Gold consolidates despite ETF outflows – TDS

Chinese ETFs sold roughly -64koz last session, more than offsetting the +27koz inflows from global x-China ETFs. These outflows still remain multiples below the scale of inflows seen over the last months, suggesting additional selling activity from other cohorts, TDS' Senior Commodity Strategist Daniel Ghali notes.

USD’s weakening store-of-value role supports Gold

"A continued rise in comex Gold open interest could point to some modest short acquisitions over the last sessions, but even so, the scale of these selling flows in aggregate remains limited, which suggests prices are simply consolidating on modest retail outflows until they find the first bid."

"After all, we reiterate that CTAs will not notably sell their longs without a substantial drawdown, macro funds are roughly flat in Gold and the top Shanghai traders have been aggressively buying the dip after holding their smallest Gold position in a year — adding up to 685koz of notional Gold to their books since Gold prices topped around Chinese holidays. This leaves retail ETF holders as the only vulnerable cohort, and unless macro funds opt to build a more significant net short position, persistent central bank demand should be sufficiently strong to offset such flows."

"The surprise will be that Gold prices struggle to trade lower — despite the worst-case scenario for Gold on trade hitting the tapes this week. This is what an asymmetric trade looks like, and ultimately, we think this behavior is symptomatic of the USD partly losing its store-of-value function — even if it isn't losing its reserve currency status."