Daniel Ghali, Senior Commodity Strategist at TD Securities, stated that it is well known that the Federal Reserve is likely to cut interest rates in the coming weeks. He said that this situation is favorable for gold, but the possibility of a pullback is increasing day by day. Macro fund position indicators flash warning signals, caution should be exercised as selling activity intensifies.

Daniel said, "Our indicator for measuring macro fund positions in gold is currently at its highest level during the most severe period of the pandemic. This danger signal marks a local high set in September 2019, the previous one being in July 2016. Correspondingly, the extreme short positions of this group of people mark lows in 2018 and 2022

This time, the Commodity Trading Advisor (CTA) is also at its maximum long position, and the net long position of Shanghai traders is close to historical highs. The algorithm for silver is also fragile, and most price scenarios indicate that unless the price breaks through $31.5 per ounce, there will be selling activity soon

He finally mentioned, "This setup is completely opposite to the positioning binary at the beginning of the year, which helped push the gold price towards its current historical high. Now the downside risk is greater, and the ship is crowded with people. In fact, it's hardly as crowded as it is today. Have you found a spot on the lifeboat

However, Business Insider reported that Michael Hartnett, an investment strategist at Bank of America, said that even if gold prices hover at historical highs, investors should still buy gold.

Hartnett stated in a report last Thursday (August 22) that investors should "emulate the practices of central banks around the world and buy gold".

Hartnett mentioned that this is because the Federal Reserve's interest rate cuts in the coming months may trigger a rebound in inflation next year, while physical assets such as gold have performed well during inflationary periods in history.

At the time of Hartnett's remarks, precious metal prices were showing a record breaking upward trend. So far this year, gold prices have risen by about 20%, surpassing the S&P 500 index by several percentage points and outperforming technology stocks.

Hartnett pointed out that gold is the only asset that performs better than US technology stocks.

The confusing factor behind the rise of gold is that investors are not chasing the price of gold.

On the contrary, so far this year, there has been a net outflow of $2.5 billion in the gold market, which means investors are taking profits amidst a record high in gold prices.

This also means that the purchase of gold comes from another group of people in the market.

Hartnett stated that the coexistence of record high gold prices and negative capital outflows can only be explained by the unprecedented purchasing volume of the central bank, and added that the People's Bank of China is the largest buyer of gold in 2023.

Hartnett said, "Gold is now the second largest reserve asset (16.1% compared to 15.6% for the euro) and one of the assets with the lowest correlation to stocks among all asset classes

Potential gold ETFs worth considering are IAUM and GLDM, which Hartnett calls "top tier".

The gold price is so high that a standard gold bar now costs about $1 million.