Asset Managers’ Positioning on Gold and USD

Asset managers are increasingly long on gold and the US dollar, according to a Thursday note from Citi.

The report examines asset manager positioning across $18.6 trillion in assets under management (AUM) and indicates that long positions in gold and the dollar represent the most consensus trades.

Market Sentiment

While there is a general preference for equities, Citi reports a notable decline in sentiment toward European equities, shifting from positive to negative. In fixed income, managers have broadly decreased duration bets and most credit positions, with European investment-grade credit being the exception.

Commodities Outlook

In commodities, sentiment diverges; there is a clear preference for precious metals over energy and base commodities, with gold being the standout favorite.

Citi emphasizes, “It is all about gold, which is the most clear consensus trade.”

Currency Trends

On the currency front, the US dollar is gaining traction as a strong consensus trade. While asset managers have toned down their enthusiasm for the Japanese yen, sentiment toward the euro and British pound has improved slightly. However, the strong conviction for a stronger dollar persists.

Citi notes, “Precious metals and USD now have the highest directional conviction.”

Broader Strategy

This positioning reflects a broader strategy of de-risking and preparing for potential shifts in monetary policy, particularly in light of a possible Federal Reserve rate-cutting cycle.

During his recent speech in Jackson Hole, Fed Chair Jerome Powell hinted at potential interest rate cuts in the future, though without specifying the timing or magnitude.

The path forward appears clear, with the timing and scale of any rate adjustments likely influenced by upcoming data, changes in the economic outlook, and the assessment of related risks.