Citi said in a note on Thursday that the asset manager is expanding its long positions in gold and the U.S. dollar.
The report analyzed asset manager positions across $18.6 trillion in assets under management (AUM) and highlighted that long gold and the dollar were the “most consensus trades.”
In a broader context, Citi noted a general preference for equities, but sentiment towards European equities has clearly deteriorated, shifting from positive to negative. In fixed income, managers have broadly reduced duration bets and most credit positions, with European investment-grade credit being the exception.
Commodity markets are seeing a divergence in sentiment, with precious metals clearly favored over energy and basic commodities, with gold standing out as the most favored commodity.
“It’s all about gold and gold is the clearest consensus trade,” Citi stresses.
On the currency front, the US Dollar has emerged as another strong consensus trade. Asset managers have become less enthusiastic about the Japanese Yen and less negative about the Euro and the British Pound. However, conviction for a stronger US Dollar remains strong.
“Precious metals and the US Dollar currently have the highest directional conviction,” the note said.
This positioning is consistent with a broader strategy to mitigate risks and prepare for a potential shift in monetary policy, particularly against the backdrop of a possible rate-cutting cycle from the Federal Reserve.
Speaking at Jackson Hole last week, Fed Chairman Jerome Powell hinted at the possibility of lowering interest rates in the future but did not specify when or by how much.
The overall path forward is clear, and the timing and size of any rate cuts will likely be influenced by upcoming data, the evolving economic outlook, and an assessment of the associated risks.
