown, and while positioning tells us nothing about timing, Jackson Hole and the next nonfarm payrolls report appear to be consequential catalysts for a possible washout in positioning.”