Correlation between Gold and the broad USD grows – TDS
|Price action in Gold is telling you that macro fund positioning is extreme, TDS commodity analyst Daniel Ghali notes.
The rise in macro fund positioning
“Of course, Gold's failure to rally north of the week's opening levels despite a 50bp cut from the Fed is one cue, but the strengthening correlation between Gold and the broad USD precisely mirrors the rise in macro fund positioning.”
“This contrasts with the last several years, where Gold's physical flows dominated financial flows, distorting the relationship with traditional financial indicators such as US rates & USD and provides additional evidence that Western macro & real money funds are the marginal buyers today.”
“However, we think macro fund positioning is already at extreme levels, analogous to July 2016 (Brexit referendum), Sep 2019 ("stealth QE") and the peak of the pandemic crisis in Mar2020. The strengthening correlation with the USD is case in point, and also hints at where the chink in the armor is for macro funds.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.