Key Takeaways:
Key levels: Gold futures $4,720/oz | BofA model-implied $4,000 | TD target $5,350
Gold net speculative length rose 18% in three weeks to 141,648 Comex contracts, the highest since September, as U.S. debt concerns revived the debasement trade.
Gold appears at its most undervalued since March 2023, with 16 percent of fund managers calling the metal cheap versus 6 percent in July, according to Bank of America's August Global Fund Manager Survey.
Money managers increased gross long positions in Comex gold futures by 5,961 contracts to 154,595 in the week ended Aug. 18, while shorts rose 1,975 contracts to 12,947, CFTC disaggregated data shows. Net length of 141,648 contracts remains below the 12-month high of 165,519 and well under the January 2025 speculative peak of 215,000 contracts.
BofA's commodity strategy model suggests current investor buying is consistent with a gold price of $4,000, and purchases must accelerate before the metal can reach $5,000, Candace Browning Platt, head of global research at BofA, said. Gold futures traded at $4,720 per troy ounce Monday, near a three-month high, after Treasury Secretary Scott Bessent's bond-market intervention triggered dollar-debasement fears.
Positioning Trails 12-Month Peak of 165,519 Contracts
The three-week run of rising net length marks the longest consecutive increase since June, CFTC data shows. Yet positioning remains 14 percent below the 12-month peak of 165,519 contracts and 34 percent under the January 2025 record of 215,000, suggesting room for further accumulation if the debasement narrative holds.
Central bank buying has been a key support, running well above the 12-month average in June, according to BofA. A dovish Jackson Hole gathering this week would be bullish for the metal, Platt said.
TD Securities Keeps $5,350 Target Despite Rate Risk
Gold still faces headwinds from rising oil prices, which are driving inflation fears and could force the Federal Reserve to raise rates before year-end, Bart Melek, head of commodity strategy at TD Securities, said. The firm maintains a $5,350 per ounce target for gold but cautions that short-term rate risk could delay the move.
"U.S. dollar debasement fears should see gold well-supported in the coming weeks, as the Fed has not been sending a clear signal it is ready to fight higher inflation," Melek said. "However, it's too early for the metal to surge to our $5,350 target, given the risk rates on the short term may eventually rise as crude grinds higher."
Bridgewater Associates founder Ray Dalio separately recommended investors hold as much as 15 percent of their portfolios in bullion to hedge against U.S. debt crisis risk, in a LinkedIn post Friday.
This article is for informational purposes only and does not constitute investment advice.
