Positioning Note: Why Gold Still Has Room to Run

ALS Capital Group — Markets & Macro

Gold near a ten-week high isn't, on its own, a surprising outcome in the current environment — it's almost the textbook response to the data of the last few weeks. What's more interesting is whether the conditions that got it there are durable enough to justify holding the position through the next major catalyst, rather than treating the move as a headline-driven spike likely to fade.

What's Actually Driving the Move

Gold is, at its core, a real-rates trade. It tends to do well when the market believes future interest rates will be lower than previously priced, because the opportunity cost of holding a non-yielding asset falls. That's precisely the shift that's occurred over the past few weeks. Two consecutive soft US inflation prints — a flat June reading followed by a modest 0.1% increase in July — combined with a weak jobs report, have pushed the probability of a September rate hold from roughly 14% to around 42% in a matter of weeks.

Core CPI at 2.5% year-on-year, its lowest level since February, adds weight to the idea that this isn't a one-off print but the continuation of a genuine disinflation trend, following an energy-driven spike that appears to be fading.

The Complication: Geopolitical Risk Hasn't Gone Away

The cleaner version of this story would have oil prices falling in step with inflation, reinforcing the disinflation narrative. That hasn't happened. The Strait of Hormuz remains closed, and reports of a near-resolution between Washington and Tehran have since stalled, with both sides described as being at an impasse on the terms of a lasting deal. Brent and WTI are both holding a meaningful risk premium as a result.

This matters for the gold thesis in two ways. In the near term, persistent Hormuz-driven oil strength acts as a partial offset to the disinflation trade — a genuine upside surprise in energy prices could flow through to headline CPI within a month or two, complicating the very narrative that's currently supporting gold. But it also cuts the other way: as long as that geopolitical uncertainty persists, it provides its own independent source of safe-haven demand, somewhat insulating gold from a pure rates-driven pullback.

The Catalyst That Actually Resolves the Question

Every data point between now and the end of August is, in a sense, a placeholder. The release that will do the most to confirm or unwind the current rate-hold pricing is Chair Warsh's address at the Jackson Hole Economic Policy Symposium in late August — his first substantial policy commentary since July's ambiguous, split-vote meeting.

A dovish tone there would likely validate the market's current repricing and give gold a clearer run toward the higher end of recent institutional forecasts. A hawkish surprise, even a modest one, would force a reassessment of how much of the current move has been justified by data versus sentiment, and could see a meaningful portion of the recent gains unwind quickly.

How We're Positioned

Our current bias holds gold as an active position rather than a fresh entry sized for further upside from here — a distinction that matters given how far the move has already run. The structural case (cooling core inflation, a Fed that's clearly divided rather than uniformly hawkish, and a widening probability of a hold) supports staying long. But position sizing reflects the binary nature of the Jackson Hole catalyst: this is not a moment to be maximally exposed into an event capable of moving the rate-hold narrative sharply in either direction.

The broader lesson applies beyond gold specifically. When a single catalyst — a speech, a meeting, a data release — carries this much weight for where a thesis goes next, sizing discipline into that event matters more than trying to predict its outcome with confidence.

This piece reflects ALS Capital Group's internal macro research and current positioning view. It is intended for general informational purposes only and does not constitute financial advice. Positioning is subject to change without notice as market conditions evolve.