Gold: Cautiously constructive demand split – DBS

DBS Group Research’s Eugene Leow assesses Gold with a cautiously constructive stance, highlighting a divergence between speculative futures traders and strategic ETF and physical buyers. He notes rising short positions and elevated real yields weighing on tactical sentiment, while longer-term investors accumulate on price weakness, creating scope for an asymmetric upside reversal if US inflation and Federal Reserve signals turn more dovish.

Speculators short while ETFs accumulate

"Speculative positioning on gold deteriorated in the week ending April 7, with managed money net-long positions falling to a two-year low."

"This simultaneous increase in gross positioning on both sides signals two-way risk, underscoring market uncertainty about gold's near-term trajectory.Hedge funds are building shorts as the traditional gold playbook has inverted, with inflation a headwind rather than a tailwind, keeping the Fed restrictive and real yields elevated."

"If sentiment shifts on softer inflation data, dovish signals from the Fed or geopolitical ceasefire, the combination of aggressive short-covering and continued ETF accumulation could trigger a strong rally."

"Conversely, if real yields rise towards 2% again, ETF inflows may stall while shorts add to positions."

"The contrast between deteriorating futures positioning and steadily rising ETF holdings reveals a bifurcated market structure at present."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)