Oct 2019


Oct 2019

Weekly markets round-up for StoneX Bullion

By StoneX Bullion

Welcome to a very brief overview of the recent performance in the markets. The essentials are captured in the table below and each week we will show a chart of interest.

Both gold and silver have been marking time in recent days and weeks and once again gold looks as if it is forming a triangle on the daily charts; last time this happened it was May and the pressure was building as market and financial uncertainties and tensions were rising. As a result when gold broke out of the triangle it moved sharply higher and set off the bull phase that ran through to the end of August. This time the picture is similar in that geopolitical and financial uncertainties are still behind the market, but they are now well-documented and this time the U.S.-China talks, at least, have made some progress although it is more likely than not that the trade differences will be sustained for a long while to come. The European issues with respect to Brexit have not gone away and the tension in the Middle East has obviously heightened. While the tailwinds are still behind gold for the medium term, the fact that it did not react to the escalation in the Turkey-Syria situation should be telling us that it is discounting an awful lot of uncertainty at the moment and needs to draw breath – especially as the physical demand side of the market is still fragile.

The CFTC figures for the week to Tuesday 15th October were also informative. Over that previous week gold slipped by roughly $13 towards $1,480, with outright longs contracting by 56t and outright shorts increasing by 21t. The overhang was still heavy, however, at 547t, although this is substantially lower than the year-to-date peak of 740t in late September. To put this into context, global mine production is currently running at approximately 3,350t.

Meanwhile the chart below shows the lack of a real relationship between the gold price in euro terms and the major European stock markets. Charts like these are worth looking at because it is as important to know when there is a viable relationship and when there isn’t. For what it’s worth the equities underperformed gold in euro terms from late September of last year through to late August this year but the trend has now reversed as a degree of the equities have shown signs of revival and gold has been treading water after absorbing so much risk over the middle part of the year.

Thought for the week

Gold in euro terms is 6% off its recent peak but is still at levels last seen in 2012.

Chart: Gold in euro terms and the .STOXX50

Source: Refinitiv