Net long positions taken by funds in gold traded on the Chicago Commodity Exchange are at their fourth-highest level in more than 20 years (Chart 1).
While this is an indication of strong speculative demand, technical indicators also support this: RSI and Stochastic indicators confirm that the momentum is very much up. Yet, the fact that it is too much above the 200-day moving average may cause gold to retreat rapidly from time to time. (Chart 2)
Another hint that supports these possible pullbacks is that the physical demand for gold has been falling since the beginning of 2023. The sum of demand from central banks, exchange-traded funds, and jewelry demand has been on a downward trend, while gold prices have risen.
There is only one reason why the price of gold is rising while the demand for gold is declining. Gold rose not because it is golden, but because funds investing in US stocks bought it as a hedge against a possible fall in the dollar. As long as the funds remain in US stocks, it will maintain its upward trend for a while longer, accompanied by rabid withdrawals.