Deutsche Bank Analyst Signal: Gold Oversold / This Metal Has More Room for Growth Than Gold
Daniel Ghali, Head of Metals Research at Deutsche Bank, sees the outlooks for gold and copper differently. He says that although gold has fundamental support from central bank purchases and growing participation by institutional investors, the copper market faces severe supply constraints and may have more room for growth in the short and medium term.
According to Ambassador Arjan Ghali, in an interview with BNN Bloomberg, gold has not registered a new price floor since July, despite the 10-year US Treasury bond yield crossing 5% and the oil price rising to more than $100 per barrel. According to him, maintaining this level under pressure caused by the increase in bond yield indicates the relative strength of the gold market.
Ghali described gold as oversold and below the usual level in investors' portfolios and said that although this metal looks attractive for the next year, the Iran war has caused a part of investors who are not dependent on algorithmic transactions to temporarily distance themselves from the gold market.
gold or copper; Which metal has a better outlook?
This analyst described the copper market as having the most severe shortage of supply since the 1980s and believes that this metal has the greatest capacity to increase the price in the short and medium term among the examined metals.
On the other hand, the outlook for silver is weaker according to this analyst. An increase in silver reserves in London and a decrease in China's solar demand can put more pressure on the price of this metal.
The positioning of gold investors is close to surrender
The head of Deutsche Bank's metals research described the state of gold trading positions as close to the "surrender" stage; A term in the market that refers to a situation where investors exit their positions after losses or strong selling pressure.
According to the note, trend-following funds have reached their largest net short position since October 2021. Also, non-algorithm traders have reduced their long positions by about 55% from the June peak, and the volume of open positions in gold futures on the Chicago Mercantile Exchange (CME) has reached an all-time low.
From his point of view, the inability of gold to record new lows, despite this amount of selling pressure, can be a sign of attracting supply by central banks and institutional investors. In other words, some of the big buyers may buy gold when other investors are exiting the market.
purchase of central banks; Gold support agent
This analyst believes that the current market conditions are similar to 2022 in terms of investors' positioning, but the fundamental factors are different. According to him, gold purchases by central banks and other official buyers are now more than double the pace of purchases in 2021 and 2022.
He also announced that the participation of institutional investors in the gold market has increased by 70% since 2021. These factors, he believes, can neutralize part of the pressure caused by the increase in interest rates and bond yields.
Oil prices are a double factor for the gold market
Oil prices above $100 per barrel affect the gold market in two different ways. On the one hand, rising energy prices can exacerbate inflationary concerns and geopolitical risks and increase demand for gold as a hedging asset. On the other hand, continued inflation may reinforce expectations of a contractionary monetary policy and keep bond yields high; A factor that usually hinders gold.
Despite these pressures, Ghali has evaluated the resistance of the gold price as a positive sign. However, he does not rule out the possibility of further decline in the short term.