Western investors love the prospect of ‘panic cuts without the panic’, but Shanghai traders are short on precious metals. This morning, the prospect of a direct military confrontation between Israel and Iran is driving safe-haven inflows into Gold, notes TDS commodities analyst Daniel Ghali.
The prospect of monetary inflation has historically benefited Gold
“Selling activity in Gold has been somewhat limited, but major traders still liquidated almost 5t of nominal Gold over the last week. This contrasts with Western investor sentiment. Our read on macro fund positioning remains in their highest levels since the Brexit referendum in July 2016; the re-leveraging of risk parity and volatility targeting funds is supporting a reaccumulation of CTAs and prices continue to rise without challenge.”
“For Western investors, concerns about monetary inflation are rising as participants interpret the Fed’s reaction function as asymmetric, at a time when the US economy remains decent by many measures. “We expected a more measured monetary policy normalization to challenge inflated positions, given that aggressive global easing similar to current market expectations has typically occurred in response to deteriorating economic or financial conditions.”
“This outlook for monetary inflation has historically benefited gold prices, but make no mistake, in real terms, prices are already challenging levels not seen since the 1980s, macro fund positioning is already extreme, activity Central banks’ buying pressure has eased, and regained confidence in Asia could sap a major driver of gold demand. In the short term, the prospect of a direct confrontation between Iran and Israel is driving even more capital into gold. “
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
