Gold Traders’ Report - April 15, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
APR 15, 2019

Gold continued to soften last night, trading in a relatively narrow range of $1284.75 - $1291.35.  It tripped some selling below its 100-day moving average at $1288 that took it to its low, but support ahead of $1284 (trendline from 12/28 $1274 low) and $1281-84 ($1281-84 – 5 bottom 3/4, 3/5, 3/6, 3/7, and 4/4 lows) held.  Gold couldn’t gain traction from a modestly weaker dollar (DX slid from 96.93 – 96.79), which was pressured by some firming in the yen (112.09 – 111.88, bounce from recent risk on weakness), the pound ($1.3076 - $1.3114, UK Foreign Secretary Hunt noted Brexit talks with the Labour party were constructive), and the euro ($1.1298 - $1.1321, Bundesbank’s report not as negative as anticipated).  Gold was pressured however, by an uptick in the US 10-year bond yield 2.569% (4-week high), and slightly firmer global equities, which were aided by reports of further progress in the US-China trade negotiations (Mnuchin said the agreement would go way beyond previous efforts to open China’s markets to US companies, two sides were getting close to the final round of concluding issues).  The NIKKEI was up 1.4%, the SCI was off 0.3%, European shares flat to +0.1%, and S&P futures were +0.1%.  Oil was softer and a drag on equities with WTI slipping from $63.84 - $63.17 (rumors Russia might exit the coordinated production cuts). 

 At 8:30 AM, a stronger than expected reading on the US Empire State Manufacturing Index 10.1 vs. exp. 8.0) lifted the US 10-year bond yield to 2.57%, and the DX ticked up to 96.93.  Gold softened and broke through support at $1284, but strong dip buying limited the decline to $1282.60.   The move was mitigated somewhat by some dovish commentary from the Fed’s Evans (Inflation weaker than he’d like to see, sees funds rate being flat into fall of 2020).

 US stocks opened weaker (S&P -11 to 2896) and declined into mid-day - hurt by disappointing earnings reports from Goldman and Citigroup and with the Real Estate, Financials, and Industrial sectors leading the decline.  A further dip in oil (WTI to $63.02) also contributed to the move. The 10-year yield was tugged down to 2.551%, but the DX – after a modest slip to 96.85 – turned up to reach 96.95.  Gold was caught in the cross currents, but rebounded to reach $1290 with bargain hunting bids encouraged by gold’s ability to bounce back above the trendline at $1284. 

 In the afternoon, US equities rallied back to near unchanged (S&P finished -2 to 2905) with gains in Consumer Staples leading the rebound.  The 10-year yield hovered around 2.55%, and the DX ticked up to 96.97.  Gold was pressured lower, but support at $1288 (100-day moving average) held.  It was $1288 bid at 4PM with a loss of $2. 

 Open interest was off 3.1k contracts, reflecting a net of long liquidation from Friday’s decline.  Volume was much lower with just 200k contracts trading. 

 Bulls were disappointed with today’s further price erosion ($28 in last 3 sessions), and gold’s inability to advance earlier this morning – especially when the DX softened. However, bulls were encouraged with gold’s ability to bounce after breaching its 100-day moving average ($1288) and its head and shoulders neckline ($1285) - reflecting a lack of conviction on the downside, and an abundance of bargain hunting bids.  Bulls expect the market to consolidate at present levels before making another attempt higher.  The maintain that gold’s correction down from $1347 had been overdone, as was the pullback from $1325, and have used the recent dips to get long(er) at more attractive levels.   Bulls feel that the trend is their friend and that the up move going back to the 8/16/18 $1160 low is still intact.  They look for the strong rally over the past 7 months to carry further, expecting continued volatility in equity markets along with the surprisingly dovish statement from the Fed at its last meeting to keep downward pressure on US interest rates and the dollar (including recent dovish comments from Trump, Kudlow, and Fed nominee Moore), which should help drive gold higher.    Bulls also point to Friday’s Commitment of Traders Report (as of 4/9) that still has the large funds with a significant gross short position (94k contracts).  Therefore, the bulls feel the gold market remains set up to move higher, as these shorts will provide fuel to further upside moves – when forced to cover.  Bulls look for gold to consolidate in the low $1290’s, and then mount a re-test of initial resistance at $1309-12 (triple top, down trendline from 2/20 $1347 high) followed by $1314 (50% retracement of down move from 2/20 $1347 high to 3/7 $1281 low), then $1319 (3/27  high).

