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.

Visible short positions remain near decade-lows

“Macro fund positioning in Gold is at its highest levels since the depths of the pandemic. It is more statistically consistent with deep recession cuts than it is with normalization cuts, or alternatively may be bloated due to geopolitics, deficits, or any number of the bullish narratives touted above.”

“What is clear is that macro funds have scarcely held more Gold than they do today, with our estimates now at levels that marked local highs in 2019 and 2016. CTAs are also effectively 'max long'. Chinese 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.”

“Asia is on a buyer's strike in physical. Visible short positions remain near decade-lows. Narratives in Gold markets are unanimously bullish. We see significant risks to the near-term outlook tied to positioning, despite the strong fundamental backdrop.”