Gold shines as trust in monetary order erodes – TDS

Gold's rally isn't about demand, it's about trust. We believe we are in the midst of the third major change in the monetary order. The positioning set-up in Gold is simply a symptom of this mega-theme, TDS' Senior Commodity Strategist Daniel Ghali notes.

Positioning signals pressure building for Gold’s next leg up

"Global ETF holdings of Gold continue to rise, despite signs of a retail wash over the last sessions. Global central banks continue to accumulate Gold. The détente on trade has eased Gold's buying impulse, potentially hinting at hopes that the US administration can resolve the tensions that underlie the global financial system. Eastern demand has eased along with currency depreciation fears."

"Western macro funds now not only remain underpositioned, but have likely outright shorted Gold over the last weeks, potentially reflecting a USD view. CTAs are on the offer in response to deteriorating trend signals, with downside flows now more likely to hit the tapes than just a month ago— after all, range-bound trading is akin to time decay for trend signals."

"Zoom out - Gold prices remain only a touch below all-time highs, despite a massive rebound in risk assets, extreme volatility in Treasury markets, and a persistently heavy USD. If we are truly in the midst of a change in the monetary order, Gold will capture a portion of what the USD is losing as a store-of-value. Such transitions are not typically smooth, but recent flows are building the pressures required for the next leg higher in Gold."