Gold fell last week, after a six-week rally (LBMA -1.0%, XAU -0.6%).
This occurred primarily on Friday, driven by a strong US Job’s report that drove the probability of a July 50bps cut from 25% to 0%, as well as a surprise increase in India’s tax duty to 12.5% from 10%.
Fed rate cut probability
Source: Bloomberg
Volume and Liquidity:
Gold trading volumes continued to increase meaningfully to start the month with last week’s average at $184bn a day. The June average was $169bn vs YTD average of $115bn.
Interestingly, the Shanghai Futures Exchange volume increased significantly, with daily volumes at $14.5bn, well above the YTD average of $5.8bn; we recently highlighted Chinese investment behaviour in a blog.
Technicals:
The gold price rally finally paused, which was expected given the extremely overbought conditions.
The gold price could be forming a bullish flag, which if confirmed would project the price of gold to approximately $1,550.
Volatility:
Realized volatility caught up to implied volatility as 30-day realized volatility is at the highest levels since 2016.
30-day gold realized volatility
Source: Bloomberg
ETF Flows:
July began with small global inflows of $72mn, all from North America.
Global inflows are $5.1bn on the year, led by European funds, that have added $4bn or 78% of global net inflows.
