TD Securities reports that discretionary traders, including hedge funds, are now the main force behind gold’s recent surge, as market positioning remains stretched amid shifting rate cut expectations and geopolitical uncertainties.
TD Securities says gold’s latest climb is being driven less by passive flows and more by active conviction from discretionary traders, a group that includes hedge funds and other large speculators. In the bank’s view, that positioning has helped keep bullion near record levels even as investors weigh inflation pressures, a still-strong US dollar and firm real yields, which usually act as a drag on the metal.
The bank’s reading is backed by data from the Commodity Futures Trading Commission, which showed that non-commercial traders held 9,403 long contracts and 11,167 short contracts in gold futures in the week to January 21, 2025. A week later, the CFTC said non-commercial longs had eased to 8,622 while shorts fell to 7,991, suggesting some covering rather than a broad reversal in sentiment. Wider positioning data from market trackers shows money managers still carrying sizeable net long exposure through that period.
That matters because gold’s appeal has been reinforced by expectations that the Federal Reserve and other central banks may cut interest rates later in 2025. Lower borrowing costs reduce the opportunity cost of holding a non-yielding asset such as gold, while geopolitical uncertainty and central bank buying continue to support demand for a traditional haven.
TD Securities also warned that the rally may be vulnerable if rate-cut expectations are pushed back or if market sentiment abruptly turns more optimistic. With positioning already stretched, any shift away from caution could trigger profit-taking, even if the broader bull case remains intact for now.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
