Since late summer, both commercial and retail cohorts have steadily reduced their positions, exerting downward pressure on physical gold demand. However, the latest report from Deutsche Bank signals a shift in this dynamic.

According to a trading desk update on September 3, the bank’s newest dbMetals All-Metals Flow Report opens with the headline "Here Comes the Cavalry." In that report, Head of Metals Research Daniel Ghali writes:

The flow of physical gold capital has turned. Following sustained selling by commercial and retail players during the late-summer rally, non-commercial participants are now stepping up—led by discretionary hedge funds, asset managers, and banks. Their collective action points to one conclusion: at current price levels, demand for physical gold is robust.

Deutsche Bank explicitly identifies three primary buyer groups: discretionary hedge funds, asset management institutions, and banks are emerging as the key purchasing force. While buying has begun, these new buyers still hold relatively low positions. The report adds:

This aligns with our view that discretionary cohorts remain underweight in gold. Evidence from futures and the forward curve suggests that the recent sharp rally was primarily driven by liquidity dynamics, while dual financial repression measures have surprisingly failed to attract large-scale discretionary inflows. Discretionary investors remain under-positioned across physical, futures, and ETF dimensions. This may imply that the true institutional accumulation phase is only just beginning, with upside potential yet to be unlocked.

Risk remains from CTA algorithms, drawing attention to two critical price levels—Deutsche Bank does not shy away from potential downsides. CTA (commodity trading advisor/trend-following algorithms) are currently in a modest buy stance, and commercial selling has also eased. However, the report explicitly warns:

A break below $4,300 per ounce could trigger the next round of algorithmic sell programs, which, if combined with a strong non-farm payrolls print, could open scope for further liquidation.

Conversely, a rally above $4,700 per ounce would trigger subsequent futures-driven capital inflows, with buying volumes equivalent to +13% of the algorithm's maximum position size.

Summing up the current situation, Deutsche Bank offers three key takeaways:

The cavalry has arrived.

Discretionary participants remain broadly underweight across physical, futures, and ETFs.

Once the $4,700 threshold is breached, algorithmic buying will follow suit.

Structural bull market: the Strait of Hormuz matters more than the Fed—Beyond short-term tactical considerations, Deutsche Bank offers a clear verdict on gold’s long-term logic. Analysts note that the fundamental driver of gold’s structural bull market is reserve diversification, a rationale that now extends beyond interest rates and price dynamics into the geopolitical sphere. He writes:

In our worldview, a conflict in the Strait of Hormuz is currently more consequential for the reserve competition than Fed Chair Warsh's own war on inflation—this directly links to the foreign exchange reserve pools of major energy importers and exporters, which may be active participants in the gold market.

Deutsche Bank further emphasizes that it is the multi-year bear market in Treasuries, rather than a downturn in risk assets, that is pushing institutional and reserve managers toward diversifying their holdings. On energy prices, the analyst argues:

Persistently rising energy costs pose a more significant threat than a hawkish Fed. Nevertheless, unless energy prices break to new highs, the current configuration remains bullish. The market still frets over a hawkish Fed, but the next upside surprise is likely to come from precious metals' robust performance.

Other metals: platinum and palladium face algorithmic selling pressure, nickel sees supply disruption—The report also covers capital flows for other metals, with key points as follows:

Platinum and palladium: Algorithms are heavily biased toward selling. Deutsche Bank estimates that if prices decline, platinum CTA sell programs could reach -12% to -26% of maximum algorithmic positions over the next week, while palladium could see -18% to -30%.

Aluminium: CTA positioning is slightly tilted toward buying, but the asymmetry has largely dissipated, pointing to a neutral direction in the coming week.

Nickel: Potential supply disruptions are emerging, but prices have so far shown limited reaction. Deutsche Bank notes that the LME three-month nickel price of $17,300 per tonne is the next key level to trigger substantial CTA buying, with volumes potentially reaching +13% of maximum algorithmic positions. If risks of water disruption linked to El Niño escalate, CTA buying in a breakout scenario could reach +30%.