In a surprising turn of events, gold prices have not only held their ground but have also surged past the downward trendline established since the Jackson Hole symposium, despite the Fed's recent interest rate hike. This unexpected resilience has left the market puzzled and analysts scrambling to identify the catalyst behind this unusual buying pressure.
According to fund flow data from Deutsche Bank, the hawkish stance of Fed Chair Warsh provided only minimal support to gold prices. Both commercial and non-commercial buying failed to show significant volume increases, while CTA (Commodity Trading Advisor) positions remained virtually unchanged. Open interest in CME gold futures saw only a marginal uptick, and although Chinese ETF inflows have been rising, the pace is not exceptionally notable.
Daniel Ghali, Head of Metal Research at Deutsche Bank, stated candidly in the report that with all conventional buyers failing to make significant moves, the driving force behind this price surge points to a deeper, structural power—reserve management institutions.
Deutsche Bank believes that geopolitical tensions in the Strait of Hormuz carry far more weight for gold than Warsh's anti-inflationary stance. For reserve managers, the synchronized decline in energy prices creates more room for reserve reallocation, making this a far more substantive factor than a few rate hikes. This logic brings the correlation between gold and oil prices to the forefront, forming the core framework of the bank's gold outlook.
As conventional buyers remain conspicuously absent, a mysterious buying force has surfaced. Through real-time tracking of spot fund flows via its global aggregated electronic trading platform, Autobahn, Deutsche Bank observed that during the latest trading session following the FOMC meeting, the commercial and non-commercial buying that had previously supported the market and offset retail outflows showed no significant inflows.
Meanwhile, CTA positions held steady during this period, CME gold open interest only marginally increased, and while Chinese ETF inflows trended upward, the pace of that flow was anything but extraordinary. Given that these conventional funding sources have notably failed to deliver, the fact that gold has managed to break through its downward trend since Jackson Hole raises a pivotal question for Deutsche Bank: who is the mysterious buyer driving this rally?
Deutsche Bank's answer points to reserve management institutions. The report highlights that geopolitical tensions stemming from the Strait of Hormuz conflict carry more weight at the reserve management level than the Fed's rate hike trajectory itself. For reserve managers, the simultaneous decline in energy prices carries more direct policy implications—falling oil prices mean reduced foreign exchange earnings for energy exporters, increasing pressure on reserve allocation, and enhancing the appeal of gold as a non-sovereign reserve asset.
This leads Deutsche Bank to conclude that gold's sensitivity to oil is rising, a relationship that is being reinforced through three interconnected paths: Fed policy decisions, reserve management buying behavior, and geopolitical developments. The report also notes that active investors currently hold relatively light positions overall, while structural demand persists, making it difficult to trigger large-scale sell-offs in gold even in the face of bearish pressures.
Despite gold's demonstrated resilience, Deutsche Bank cautions that the current price gains are insufficient to shift CTAs' overall selling bias in the coming week. The report indicates that algorithmic trading systems are inclined to sell precious metals in the week ahead under nearly all price scenarios. Deutsche Bank's advanced positioning analysis shows that the skew in CTA selling activity is not directly linked to the Fed's hawkish meeting itself. Some market participants interpret this as a "lagged reaction to the hawkish FOMC," but the bank believes this interpretation is inaccurate.
Among the various precious metals, palladium is considered the most vulnerable due to sustained significant outflows in spot funds over the past month. Silver appears relatively resilient, benefiting from persistent arbitrage opportunities and steady retail buying. Platinum faces risks as well—with no scenario likely to trigger large-scale algorithmic buying, any price correction could see CTA selling reach 20% to 40% of its historical maximum positioning.
Given this complex landscape, Deutsche Bank maintains its existing operational framework: over the next week, if crude oil prices rise, it will buy gold during algorithm-driven selling pressure; if oil prices show reversal signals, it will actively go long on gold. The core logic behind this strategy is that the correlation between gold and oil has become the primary pricing anchor for current market dynamics, rather than the traditional interest rate-driven framework. Until reserve managers' structural buying becomes fully apparent in public data, oil price trajectory will serve as the most forward-looking indicator for determining gold's direction.