Macro fund positioning in gold as a percentage of open interest hit an all-time high last week, according to Daniel Ghali, Senior Commodity Strategist at TD Securities. This heightened positioning comes amid speculation about substantial interest rate cuts from the Federal Reserve.
Continued Risk for Rising Gold Prices
Ghali emphasized that while macro fund positioning has reached extreme levels, the recent bets on significant Fed cuts have propelled their gauge beyond notable historical benchmarks, including the Brexit referendum, the “stealth QE” narrative, and even the depths of the pandemic crisis.
In terms of market movements, Western gold ETFs are experiencing modest inflows, whereas outflows from Chinese gold ETFs continue. Although top traders in Shanghai have slightly increased their net positions in the Shanghai Futures Exchange (SHFE) gold market, their holdings have remained near record highs for several months.
“We have closed our tactical short position in gold following the Fed’s larger-than-expected initiation of its cutting cycle,” Ghali noted. “However, it’s important to recognize that positioning cues remain extreme. The risk for higher gold prices continues, fueled by an expanding narrative that could attract more capital—particularly as fears grow regarding a ‘macro reckless’ Fed that has historically maintained an unusually low threshold for easing, even amidst decent economic data.”
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