Thread by @JReade_WGC

Gold: Back in the office for the first time since before Christmas, its time to look back on #gold's recent performance and what may lie ahead.

1/15

Gold: the recent strength in gold has been helped by some weakness in the US dollar.

But as this chart shows, #gold has run ahead of the weakening dollar.

2/15

Gold: plotting its performance in a number of currencies is another way of demonstrating that the dollar has not been the only factor lifting #gold.

3/15

Gold: Similarly, #gold has increased by more than can be explained by the so-far modest decline in real US 10-year yields.

4/15

Gold: Fears about US inflation are hardly driving #gold, with core CPI and PCE both of recent (modest) highs. Average Hourly Earnings have increased steadily of late, but are still only increasing at a small premium to inflation.

5/15

Gold: Longer dated expectations of US inflation remain low and flat, while shorter-term expectations have recently calmed too, likely because of lower oil and its impact on US fuel prices.

6/15

Gold: Certainly, ongoing US equity market volatility and recent further weakness is helping #gold.
Updating this chart today reminded me of the size of the declines in late December and make the post-October fall look more significant.

7/15

Gold: And what started as an equity market correction is beginning to contaminate sentiment in other markets too, as this chart of US High Yield spreads shows – up quite a lot, although still well below recent highs in 2016.

8/15

Gold: What of the gold market itself? A couple of factors have stood out as I’ve updated my spreadsheets – firstly Chinese gold demand was decent in December.

9/15

We’ve noted for most of 2018 that physical turnover on the SGE was stabilising and December’s strong performance was up 10% y/y, the largest m/m increase since Sep-15. And premiums have been quite strong too.

10/15

Gold: ETF flows, which were negative Jun-Sep, turned positive again in October and November. Although we are still finalising our December numbers, #gold inflows were strong last month too.

11/15

Gold: Finally, turning to speculative positioning on Comex, Net Managed Money long #gold positions increased a little in the week to 18 December (we are still waiting for the following week’s data).

12/15

Gold: Gross long #gold positions increased slightly, but remained very subdued all-in-all.

13/15

Gold: And while Gross short #gold positions are well off recent highs, they are still around the same levels seen in January 2016, before the last decent run in gold.

14/15

Gold: Concluding, #gold looks interestingly poised here: its recovered much of the summer weakness and yet the US dollar is still pretty strong. Further US market (or political) volatility could trigger additional investment flows.

Best of luck for 2019!

15/15

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