Discretionary Demand Keeps Gold Bullish Amid Inflation Concerns

TD Securities reports that discretionary demand for gold is driving its bullish momentum, even as the market navigates complex macroeconomic conditions. According to their analysis, non-commercial and discretionary traders are maintaining long positions in gold futures, offsetting any weakness from algorithmic or trend-following funds.

The bank's positioning data shows that these traders are not only holding but also adding to their longs, reflecting confidence in gold's safe-haven appeal amid geopolitical tensions and central bank buying. This demand is occurring against a backdrop of persistent inflation concerns and expectations that major central banks may begin cutting interest rates later this year.

The latest CFTC data shows money managers increased their net long positions in gold futures as of January 21, with gross longs rising and shorts being covered. TD Securities notes that gold's resilience is notable given the recent strength in the U.S. dollar and real yields, which typically pressure the metal.

TD Securities cautions that any sharp shift in Fed policy expectations or a sudden risk-on sentiment could trigger a pullback, as positioning is already stretched. However, they maintain that discretionary demand is the cornerstone of gold's bullish trend, with the Federal Reserve expected to ease policy and geopolitical risks persisting.