Spot Gold finished the week on a negative note, falling by 1.7% hovering around $1700 an ounce. A well orchestrated sudden sell panic emerged on Thursday pushing Gold to a weekly low of $1,670 Oz. We have seen this story before….
The Spread between the Spot and the June 2020 Gold contract has been trading at a $11.00oz premium over Gold spot contract @ $1,699 on Friday, Slightly higher than the prior week.
The gold volatility complex has been trading lower by 20%( implied vol, GVX) pushing ATM June2020 Straddle lower. Market participants are now expecting a 4% move in either way (up or down), Vs 6% from the prior week.
According to the latest COT report, bullion banks increased their short position by 13,556 contracts (1,356,600 new ounces…), whereas managed money have increased their long exposure by 13,158 contracts…
We have demystified the COT report (exhibit 2)into an easier version to digest for our readers. Instead of 5 categories you will find 3 categories only.
- We combine the “producer” and “swap dealer” into one category Commercials AKA the bullion banks
- Managed money and other reportable AKA Hedge fund, CTA
- Non reportable AKA smaller traders without significant influence on market price.
We think Gold market will regain its luster, with no meaningful economic recovery in sight. Should we anticipate a boost from a weaker dollar??
For more details, read our weekly Gold snapshot who contains a concise summary of some dynamics driving the gold market.