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Gold Traders' Report - February 7, 2018

Jim Pogoda, Metals Trader, Gold Bullion International 
FEB 7, 2018

Gold remained nervous and choppy overnight along with other markets, trading between $1322.50 - $1332.40.  Asian equity markets sold off late in their sessions along with S&P futures (2660), and the DX slipped to 89.46 (comments from Trump “If we don’t get rid of [immigration] loopholes…let’s have a shutdown” did not calm markets).  This triggered another flight to quality as the US 10-year yield dipped from 2.805% to 2..76%, and gold strengthened to $1332.40.

During European time, however, S&P futures stabilized, and European equities advanced (+0.4% - +0.8%).  The dollar rebounded (DX to 89.90), aided by some euro weakness (euro from $1.2406 - $1.2335) from a weaker report on German Industrial Production, and news that the SPD’s Martin Shulz would not be taking over as Germany’s finance minister, along with a recovery  in the US 10-year yield to 2.804%.

Markets were also aided by some reassuring comments from the Fed’s Kaplan, saying the recent sell-off in the stock markets is a "healthy" correction from high valuations, that he did not think it would have repercussions on the economy.  Gold was pressured lower and slid to $1322.50 ahead of the NY open. 

US equities opened stronger, helped by more reassuring remarks by the Fed’s Dudley (“This wasn’t that big a bump in the equity market…the stock market had a remarkable rise over a very long time with extremely low volatility…my outlook hasn’t changed just because the stock market’s a little bit lower than it was a few days ago. It’s still up sharply from where it was a year ago”) and Evans (sluggish price increases give the Fed room to hold off on interest rate hikes until at least mid-2018).

The S&P jumped  to +22 to 2717 while the 10-year yield hovered between 2.77% - 2.80%.  The DX continued to climb, and took out yesterday’s 90.05 high to touch 90.06.  Gold softened further, and found support at yesterday’s $1320 bottom. 

By late morning news that the Senate was nearing a long-term deal on spending ahead of the Thursday deadline to fund the government pushed US stocks further ahead (S&P +33 to 2728, telecom and industrials lead advancers). This was despite oil tumbling (WTI from $63.90 - $61.60) on a surprise build in US oil inventories (+1.9M bbl. vs. API est of 1.05M bbl draw) and an upgraded forecast from the EIA that US oil production will average 10.6M bdp in ’18, and reach 11.2M bpd in ’19.

The 10-year yield ticked up to 2.817%, and the DX reached 90.30 – a fresh 2-week high.  Gold slid further, and took out support at yesterday’s $1320 low, the down channel trendline at $1319, and the $1316 low from 1/11 to reach $1315.

Into the afternoon, equity markets turned down (S&P -7 to 2688 – who said the wild ride was over?), hurt by a spike in the 10-year yield to 2.851%.  The DX advanced to 90.38, and gold worked lower.  It took out some minor support at the 40-day moving average at $1314, touching off some stops to push it to $1311.60 – a fresh 1-month low.

Open interest was off 10.6k contracts, showing a substantial amount of long liquidation from yesterday’s decline.  Volume surged with 486k contracts trading.  All markets will continue to focus on the volatile equity and bond markets, geopolitical events, developments with the Trump Administration, corporate earnings, oil prices, and will turn to reports tomorrow on Japan’s Trade Balance, China’s Trade Balance, Germany’s Trade Balance, BoE’s Rate Decision, Minutes, and Quarterly Inflation, US Jobless Claims, and comments from the Fed’s Harker, Kashkari for near term direction.

In the news:


Resistance levels: 

$1314 – 40 day moving average

$1316 – 1/11 low

$1320 – 2/6 low

$1319 – down channel line

$1323-24 – double bottom, 1/12 and 1/18 lows

$1327 - 29 – quadruple bottom - 1/19, 1/22, 2/2 ,and 2/5 lows

$1335 – 1/30 low

$1337 – 20 day moving average

$1338 – 11/9 election night high

$1341 – 2/5 high

$1345 – 1/31 high

$1345 – down trendline from 1/25 $1366 high

$1347 – down trendline from 8/2013 weekly chart

$1348-49 – double top, 1/30 and 1/31 highs

$1350 – 52 – triple top – 1/29 , 2/1, and 2/2 highs

$1350 – options

$1356-58 – 5 tops 1/26/18, 9/8/17, 8/10/16, 8/14/16, 8/18/16 highs

$1365-67 – 5 tops 1/25, 8/2/16, 8/3/16, 8/4/16, and 8/5/16 highs

$1375 – 7/6/16 high

$1388-89 – double top 3/16/14, 3/17/14 highs

Support levels:

$1308-09 – double bottom 1/9 and 1/10 lows

$1306-7 – double bottom, lows 1/3, 1/4

$1303 – 50 day moving average

$1304 – 1/2 low

$1302 – 1/1 low

$1301 – 50% retracement of up move from 12/12/17 $1236 low to 1/25/18 $1366 high

$1300 – psychological level, options

$1294 – 12/29 low

$1293 – 100-day moving average

$1287 – 12/28 low

$1281 – 12/27 low

$1281 – 50% retracement of up move from 7/10/17 $1205 low to 9/8/17 $1357 high

$1280 – 200-day moving average



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