A period of high deficits, slowing growth, persistent inflation, currency devaluation and an impending cutback cycle has already drawn capital into the warm embrace of gold, notes Daniel Ghali, Senior Commodity Strategist at TDS.
Bullish narratives in gold markets pose risks
“Our flow-based analysis now suggests that downside risks are more potent. After all, macro fund positioning is now at its highest levels since the worst moments of the pandemic. It is more statistically consistent with 370 basis points of Fed cuts over the next twelve months. CTAs are effectively ‘max long’. Outflows from the Chinese Gold ETF have resumed.”
“Traders’ positioning in Shanghai near record highs already reflects the attractiveness of gold against a weaker domestic currency, equity and property markets. The narratives in gold markets are unanimously bullish and have attracted a near-unanimous consensus for higher gold prices, but we see significant risks to the near-term outlook linked to positioning.”
“Jackson Hole is the first potential catalyst, but the upcoming payrolls release may be a more consequential potential catalyst.”
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.
