Forex Flash: Catch a falling gold knife? - Nomura

FXstreet.com (Barcelona) - Nomura strategists Saeed Amen and Geoffrey Kendrick have taken a look at gold ETF holdings and wonder what are the chances of catching a falling gold knife.

Their study is focused on Gold ETF holdings, with the aim of trying to understand whether they are stretched compared with history and to give an idea when their liquidation could finish. Their first step was to create a metric, which indicates ETF holdings are around +100 tonnes more than they were when gold was trading at a similar price point in April 2011 before gold’s August 2011 high, which compares with an overstretched measure of around +430 tonnes in February 2013, before the start of the large-scale liquidation of gold ETFs. Hence, they feel that this suggests a large part of the gold ETF liquidation has already been done and there is a small amount left, provided the gold price remains relatively stable. They write, “We think gold is still likely to trade with an upward bias in the short term, but we think view that gold ETF holdings need to turn higher for the move to accelerate.”