Money manager net longs fell sharply last week as gold volatility increased

Gold performance/technicals:

• Gold moved higher last week (XAU 0.5%, LBMA 0.6%) as the US dollar gave back some of the previous week gains and market weakness drove rates lower.
• Gold moved back above the $1,500 and 50-day moving average levels, suggesting the bearish head-and-shoulders breakdown the previous week was a false move. These levels will remain very important as to sense the next price direction of gold.

Gold Price

Liquidity:

• COMEX net longs fell sharply last week from 1,113t to 938t. Notably the money manager net longs fell nearly 20% from 908 to 731, a sign of a pullback in what was very optimistic positioning by money managers. This could be a function of profit taking or concerns with the most recent price sell-off.
• Trading volumes held the September average at around $183bn a day, 60% higher than 2018 averages.

COMEX Net Longs

Source: CFTC, Bloomberg

Gold-backed ETF flows by time periods:

• $800mn worth of inflows globally last week split between the US (+$380mn) and Europe (+$408mn). Other regions had minimal flows.
• Flows are higher by $638mn in October; September ETF flows will be released tomorrow at 8am EST

Options and volatility:

• Implied volatility rose to near 1-yr highs with the recent >1% moves in the price of gold. Options skew remains bullish in sentiment with premiums paid for calls versus puts.
• $1,500 and $1,550 house significant futures open interest and should act as a trading range in the near term.