Asset managers are long gold and US dollar: Citi

Asset managers are increasingly positioning themselves long on gold and the US dollar, Citi said in a Thursday note.

The report, which analyzes asset manager positioning across $18.6 trillion in assets under management (AUM), highlights that Gold and dollar longs “are the most consensus trades.”

In the broader context, while Citi notes a general preference for equities, the sentiment towards European equities has notably soured, shifting from positive to negative. In fixed income, managers have broadly reduced their duration bets and most credit positions, with European investment-grade credit being the exception.

Commodities have seen a divergence in sentiment, with a clear preference for precious metals over energy and base commodities. Gold, in particular, stands out as the most favored commodity.

“It is all about gold, which is the most clear consensus trade,” Citi highlights.

On the currency front, the US dollar is emerging as another strong consensus trade. Asset managers have reduced their enthusiasm for the Japanese yen, while becoming less negative on the euro and British pound. However, the conviction for a stronger greenback remains robust.

“Precious metals and USD now have the highest directional conviction,” the note states.

This positioning aligns with a broader strategy of de-risking and preparing for a potential shift in monetary policy, particularly in the context of a possible Federal Reserve rate-cutting cycle.

During his Jackson Hole speech last week, Fed Chair Jerome Powell set the stage for potential interest rate cuts in the future, although he did not specify when or by how much the rates might be lowered.

The general path forward is evident, with the timing and scale of any rate reductions likely to be influenced by upcoming data, the changing economic outlook, and the assessment of associated risks.