Gold: DBS sees a cautiously optimistic outlook with mixed demand

DBS Group Research: Gold Market Outlook

Eugene Leow from DBS Group Research offers a cautiously optimistic perspective on gold, pointing out a notable split between speculative futures traders and long-term investors such as ETF and physical gold buyers. He observes that while short positions are increasing and higher real yields are dampening short-term sentiment, long-term participants are taking advantage of price dips to build their holdings. This dynamic sets the stage for a potential sharp upward move if US inflation cools or the Federal Reserve adopts a more accommodative stance.

Speculative Traders Reduce Exposure as ETFs Continue to Buy

During the week ending April 7, speculative interest in gold weakened, with managed money net-long positions dropping to their lowest level in two years.

This simultaneous increase in both long and short positions highlights the two-way risks in the market, reflecting uncertainty about gold’s short-term direction. Hedge funds are increasing their short bets as the traditional drivers for gold have shifted—now, inflation acts as a headwind, keeping the Fed’s policy tight and real yields high.

Should inflation data soften, the Fed signal a more dovish approach, or geopolitical tensions ease, a wave of short covering combined with ongoing ETF buying could spark a significant rally in gold prices.

On the other hand, if real yields climb back toward 2%, ETF inflows may slow and short sellers could intensify their positions.

This divergence between weakening futures positions and steady ETF accumulation illustrates a divided market landscape for gold at present.

(This article was produced with the assistance of AI technology and reviewed by an editor.)