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After the breakout to new highs, gold has hit a wall, and our client flow is more and more concentrated on positioning for short-term downside.
There is a view that Fed Chair Powell’s speech at Jackson Hole is the landmine that could rock US rates and will then prove to be the big risk that drives the yellow metal.
However, while we always hold an open mind to the price moves that could play out, and react as objectively as possible – my base case is that Powell’s tone will hit the market pricing almost perfectly, so in theory, the US swaps and Treasury markets shouldn’t get a shock – so for those positioned in gold for Powell to lean towards a 50bp cut then they may get a look to pare back.
News that China’s gold imports fell 24% in July won’t necessarily surprise, and as we look at what could be, reports that Chinese banks have new import quotas may suggest future imports may start to rise again – a factor that has been such a critically important driver of the upside through 2024.
Still, there is nothing more emotive than momentum, and should this wall of supply that we’re seeing stand aside and the gold bulls make a statement, then we have to think less about the why and align to the flow and weight of capital, where the upside in gold is there for chasing.
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