Gold fell last week following the strong US Job's report

Goldhub blog

Gold fell last week following the strong US Job's report

Adam Perlaky
Manager of Investment Research
World Gold Council

Posted:

Gold price behaviour:

  • 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. 
  • We will be releasing the June ETF flows report on Tuesday, at 8am EST.