US: MNI POLITICAL RISK - Trump Meets Rutte After Nixing Putin Summit

• Spot gold registered a fresh all-time high of $3,728/oz this morning (currently +1.03% at $3,723). Gold remains in a clear bull cycle, and shallow short-term pullbacks remain corrective.
• The next objective is $3744.2, a Fibonacci projection point, with initial firm support not seen till $3,578 (the 20-day EMA).
• On an intraday basis, it’s not unreasonable to suggest that this morning’s weakness in cryptocurrencies (reportedly spurred by a large liquidations in Ethereum and Bitcoin) drove some rotations into Gold. Over the short-term, crypto and gold can exhibit a negative correlation due to the former’s risk sensitive nature.
• However, over the medium/long-term, the correlation between the likes of bitcoin and gold is positive. Some argue that both assets have can perform as a monetary inflation hedge, and are positively correlated with overall financial system liquidity.
• Bloomberg also reported this morning that "On Friday, bullion-backed ETFs surged 0.9%, the most in percentage terms since 2022", indicating that investor demand for gold following the Fed's rate cut last week remains strong.
• Gold positioning metrics unsurprisingly continue to advance further into “long” territory according to CFTC COT data as of September 16.
• However, 52-week Z scores of net longs both on an outright and % OI basis still don’t screen as stretched as was seen around last year’s US election.
• Other precious metals are also performing strongly today, with silver up 1.4%, platinum up 0.7% and palladium up over 2%. 

Figure 1: Gold and Bitcoin Since 2020

Figure 2: Gold and Bitcoin Intraday

Figure 3: Gold Positioning Metrics

• Last Thursday’s advance for EURJPY resulted in a breach of 173.97 resistance, the Jul 28 high and bull trigger. This confirmed a resumption of the medium-term uptrend and maintains the price sequence of higher highs and higher lows.
• The cross has been oscillating either side of the 174.00 mark to start the week but has been consolidating above the figure across the late European morning. Sights are on 174.86 next, a Fibonacci projection, before the 2024 highs which reside at 175.43, a key medium-term resistance. Support moves up to 173.01, the 20-day EMA.
• Event risk this week will continue to keep EURJPY in focus, starting with tomorrow’s Eurozone flash PMIs. The Eurozone-wide composite PMI has been gradually improving in recent months, but this has largely been a function of a recovery in manufacturing. While welcomed after several years of malaise, the services sector is much more important in terms of total value added.  A deterioration in services sentiment (and by extension actual activity) would be one pre-requisite for another ECB rate cut this cycle.
• Separately in Japan, Tokyo CPI is due Friday, while domestic emphasis remains on the high level of political uncertainty ahead of the LDP leadership election on Oct 04. A poll released by the Asahi newspaper revealed that Shinjiro Koizumi remains the most popular candidate, securing 41% of the vote from LDP supporters compared to 24% for Tanae Takaichi. While the Koizumi-Kato team are seen as broadly endorsing a more hawkish BOJ, the JPY may stay under pressure until further clarity is secured.

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