Deutsche Bank: Reserve Managers Likely Behind Gold's Anomalous Rally

Following the Federal Reserve's latest rate hike, gold prices did not fall as expected. Instead, they broke above the downward trendline that had been in place since the Jackson Hole symposium. This unusual move has puzzled the market and prompted analysts to ask: Who is buying gold?

Deutsche Bank: Conventional Buyers Are Absent

According to a metals fund flow report from Deutsche Bank, obtained by Zhuifeng Trading Desk, the hawkish stance from Fed Chair Jerome Powell had only a limited impact on gold prices. Commercial and non-commercial buying showed no significant increase. CTA (Commodity Trading Advisor) positions remained largely unchanged, CME gold open interest rose only marginally, and while Chinese ETF inflows increased, the scale was not unusually large.

In the report, Daniel Ghali, Head of Metals Research at Deutsche Bank, stated bluntly: with none of the usual buyers stepping up meaningfully, the driving force behind this gold rally points to a deeper structural force—reserve management institutions.

Geopolitics and Oil: The Real Drivers

Deutsche Bank argues that geopolitical tensions in the Strait of Hormuz have a far greater impact on gold than Powell's anti-inflation stance. For reserve managers, the simultaneous decline in energy prices frees up room for reserve reallocation—a factor more significant than several rate hikes. This logic brings the correlation between gold and oil prices to the forefront and forms the core framework of Deutsche Bank's gold outlook.

Who Is the Mysterious Buyer?

Using real-time tracking of spot fund flows via its global aggregated electronic trading platform, Autobahn™, Deutsche Bank observed that in the trading session following the FOMC meeting, neither commercial nor non-commercial buying—which had previously supported the market and hedged retail outflows—showed any notable inflows.

Meanwhile, CTA positions remained flat, CME gold open interest rose only marginally, and Chinese ETF inflows, while trending upward, did not accelerate abnormally.

Against this backdrop, gold prices still managed to break the post-Jackson Hole downtrend. This divergence leads Deutsche Bank to a central question: Who is the mysterious buyer behind this rally?

Reserve Managers: Geopolitics and Oil Are Key

Deutsche Bank's answer points to reserve management institutions. The report notes that the geopolitical tensions triggered by the Strait of Hormuz conflict carry more weight at the reserve management level than the Fed's rate hike path itself.

For reserve managers, falling energy prices have a more direct policy implication: lower oil prices mean reduced foreign exchange revenue for energy exporters, increasing pressure on reserve allocation. This, in turn, enhances the appeal of gold as a non-sovereign reserve asset.

Deutsche Bank concludes that gold's sensitivity to oil prices is rising, and this correlation is reinforced through three channels: Fed policy decisions, reserve manager buying behavior, and geopolitical factors. The report also notes that active investor positioning in the market remains generally light, while structural demand persists, making it difficult for gold to experience a sharp sell-off even under bearish pressure.

CTA Still Biased Toward Selling; Algorithmic Pressure Cannot Be Ignored

Despite gold's resilience, Deutsche Bank warns that the current price gains are insufficient to change CTA's overall selling bias over the next week.

The report states that algorithmic trading systems are inclined to sell precious metals in almost all price scenarios over the coming week. Deutsche Bank's advanced positioning analysis shows that the skew in CTA selling activity is not directly linked to the Fed's hawkish meeting. Some market participants interpret this as a "lagged reaction to the hawkish FOMC," but the bank considers this interpretation inaccurate.

Among precious metals, palladium is seen as the most vulnerable, due to sustained and significant spot fund outflows over the past month. Silver is relatively resilient, supported by persistent arbitrage opportunities and steady retail inflows. Platinum also faces risks: with no scenario likely to trigger large-scale algorithmic buying, a price pullback could lead CTA selling to reach 20% to 40% of its historical maximum position.

Deutsche Bank's Strategy: Oil-Linked Gold Trading

Given this complex landscape, Deutsche Bank maintains its existing operational framework:

• If crude oil prices rise: Buy gold during algorithmic selling pressure.
• If crude oil prices show a turning signal: Actively go long on gold.

The core logic behind this strategy is that the gold-oil correlation has become the primary pricing anchor for the current market, replacing the traditional interest rate-driven framework. Until reserve managers' structural buying becomes fully visible in public data, oil price trends will serve as the most forward-looking reference indicator for gold's direction.

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