Broad Markets - Globally stock markets were slightly higher last week, the standout was China +7% with positive US/China trade-related talks. Stocks are climbing to start the week on trade optimism. The 2/10 curve in the US steepened to its highest levels of the year at 20bps. Commodities as a whole fell with the GSCI down 2%, led by oil down 2.5%. The US dollar was flat. President Trump lashed out at Powell and his ‘tightening policies’ over the weekend. Probability of a hike this year is at 8% and a cut at 2%, slightly more hawkish than the previous two weeks. The ECB meeting is this week and probability of a hike on the year is close to 50%.
Gold – Gold was sharply lower last week (LBMA -1.3%, XAU -2.7%) closing strongly to the downside on Friday as the US dollar strengthened and stock markets moved higher
Technicals – Gold broke support and is well below the 50-day moving average and $1,300. It stalled at ~$1,350 as we thought might happen and is starting to become slightly oversold. $1,275 is probably the next psychological support level.
Flows by time periods – Weekly flows were lower last week -$926mn. This was mostly from North American and Asian Funds. Global funds lost $1.3bn in February driven almost entirely by GLD and Huaan Yifu.
Liquidity – COMEX net longs were updated as of 2/22 and we saw and increase in net longs to 531 tonnes, the highest levels since April of last year. Gold market liquidity fell in February from $114bn to $104bn a day versus January. However, Volumes were heavy on the first day of the month at $128bn with the selloff on Friday.
