A period of high deficits, slowing growth, sticky inflation, currency devaluation and an imminent cutting cycle has already attracted capital towards Gold's warm embrace, TDS Senior Commodity Strategist Daniel Ghali notes.

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 depths of the pandemic. It is more statistically consistent with 370bps of Fed cuts over the next twelve months. CTAs are effectively 'max long'. Chinese Gold ETF outflows have resumed.”

“Shanghai trader positioning near record-highs already reflects Gold's allure in the face of a weaker domestic currency, stock and property market. Narratives in Gold markets are unanimously bullish and have attracted a nearly unanimous consensus for higher Gold prices, but we see significant risks to the near-term outlook tied to positioning.”

“Jackson Hole is the first potential catalyst, but the next payrolls release may be a more consequential potential catalyst.”