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  • Busy news and economic calendar could drive gold prices this week

    • Busy news and economic calendar could drive gold prices this week

    16 September, 2019

    Gold prices:

    • Gold fell last week (XAU -1.2%, LBMA -1.4%) as the stock market rallied and yields rose the most in six years.
    • Gold fell back to the important level of ~$1,500 which could act as support in the interim.

     

    Potential gold price drivers this week:

    • Oil had the largest intraday move in history last evening following the Saudi Arabia oil field bombing which impacts 5% of the global oil supply; this has gold bid with concerns about potential retaliatory actions.
    • Rate decisions from the FOMC, BOE and BOJ could drive gold prices; US markets are pricing in 25bps cut.
    • Markets will continue to weigh news out of the UK where PM Boris Johnson is expected to meet with EU officials on Brexit.
    • Quadruple-witching in the US on Friday, when expiration on futures and options on indices and stocks occur on the same day; this is often met with increased volatility and volumes.

     

     

    Liquidity:

    • COMEX net longs fell sharply from 1,134t to 963t, still near all-time highs and well above long-term averages as the price of gold fell for a second week in a row.
    • Gold trading volumes also fell sharply last week as we received some late August OTC data; levels went from $238bn a day to $209bn a day; this remains 83% above the 2018 average. 

     

    COMEX Net Longs

    Source: CFTC, Bloomberg

     

    Gold-backed ETF Flows:

    • $760mn worth of outflows globally last week mainly coming from the US (-$610mn) and Europe (-$178mn). Other regions had minimal flows.
    • Flows are mostly flat for the month (+$187mn) with all-regions except Europe with small inflows.

     

    Gold-backed ETF flows last week

     

    Source: Bloomberg, World Gold Council

     

    Options and volatility:

    • $2.8tn worth of gold futures option open interest at the $1,500 strike over the next two months; many multiples higher than traditional amounts. $2tn at $1,550 and $2.4tn at $1,600 which was added last week.
    • Implied and realized volatility both fell last week as gold hovers around $1,500.
    • Call skew increased near the one-year highs as investors likely added to bullish bets following the pullback.
    • Put skew increased sharply as investors began to buy downside protection.

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