Gold Defies Rate Hike, Breaks Above Downtrend as Reserve Management Institutions Take Hold
Gold prices have defied expectations by breaking above a downtrend line after the Federal Reserve initiated a rate hike. The unexpected price action has raised questions about who is behind the rally, given that traditional buyers were largely absent.
According to Deutsche Bank's metals research team, reserve management institutions are the driving force behind this rally. Daniel Ghali, head of metals research at Deutsche Bank, stated that with conventional buyers failing to show meaningful participation, the surge in gold prices points to a deeper structural force - reserve management institutions.
The geopolitical conflict in the Strait of Hormuz has had a greater impact on the gold market than Federal Reserve Chair Kevin Warsh's personal anti-inflation stance. For reserve management institutions, the decline in energy prices carries more weight than rate hikes. This logic has pushed the gold-oil correlation to the forefront of market attention.
Deutsche Bank tracks spot fund flows in real-time through its Autobahn platform and found that commercial and non-commercial buying showed no significant inflows following the FOMC meeting. Meanwhile, Commodity Trading Advisor (CTA) positioning remained unchanged, and open interest in CME gold futures rose only marginally.