According to Daniel Ghali, a commodity analyst at TD Securities, recent price movements in gold indicate that macro fund positioning has reached extreme levels.
Ghali points to gold’s inability to rise above its opening levels for the week, even after the Federal Reserve’s 50 basis point rate cut, as a key signal. He highlights that the increasing correlation between gold and the broader US dollar aligns with the heightened positioning of macro funds.
“This stands in contrast to previous years, when physical gold flows were more influential than financial flows, leading to a distorted relationship with traditional financial indicators like US interest rates and the dollar,” Ghali explains. “This suggests that Western macro and real money funds are currently the primary buyers in the market.”
He further notes that the current macro fund positioning mirrors past extremes seen in July 2016 during the Brexit referendum, September 2019 during “stealth QE,” and the peak crisis levels of March 2020. The strong correlation with the dollar underscores the vulnerabilities facing these macro funds, according to Ghali.
