Is Gold Close to a Change? No visible signs yet, says TDS analyst

A period of high deficits, slowing growth, sticky inflation, currency devaluation and an impending discount cycle have already drawn capital into gold’s warm embrace, notes Daniel Ghali, TDS senior commodities strategist.

Visible short positions remain near decade lows

“Macro fund positioning in gold is at its highest levels since the depth of the pandemic. It is more statistically consistent with deep recession cuts than with normalization cuts, or alternatively it may be inflated by geopolitics, deficits, or any number of the optimistic narratives outlined above.”

“What is clear is that macro funds have not held more gold than they currently do, with our estimates now at levels that marked local highs in 2019 and 2016. CTAs are also effectively ‘max long’ . ETF outflows from China have resumed. Shanghai traders’ positioning near record highs already reflects gold’s allure against a weaker domestic currency, stock market and property market.”

“Asia is in a physical buyer’s strike. Visible short positions remain near decade lows. The narratives in the gold markets are unanimously optimistic. We see significant risks to the near-term outlook related to the positioning, despite the strong fundamental context.”