Broad Markets – Globally stock markets were weaker last week (US -2%, Europe -1%, Japan -3%, China -1%, EM -2% in local terms), the worst week since December. The ECB held rates flat, but introduced additional TLTROs (targeted long term loans to banks), which hurt the value of the euro, while the pound sterling fell 1% vs the US dollar. The US dollar was higher by almost 1%. The US 2/10 curve flattened and continues to stay in the mid-teen range (17bps). 10yr German Bund yields continue to fall to 7bps, their lowest levels since mid-2016, when yields were negative. Commodities were effectively flat with oil mostly unchanged. Focus remains on US/China trade discussions as well as the Friday meeting of the BOJ.
Liquidity – COMEX net longs are back up-to-date and showed a decrease in net longs from 500t to 300t. Gold market liquidity fell in February from $114bn to $104bn a day versus January. However, volumes were heavy on the first week of the month at $128bn.
Technicals – Gold rebounded last week and tested a return to its 200-d moving average with a strong move on Friday.$1,300 will continue to be an important level
Flows by time periods – Weekly flows were lower last week -$554mn. This was mostly from North American and European Funds. Global funds lost $1.1bn this month driven by North America and Europe.
Option Exposure and Volatility –Put/call skew has shifted to cheap while call skew is expensive. This means people are paying up for upside exposure to gold with less concern about the downside.
