BONDS: Japanese Investors Net Sold OATs and BTPs In August

Spot gold trades at another fresh all-time high this morning, currently up 0.8% at $3,616/oz. Spot may be being supported by haven flows this morning, following significant Russian drone/missile attacks on Kyiv over the weekend. Meanwhile, tailwinds from increased Fed easing expectations after Friday’s labour market report may also be at play.

• The next topside objective for gold is $3,623, the 2.236 projection of the Dec 30 ’24 - Apr 3 - 7 price swing. Clearance of this level would expose $3,675, another Fibonacci projection point. It’s worth noting that spot remains in a heavily oversold condition on a 14-day RSI basis.
• On Friday, the World Gold Council released its monthly update on ETF (as of August) and central bank (as of July) flows.
• August ETF flows totalled 53 tonnes (worth $5.5bln), the majority of which (34.9 tonnes) came in the last week of the month as the US Govt vs Lisa Cook saga exacerbated existing concerns around Fed independence.
  • August ETF flows were centred in North America (37.1 tonnes) and Europe (20.8 tonnes).
• Central banks purchased 14.9 tonnes of gold in July, after 41 tonnes in June and 34.7 tonnes in May. Central banks have been net purchasers of gold for 26 months now, continuing to help underpin spot prices.
  • More timely data from the PBOC overnight indicated a tenth consecutive month of net buying, with the Chinese central bank reporting another 1.9 tonnes of purchases in August.

“US demands EU stops buying Russian gas if it wants new sanctions on Putin” - FT

• "European countries should stop buying Russian oil and gas if they want Washington to tighten sanctions on Moscow, according to Donald Trump’s energy chief, who said the trade was funding Vladimir Putin’s “war machine”."
• "Chris Wright, US energy secretary, told the Financial Times that European countries should instead buy American liquefied natural gas, gasoline and other fossil fuel products to meet the terms of the US-EU trade deal, which calls on EU countries to buy $750bn of US energy by the end of 2028."
• Link here

• In FX, the trend theme in EURUSD remains bullish. Friday’s gains resulted in a print above resistance at 1.1743, the Aug 22 high. A clear break of this hurdle would mark a short-term bullish development and signal scope for an extension towards 1.1829, the Jul 01 high and bull trigger. Support to watch is around the 50-day EMA, at 1.1619. A clear breach of this average would signal scope for a deeper retracement.
• GBPUSD is holding on to the bulk of its latest gains following the recovery from last Wednesday’s low. The move higher appears corrective - for now. Recent weakness resulted in a breach of 1.3391, the Aug 22 low. This signals scope for a deeper retracement and exposes 1.3315 next, 61.8% of the Aug 1 - 14 bull leg. On the upside, clearance of 1.3595, the Aug 14 high, is required to reinstate a bull theme.
• Resistance to watch in USDJPY is 148.78, the Aug 22 high. Last week’s gains resulted in a print above it. A clear break of this level would highlight a range breakout and a stronger bullish theme, and open 149.81, 76.4% of Aug 1 - 14 bear leg. However, the pair has pulled back from its recent highs and remains inside its range. Key support to watch is 146.21, the Aug 14 low and the bear trigger.