Gold is currently experiencing a surge in popularity as a trade, with many investors bullish on its prospects. However, macro fund positioning may have reached its peak without a looming recession, while CTA positioning remains near its maximum long position size. Additionally, the top Shanghai traders have been selling their positions at near-record highs, and Asian physical markets are showing a reluctance to buy, according to TDS senior commodity strategist Daniel Ghali.
Despite these factors, gold prices are still inching higher. The upcoming inflation data and the Jackson Hole symposium are seen as potential catalysts for a repricing in the near future. Although positioning risks are elevated across major cohorts, gold prices continue to rise steadily.
One surprising source of demand for gold comes from Chinese retail investors. Fund flows for Chinese Gold ETFs indicate a resurgence in demand, although at a slower pace compared to earlier in the year. This renewed interest is unexpected, considering the previous buying activity was driven by Asian currency depreciation pressures. It remains to be seen if this demand will continue as a momentum trade or if it is tied to Fed pricing, making it vulnerable to repricing.
The current situation raises questions about who will continue buying gold. Chinese retail investors may struggle to find additional buyers if their interest has shifted to a momentum trade. Alternatively, if their demand is tied to Fed pricing, they may be at risk of a potential repricing. As the market awaits the next catalysts for gold pricing, it will be interesting to see how these factors play out.
Overall, the outlook for gold remains positive, with many investors still bullish on its prospects. However, the current positioning of various investor cohorts raises concerns about potential risks and vulnerabilities in the market. As the situation continues to evolve, it will be important to monitor how demand from Chinese retail investors and other factors impact the future trajectory of gold prices. With inflation data and the Jackson Hole symposium on the horizon, the market is bracing for potential changes that could influence the price of gold in the coming weeks.
