Gold oversold and underowned, Deutsche Bank analyst urges buying

The significance of this call lies in its timing after a major shakeout; when positioning is stretched, any recovery tends to be magnified once selling pressure subsides. Deutsche Bank's caution regarding low liquidity during Golden Week indicates that another downward move may occur before a floor is established, keeping near-term volatility elevated. The main obstacle remains the Federal Reserve's tightening policy and yields at 5%. Ghali argues that central bank buying now outweighs the impact of rising rates. Oil prices above $100 have a dual effect: they boost gold as a hedge against inflation and geopolitical risks, but also contribute to higher yields that pressure the metal. Across the broader metals complex, the divergence between silver's oversupply and copper's shortage suggests relative-value strategies rather than a general metals play.

---

Earlier articles:

• Asian gold producers are hoarding metal domestically, from refining in Laos to Indonesia's 15% levy

• Bank of America warns oil is gold's main adversary, with downside risk below $4,000
• Morgan Stanley's Gower views $4,000 as a solid gold floor, pointing to three supports
• Gold trading strategy as futures market is near Friday's close

---

Deutsche Bank interprets gold's inability to fall further as evidence that central banks are discreetly purchasing, and it is advising investors traveling to Sorrento to follow suit.

Key points:

• In a gated interview with BNN Bloomberg, Deutsche Bank metals research head Daniel Ghali described gold as oversold, underowned, and appealing for next year.
• Since July, gold has not recorded a fresh low even with 10-year yields exceeding 5% and oil above $100. Official purchases have more than doubled compared with the 2021-2022 pace.
• Additionally, in a September 30 research note, he characterized positioning as close to capitulation: CTA net shorts are at their highest since October 2021, and discretionary long positions have fallen roughly 55% from June.
• Ghali encouraged investors to "buy in Sorrento" at the LBMA conference, but cautioned that low liquidity during Golden Week might trigger one final sell-off first.
• He anticipates silver will lag due to oversupply, and views copper, which is experiencing its most constrained market since the 1980s, as offering the largest upside.

According to Daniel Ghali, who leads metals research at Deutsche Bank, gold's resilience in the face of US 10-year Treasury yields above 5% and oil above $100 per barrel makes it appealing heading into next year.

During an October 2 interview with BNN Bloomberg, Ghali pointed out that gold has not made a new low since July. He deemed that price action strong and resilient in light of yield pressure. He stated that the metal currently appears oversold and underowned, with the Iran conflict having temporarily sidelined discretionary investors.

Ghali noted that positioning is similar to 2022, but the context is quite different. He explained that central bank and other official-sector purchases have more than doubled from the 2021-2022 rate, while institutional involvement in gold has risen by about 70% since 2021.

A September 30 Deutsche Bank note from Ghali, as relayed by BigGo Finance, described gold positioning as approaching capitulation. Trend-following funds hold their biggest net short position since October 2021, discretionary traders have reduced long positions by roughly 55% from a June high, and open interest in CME gold futures has dropped to an extreme low. The note indicated that gold's inability to set new lows in this context implies that central banks and institutions are quietly soaking up the selling.

Ghali advised investors to buy in Sorrento, alluding to the London Bullion Market Association's annual conference being held in the Italian resort town that weekend. He warned, however, that low liquidity during China's Golden Week holiday could first drive the market into a final capitulation.

His views on the wider metals complex were less uniform. Silver, he said, has moved from severe scarcity to oversupply, with London stocks at their highest since November 2024 and Chinese solar demand down by about one-third this year. That leaves scope for additional drops and underperformance relative to gold. Copper, in contrast, is experiencing its most severe shortage since the 1980s, with the US and China holding around 70% of above-ground inventories. Ghali sees copper offering the greatest potential returns in the near and medium term.