Gold has become a beacon for investors amid a period of high deficits, slowing economic growth, persistent inflation, currency devaluation, and an anticipated rate-cutting cycle, according to Daniel Ghali, Senior Commodity Strategist at TD Securities.
Ghali highlights that macro fund positioning in gold is at its highest levels since the pandemic’s peak, with current levels being more aligned with severe recessionary conditions than with standard economic normalization. This surge in investment could also be driven by geopolitical tensions and economic deficits.
“Macro funds have scarcely held more gold than they do today,” Ghali noted, with positioning now matching the peaks seen in 2019 and 2016. Commodity Trading Advisors (CTAs) are similarly fully committed, holding ‘max long’ positions. Meanwhile, despite some outflows from Chinese ETFs, Shanghai traders continue to position near record highs, underscoring gold’s appeal in the context of a weakening domestic currency and declining stock and property markets.
However, despite the strong fundamentals, Ghali warns of significant near-term risks. “Asia is on a buyer’s strike in physical gold,” he points out, adding that short positions remain at near-decade lows. While the bullish sentiment surrounding gold is nearly unanimous, the elevated positioning levels pose potential risks, making the near-term outlook for the precious metal uncertain.
