Gold breaks $3200 as Chinese ETF inflows stall - TDS

Gold fell below $3200/oz as a pause in Chinese ETF flows and geopolitical optimism triggered a pullback--but underlying support from central banks and institutional inertia keeps downside risk asymmetric, TDS' Senior Commodity Strategist Daniel Ghali notes.

Positive Russia-Ukraine headlines expose Gold to sharp pullback

"Gold prices are breaking through the $3200/oz range. Why today? Perhaps because Chinese ETF flows ground to a halt overnight after gaining steam over the last sessions, leaving the door for positive Russia-Ukraine headlines to catalyze a break."

"Make no mistake: the US-China ceasefire on trade was the worst-case scenario for Gold, but our flow-based analysis continues to argue that the surprise will relate to the limited scale of subsequent selling activity. Unless macro funds opt to build a more significant net short position, our framework suggests that only retail ETF holders (both in the West and the East) are vulnerable at this juncture."

"Persistent central bank demand should be sufficiently strong to offset such flows. This is what an asymmetric trade looks like, and ultimately, we think this behavior is symptomatic of the USD partly losing its store-of-value function -- even if it isn't losing its reserve currency status."