Gold: CTA positioning remains near its effective 'max long' position size – TDS

Gold now screens as a well-populated trade. The Street is unanimously bullish, but macro fund positioning may now be tapped out without an imminent recession, CTA positioning remains near its effective 'max long' position size, the top Shanghai traders have been selling their positions from near-record highs, and Asian physical markets remain on a buyer's strike, TDS senior commodity strategist Daniel Ghali notes.

Gold prices continue to creep higher

“Positioning risks are now elevated for most major cohorts on our radar ahead of inflation data and the Jackson Hole symposium, which represent the next notable catalysts for a repricing over the coming weeks. And yet, Gold prices continue to creep higher.”

“So, who's buying it? Chinese retail. Our tracking of fund flows for Chinese Gold ETFs points to a resurgence in demand, albeit at a slower clip than the behemoth buying activity that supported prices earlier this year. This is surprising, given that Asian currency depreciation pressures appeared to be a driving force behind the previous bid from this cohort.”

“But demand from Chinese retail may either have transitioned into a momentum trade, in which case they may struggle to find subsequent buyers, or may be associated with Fed pricing, in which case they are vulnerable to the repricing we expect.”