EM LATAM CREDIT: US Replacing Chinese Telecom Equipment in Panama - Neutral

• +10,000 FVM5 107-20.5, buy through 107-20.25 post time offer at 1027:55ET, DV01 $420,000.
• The 5Y contract trades 107-21.25 last (-13.75).

The pullback in the USD and major equity benchmarks helps spot gold away from session lows, but gold remains 2.45% lower on the session at $3,240/oz amid the latest easing of US/China trade tensions. Today's pullback still appears corrective for now, with key short-term support at $3,202.0 untested during the earlier selloff. A clear break of this level is required to signal scope for a deeper retracement, with the primary uptrend still intact. Initial resistance is the May 7 high at $3,435.6.

• Positioning continues to moderate from recent extended extremes. The latest COT CFTC report covering the week to May 6 saw a third consecutive fall in non-commercial net longs, with MNI’s 52-week Z-score moving to -2.7, from a multi-year low of -2.8 the week prior.
• There have been familiar dynamics in key sources of gold demand according to latest data from the World Gold Council (WGC):
  • There were 115 tonnes of ETF inflows in April, led by Asia (70 tonnes) and North America (44 tonnes). Preliminary data from the WGC suggests light net sales of gold ETFs in the first two weeks of March - likely profit taking amongst investors.
  • Meanwhile, March saw another healthy bout of central bank demand, with 35 tonnes of net purchases (vs 25 tonnes in February) led by Poland and Azerbaijan.
  • However, price rises are still eating into jewellery demand, which was down ~20% Y/Y in Q1. 

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• Official UK labour market data has fallen in priority over the past few months, but it still has the potential to be very market moving.
• We look ahead to this month's print and also look at the key part of the BOE's MPR with respect to labour market data.