dbMetals: The Whole Flow Report — Momentum Shock: Quant Funds Deleveraging

Deutsche Bank's dbMetals Whole Flow Report examines the momentum shock driven by quant-fund deleveraging. The bank estimates that the decline in risk-parity leverage for volatility-targeting portfolios ranks around the 90th percentile of its full-sample estimates since 2010, producing indiscriminate cross-market flows. CTAs are expected to add 20%, 7%, 13% and 15% of maximum size to gold, silver, platinum and palladium, respectively, while selling a massive 24% of maximum size in copper and 20% in zinc. The report argues that absolute algo selling exhaustion in gold is near, with CTAs needing gold closer to $4,370/oz before the next large-scale buying program is triggered;