Analysts say gold appears to be headed for a bearish turn.

Global markets are pricing in a rapid return to normal, a downturn severe enough that it has few historical parallels outside of recessions, notes Daniel Ghali, chief commodity strategist at TDS.

Markets are pricing in rapid rate cuts.

“While there is an argument to be made that this is consistent with a period of low inflation from high levels, we see a threshold for challenging the ‘this time is different’ pricing. Meanwhile, the case for gold is that a period of high deficits, slowing growth, fears of stubborn inflation, currency depreciation and an impending rate cut cycle have already attracted macro funds’ capital into the warm embrace of the yellow metal.”

“The long position of aggregate funds as a percentage of total open interest has now crossed the 95th percentile, which has historically represented important turning points for aggregate narratives as shown in our first report table Today. This time, the setup also features “Maximum CTAs” and puts Shanghai traders at record highs.

“But the inflows into Chinese ETFs and broad commodity indices have already begun. That raises the question: who will move first?”