Gold Traders' Report - April 12, 2018

Jim Pogoda, Trader, Gold Bullion International 
APR 12, 2018

Yesterday’s FOMC minutes were a bit hawkish, as Fed members agreed the economic outlook had strengthened recently, and expected inflation to rise in coming months.

The dollar, which was already rebounding from the 89.35 low earlier in the session, climbed to 89.67.

Gold, which was already coming off its 11-week high of $1365, was pressed further down. It fell back under former resistance levels at $1356-57, $1354, and $1350 to reach $1348 before recovering to $1353 later in the afternoon.

Overnight, gold traded lower in a range of $1353.25 - $1342, fading strength in the US dollar (DX to 89.88).

The greenback was aided by some weakness in the euro ($1.2379 - $1.2312) which softened from a miss in Eurozone Industrial Production (-0.8% vs. exp. 0.1%), and some dovish ECB minutes (removal of dovish bias should not be misunderstood).

Mostly firmer global equities were also a headwind for gold, with the NIKKEI off 0.1%, the SCI -0.9%, European shares were up from 0.1% - 0.5%, and S&P futures were +0.5%. An early morning tweet (below) by Trump saying an attack on Syria may not be imminent also weighed on the yellow metal:

Never said when an attack on Syria would take place. Could be very soon or not so soon at all! In any event, the United States, under my Administration, has done a great job of ridding the region of ISIS. Where is our “Thank you America?”

6:15 AM - Apr 12, 2018

At 8:30 AM, though US Jobless Claims (233k vs. exp. 230k) and Import Prices (unch. vs. exp. 0.1%) were slightly higher than expected, the dollar rose further.

The greenback was buoyed by continued weakness in the euro ($1.23), which was hurt by some dovish comments by the ECB’s Coeure (rates would remain at their present levels for an extended period).  The DX climbed to 89.90, and gold tumbled to yesterday’s low of $1340.

US stocks opened higher and firmed into the mid-morning hours (S&P +29 to 2771) with financials leading gainers.

The US 10-year bond yield rose to 2.838%, and the DX was driven up to 89.96..  Gold plunged through the $1340 level in response, and traded down to $1335.70.

Into the afternoon, US stocks became steady (S&P between 2662 – 2670), and the 10-year yield pulled back to 2.82%.

The DX retreated to 89.71, and gold rebounded to $1339.75. Later in the afternoon, US stocks reached new highs, boosted by news that Trump was weighing rejoining the Trans-Pacific Partnership (S&P ends +22 to 2664).

The 10-year yield ticked up to 2.841%, but the DX was steady around 89.74-89.78.  Gold slipped to a new low at $1333.65 and was $1335 bid at 4PM with a loss of $18.

Open interest was up big – 32.2k contracts – reflecting a sizeable chunk of new longs (but also a fair amount of new shorts) from yesterdays’s rally.  Volume exploded with 517k contracts trading.

After gold was knocking on the door of a major upside breakout at $1365 yesterday, bulls can’t help but feel distraught as gold plummeted $30 from that level. However, bulls think gold’s minor uptrend is still intact (uptrend line from 12/12/17 $1236 low still holding).

They feel the direction in the dollar is still lower and that will drive gold higher.  Also, they remain confident that while many spec longs have been added on the rally, the large fund positioning is still bullish.

Bulls will look for gold to hold above key moving averages in the low $1330’s (50, 40, and 20 day MA’s), and to challenge resistance in the low $1350’s next week.

Bears that have been comfortable selling into strength have been paid in spades. They continue to believe that gold has no followthrough to propel it past the $1360’s, as they have witnessed a gold rally graveyard on forays north of $1340 for months.

They still believe a major bottom in the DX from 2 months ago is in place at 88.25, and expect its rebound to resume (but are concerned with the recent hawkish chatter that has fueled a stronger euro).

The bears will look for a breach of support in the low $1330’s (50, 40, and 20-day MA’s), to challenge support at $1323 – the up trendline from the 12/12/17 $1236 low.

All markets will continue to focus on the volatility in the equity and bond markets, geopolitical events, developments with the Trump Administration, corporate earnings, oil prices, and will turn to reports tomorrow on Chinese Imports and Exports, German CPI, Eurozone Trade Balance, US JOLTS Job Openings, University of Michigan Sentiment, Baker-Hughes Rig Count, Commitment of Traders, and comments from the Fed’s Kaplan and Rosengren for near-term guidance. 

In the news:

Sharps sees 253% increase in gold sales in London as tensions run high

Resistance levels: 

$1340 – 4/11 low

$1343 – 4/10 high

$1345 – down trendline from 8/2013 weekly chart

$1350 – options

$1353 – 4/12 high

$1353 – down trendline from 1/25/18 $1366 high

$1356 - 57 – double top, 3/26 and 3/27 highs

$1362 – 2/16 high

$1365 – down trendline from 7/6/16 $1375 high

$1365-67 – 6 tops 4/11, 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:

$1335 – 50% retracement of down move from 1/25 $1366 high to 3/1 $1303 low

$1335 – double top highs 4/5 and 4/6

$1334 – 4/12 low

$1333 – 20-day moving average

$1332 – 50% retracement of up move from the 3/20 $1307 low to the 3/27 $1357 top.

$1331 – 4/10 low

$1331 – 50 day moving average

$1331 – 40 day moving average

$1323 – up trend line from 12/12 $1236 low

$1321 – double bottom, 3/29 and 4/6 lows

$1313-15 – quadruple bottom, lows 3/2, 3/9, 3/12, 3/13

$1315 – 100-day moving average

$1307-10 – quadruple bottom – 3/16, 3/19, 3/20, and 3/21 lows

$1303 – 3/1 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

$1298– 200-day moving average

$1294 – 12/29 low

$1287 – 12/28 low

$1281 – 12/27 low