Gold positioning are reacting to what the US Federal Reserve might do next. The market is almost split on whether the Fed will cut rates by 50 basis points or 25 basis points. However, many investors are already betting on more than 175 basis points of cuts by March. Daniel Ghali, a Senior Commodity Strategist at TDS, says this is why the market didn’t react much to the latest US Nonfarm Payrolls (NFP) data.
Gold Prices Near Record Highs
Gold positioning are close to their highest levels ever. Ghali points out that the current investment in Gold reminds him of past events like the Brexit vote in 2016, the “stealth QE” narrative in 2019, and the height of the Covid-19 panic in March 2020. When Gold prices hit such high levels, it often leads to a drop of around 7%-10% afterward.
NFP Data and Future Market Moves
A strong NFP report could have changed market expectations, but Ghali believes it wasn’t necessary for Gold prices to start falling. The slow and steady price movements are making it easier for Commodity Trading Advisors (CTAs) to sell. Even though Gold is near its peak, there could be a sharp downturn, leading trend-following investors to sell their Gold holdings.
In short, while Gold prices are high, the extreme investment levels suggest that a correction may be coming. Investors should be cautious and aware that prices could drop.
For more insights on Gold market trends, visit Daily Gold Signal. You can also explore the latest updates in the Daily Gold Update.
