Price action in Gold is telling you that macro fund positioning is extreme, TDS commodity analyst Daniel Ghali notes.

The rise in macro fund positioning

“Of course, Gold's failure to rally north of the week's opening levels despite a 50bp cut from the Fed is one cue, but the strengthening correlation between Gold and the broad USD precisely mirrors the rise in macro fund positioning.”

“This contrasts with the last several years, where Gold's physical flows dominated financial flows, distorting the relationship with traditional financial indicators such as US rates & USD and provides additional evidence that Western macro & real money funds are the marginal buyers today.”

“However, we think macro fund positioning is already at extreme levels, analogous to July 2016 (Brexit referendum), Sep 2019 ("stealth QE") and the peak of the pandemic crisis in Mar2020. The strengthening correlation with the USD is case in point, and also hints at where the chink in the armor is for macro funds.”