Is this time different? – TDS

Positioning signs are flashing red in gold markets on several fronts, so fund managers are now likely to be justified only in an imminent recession or with an increasingly broad mix of gold investors, notes Daniel Ghali , senior commodities strategist at TD Securities.

Jackson Hole and the next wage report seem consequential

“Gold prices are now retreating from new all-time highs following the significant technical break north of $2,500/oz in spot gold, which participants linked to significant macro fund buying, digital barriers, ETF options expirations and report that the PBoC issued a new gold import. licenses. In reality, the patchwork of information suggests that the breakout was more likely associated with options flows, with reports of China’s import quotas looking largely irrelevant for now, with domestic gold prices still trading at a discount. “

“We continue to see signs of buying exhaustion on multiple fronts, barring an imminent recession. Traders’ positions in Shanghai remain near record levels, despite demand for hedging against currency depreciation stalling. CTAs remain “maximum long”. Most importantly, macro fund positioning is now at its highest levels since April 2020 and is in fact now more statistically consistent with 370bp of Fed tapering over the next twelve months.”

“This is inconsistent with more modest pricing for cuts across macro-global markets and screams of a dislocation in positioning that can only be justified by an impending recession, unless ‘this time is different.’ Wednesday’s annual benchmark revision estimate for payrolls could fuel recession fears as payrolls data appear to overstate job gains, but Jackson Hole and the next payrolls report look most important.”