 Bears were disappointed with the lack of follow through selling that gave gold an opportunity to bounce after breaching its 100 day moving average at $1288 and head and shoulders neckline at $1284 - as it did on 4/4.  However, other bears remain patient, and are expecting the recent dip buying to dry up to allow the market to fall back below these key levels and trip probable sell stops to push the market considerably lower.  Bears feel the downside has legs and maintain that the recent two bounces from $1281 were just modest upticks within the early stages of a more significant downside correction.  They feel that gold’s advance to $1347 had been overdone – having rallied $70 since the $1277 low on 1/24 (5.48%), $114 since the $1233 low on 12/14 (9.25%), and $151 since the $1196 low on 11/13 (12.63%).  They feel that the 20% correction in equities – much of which occurred during very illiquid holiday trading – was also overdone, and expect the rebound seen over the past 4 months to continue (encouraged by the recent golden cross in the S&P– 50 day moving average crossed 200-day moving average, now about 1% from its all-time high).  Bears also feel that the strength in the US dollar has legs – despite the surprise dovishness from the Fed at their last meeting - given the recent lousy Eurozone data that forced the German 10-year bund yield back into negative territory recently. They feel that the US remains the sole global growth engine, and will continue to grow – despite the pronounced slowdown in global growth prospects.  This, they feel, should keep the US dollar well bid and will continue to pressure gold south.  Bears expect long liquidation to resume and will be gunning for stops below $1288 (100-day moving average) $1284 (up trendline from 12/28 $1274 low), $1281-84 (5 bottom 3/4, 3/5, 3/6, 3/7, and 4/4 lows), $1277-80 (7 bottoms – 12/28, 1/4, 1/21, 1/22, 1/23, 1/24 and 1/25 lows) to bring the mid-$1260’s into play. 

 All markets will continue to focus on geopolitical events (especially Brexit news), developments with the Trump Administration (especially on US-China trade, potential legal issues), Q1 corporate earnings, oil prices, and will turn to reports tomorrow on Japan’s Tertiary Industry Index, UK Jobless Claims, Employment Change, and Earnings, EU Construction Output and ZEW Survey, German ZEW Survey, US Industrial Production, Capacity Utilization, NAHB Housing Market Index and comments from the Fed’s Kaplan for near term guidance.  

 In the news:  

Standard Chartered is very constructive on gold:   https://www.bloomberg.com/news/videos/2019-04-15/standard-chartered-is-very-constructive-on-gold-robertsen-says-video

 Gold speculator’s bullish bets rebounded this week:   https://www.investing.com/analysis/gold-speculators-bullish-bets-rebounded-this-week-200406538

 US Mint gold and silver eagles sales decline from prior week:   http://www.coinnews.net/2019/04/12/gold-and-silver-post-third-weekly-decline/

YTD Performance


12/31/2018

4/15/2019

Change
% Change
Gold


1282.5

1288

5.5

0.429%

DX


96.06

96.95

0.89

0.927%

S&P


2505

2905

400

15.968%

JYN


109.63

112.02

2.39

2.180%

Euro


1.1466

1.1296

-0.017

-1.483%

US 10-year bond yield


2.69%

2.56%

-0.0013

-4.877%

Oil (WTI)


45.45

63.52

18.07

39.758%

 

Resistance levels: 

$1290 -91 double bottom – 4/11 and 4/12  lows

$1293-95 –quadruple top 4/2, 4/3, 4/4, and 4/5 high

$1296 – 4/12 high

$1300 – psychological level, options

$1301 – 4/10 low

$1301 – 20-day moving average

$1303-05 – former breakout (6/15/18 top) and prior 5 bottom support (1/29, 2/7, 2/11, 2/13, and 2/14 lows)

$1305 – 40-day moving average

$1306 – 50-day moving average

$1306 – 4/9/high

$1309 - 12 - triple top – 3/28, 4/10 and 4/11 highs

*$1310 – down trendline from 2/20 $1347 high

*$1314 – 50% retracement of down move from 2/20 $1347 high to 3/7 $1281 low

$1319 - 3/27  high

$1322  -3/26 high

$1325 – options

$1325 – 3/25 high

$1327 – 2/28 high

$1330 – double top – 2/27 and 2/26 highs

$1333 –double top 2/22 and 2/25 highs

$1342 – double top - 2/19 and 2/21 highs

*$1346-47 – double top 2/20 and  4/20/18 highs

$1353-56 – triple top – 4/12/18, 4/18/18 and 4/19/18 highs

*$1365-67– triple top – 8/2/16, 1/25/18 and 4/11/18 highs

*$1373-75 – double top – 7/6/16 and 7/11/16 highs

 Support levels:

*$1288– 100-day moving average

*$1284 – up trendline from 12/28 $1274 low

$1281-84 – 5 bottom 3/4, 3/5, 3/6, 3/7, and 4/4 lows

*$1277-80 - 7 bottoms – 12/28, 1/4, 1/21, 1/22, 1/23, 1/24 and 1/25 lows

$1275 – options

$1274 – 12/28 low

$1265-67 – 12/25, 12/26 ,and 12/27  lows

$1259 – 12/24 low

$1254 – 12/21 low

$1250 – options

$1250 – 200-day moving average