Gold: Trust, not demand, drives the mega-theme – TDS

Gold prices aggressively rejected the move towards the uptrend that defined this year's epic rally, TDS' Senior Commodity Strategist Daniel Ghali notes.

Fast money shorts set stage for a surprise surge

"Price action corroborates our view that fast money have engaged in short positions, in line with our latest read of macro fund positioning. This flow may have been concealed in CFTC positioning data due to concurrent (1) risk parity re-levering over the last weeks and (2) ebbs and flows in CTA positioning, which obfuscate the read of aggregate open interest."

"For the time being, the buying impulse which powered gold's rally has eased along with the détente on trade, but many catalysts lie ahead, several of which appear imminent: (1) growing echoes of "Treasury QE"; (2) trade files; (3) resumed interest rate cuts, (4) a stagflationary environment, or (5) challenges to central bank credibility. Western money managers will be caught off guard."

"Price action in the Shanghai premium already suggest dip buyers have reemerged in the East. We continue to argue that 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 with striking analogies to the 1970s. This positioning set-up is simply a symptom of this mega-theme."