Here is an interesting thing: according to analysis reported by FT Alphaville, total ETF gold holdings have dropped sharply this year. Since 1st Feb, the drop has been the equivalent of China or Switzerland selling 11% of their gold reserves. What on earth is going on?

The first thing to consider is that ETF gold holdings are normally quite volatile. The chart shown in the piece only has data from early 2012, so is not very informative, but the CFTC data show that it is not unusual for the speculative net long position in gold to swing by as much as it has recently. I suspect that market participants who trade around their gold positions are increasingly using ETF’s rather than futures (which would go some way to explaining the downward drift in the speculative net long position since 2009).

The second thing to consider is that the selling may have been by the Japanese. Why should this be? Well, the empirical observation is that it is Japan-related instruments that have really moved recently — JPY, Japanese equities — and there is some evidence in the banking data that Japanese banks are switching to foreign assets from domestic bonds. It does not seem a huge stretch to assume that the household sector is conducting a similar portfolio reallocation. I also note that my usual gold model — a combination of US 10Y real interest rates and the US vs. the currencies of the two big importers, CNY and INR — does a poor job of explaining the recent decline, but gives a pretty close fit if JPY in included in the model. The strength of USD/JPY suggests that outflows from Japan are continuing.

What is going on in the S&P 500? I feel on the wrong side of things, though in truth my negative view on US equities was based on the failure of USD/JPY to make new highs; now that new highs have been made, it is reasonable to think that Japanese liquidity from Japan will continue to benefit global equities.

Mario Draghi held his press conference yesterday. He said that a rate cut had been considered, but that there was a “prevailing consensus” against action. The ECB’s forecasts for growth and inflation in 2013 were revised downward, to -0.5% from -0.3% and to 1.3% from 1.4% respectively, but Mr. Draghi continues to expect a recovery later in 2013. I am not sure of the basis for his confidence; I assume it is based on the usual macroeconomic models which are built on the premise that growth reverts to trend. The European experience has been that that premise is not necessarily true.

The FT reports that there is a very chirpy mood in Mexico following the new president’s first 100 days. He has already got labour-market reform, increased transparency in state and local financing and a reassertion of state power over education through the formerly-fractious Congress, and plans to increase taxes in order to deal with the country’s low tax receipts, reform the energy sector and open telecommunications to competition. He has also managed to get the heads of all the major parties to sign up to a “Pact for Mexico” comprising 95 reforms (not theses, sadly!). It is probably rather early to say that all this has had, and will have, a transformative effect on the economy — structural reforms take a long time to have an effect; but it seems that, at least, there have been some positive steps and there is a positive mood.

China has released its latest trade figures, which showed a positive trade balance, in contrast to the deficit that had been expected by the consensus. Exports were up strongly. I wonder whether the global trade slowdown might have come to an end — which would be a good thing for other Asian exporters, given their elevated inventory levels. Japan reported barely-positive growth in Q4 (0% to two decimal places QOQ, and 0.2% QOQ annualised), but that was better than the initial estimate (-0.4% QOQ annualised, I think). The US trade deficit widened more than expected, presumably not helped by the oil price (which has fallen back this month).