- Although gold prices set a new high earlier in the year, the momentum of the rally has diminished.
- Traditional relationships between gold prices and other factors such as US real yields and the US dollar have broken down. Historically, higher US real yields and a stronger US dollar would suppress gold prices, but this year, both gold prices and these factors have risen.
- The technical indicators suggest a loss of momentum, with prices already below the 50-day moving average.
- Decreased expectations of US monetary policy easing have not resulted in higher gold prices as might be expected.
- During the COVID crisis, physical gold experienced shortages, leading to high demand and premiums. This year, speculative positions have increased, but premiums on popular gold coins like the Eagle and Maple Leaf are below long-term averages, indicating no significant shortage.
- Despite the reduction in ETF positions, speculative positions in the futures market have increased, offsetting the potential negative impact on gold prices from the ETF liquidation.
Spoke about gold here a bit earlier, explaining that it's been tough justifying gold's recent price action with the fundamentals. The positioning is also stretched here, so caution warranted for sure.
