NY Open: Gold and Oil market updates

Stephen Innes SPI Asset Management

Gold Markets

Over the past 4 weeks, Gold ETF buying has continued unabated while Comex futures longs have been actively reducing. Spot gold is down ~ 3% during this time but what's odd however is that Gold ETF flows and spot gold price traditionally moves in lockstep as supported by 2019 tight correlation.

The breakdown in this correlation suggests that divergence of opinion is forming between CTA 's, macro discretionary funds and institutional investors who typically trade the COMEX and the ETF space usually dominated by retail investors.

The break down in this crucial relationship could increase volatility, as it's been the combination ETF and futures flows that have been trendsetters for most of 2019 gold rally

If you subscribe to the theory that retail investors are always late to the trend, then the picture could look even more bearish than current price action suggests.

Oil Markets

Oil is down 1 % since Monday morning with concerns about global demand steering the ship as geopolitical risk premium continues to evaporate. And in spite of gasoline draws last week suggesting demand is not as bad as the hard macro data might suggest, traders, continue to wear demand emotions on their sleeve as the run of weak economic data from Asia's colossal oil importers( China, Japan and South Korea) continues to dampen sentiment

Also, oil markets are getting no joy from the PBOC who appear reluctant to turn on the monetary policy taps from fear triggering CPI inflation to move above the NPC hard target of 3 %

Equities

This week's tech earnings report could dictate the near-term path for the S &P 500. Microsoft, Amazon and Intel are all set to report, followed by Google, Facebook and Apple next week.

Currency markets

Euro

Bullish sentiment remains intact with the Brexit finish line in sight. But the momentum has waned somewhat as traders now turn to the economic data to sustain the Euro rally. As such, Thursday's PMI will be essential to keep the rally going as little is expected from Mr Draghi's Farwell ECB send-off.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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