Gold Traders' Report - April 17, 2018

Jim Pogoda, Trader, Gold Bullion International 
APR 17, 2018

Gold traded either side of unchanged overnight in a range of $1341 - $1349.40.

It moved up to its high early during Asian hours, as the dollar slumped. The DX took out support at 89.35 and 89.25 to make a 3-week low at 89.23, hurt by a strengthening yen (107.15 – 106.85), pound ($1.4335 - $1.4377 – post Brexit high), and euro ($1.2375 - $1.2413).

Later, during European time, the DX rebounded to 89.54, helped by a pullback in sterling ($1.4306 – miss on UK average weekly earnings) and the euro ($1.2360 – miss on German and EU ZEW Survey).

That pressed gold to $1341, where it found support at yesterday’s low. Mostly stronger global stock markets were a headwind for gold with the NIKKEI up 0.1%, the SCI off 1.4%, European shares were up from 0.2% - 0.8%, and S&P futures were +0.5%.

A decline in oil (WTI from $66.70 - $66.06) was a headwind for equities. 

At 8:30 AM, a higher than expected reading on US Housing Starts (1.319M vs. exp. 1.268M) and Building Permits (1.354M vs. exp. 1.330M) lifted S&P futures (2698) which were already strengthening from stronger earnings reports from Netflix, Goldman, and United Health.

Some reassuring comments from Budget Director Mulvaney (economic growth is higher than we expected) and Treasury’s Mnuchin (rising economic growth will help pay for temporary shortfall in tax receipts) were also supportive of stocks.

The DX climbed further to 89.61, and gold retreated in response.

The yellow metal fell through its low from overnight and yesterday at $1341, and tripped some stops to reach $1338.50.

At 9:15 AM, another stronger report on US Industrial Production (0.5% vs. exp. 0.4%) and Capacity Utilization (78% vs. exp. 77.9%) helped boost US equities higher by late morning (S&P +29 to 2707, consumer discretionary and tech lead gainers).

The US 10-year bond yield was steady around 2.83%-2.845%, while the dollar pushed up to 89.67.

Gold fell further to $1337.70, also hurt by some hawkish commentary from the Fed’s Williams (sees US inflation at or above 2% goal for years, sees jobless rate falling to 3.5% next year).

However, gold’s dip was met with bargain hunting buying that led a rapid rebound to the $1344 area – despite the strength in stocks and the greenback.

Into the afternoon, US stocks came off their highs (S&P +23 to 2701), while the 10-year yield ticked down to 2.817%.

The DX slipped back to 89.48, and gold continued to push higher, and reached $1347.

Later on, some dovish comments by the Fed’s Evans (concerns that the US economy might overheat is an “old” story, "I think we have the opportunity to more patiently read — and react to — the incoming data”), lifted US stocks to fresh highs (S&P +35 to 2709).

The 10-year yield dipped a tad to 2.186%, and the DX hovered around 89.50. Gold remained fairly firm, and traded narrowly between $1346-$1346.75.  It was $1347 bid at 4PM with a gain of $1.

Open interest was up 2.7k contracts, showing a net of new longs (but some new shorts) from yesterday’s push up to $1350.

Volume was a little lower with 277k contracts trading.

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 Japan’s Trade Balance, UK CPI, PPI and Retail Sales, Eurozone CPI, US MBA Mortgage Applications, Oil Inventories, Fed’s Beige Book, and comments by the Fed’s Dudley and Quarles for near-term direction.

In the news:

Resistance levels: 

$1349 – 4/17 high

$1350 – options

$1351 – 4/16 high

$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:

$1347 – 4/13 high

$1345 – down trendline from 8/2013 weekly chart

$1341 – 4/16 low

$1338 – 4/17 low

$1337 – 20-day moving average

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

$1334-35 double bottom – 4/12 and 4/13 lows

$1331 – 4/10 low

$1331 – 50 day moving average

$1331 – 40 day moving average

$1324 – up trend line from 12/12 $1236 low

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

$1317 – 100-day moving average

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

$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

$1300– 200-day moving average

$1294 – 12/29 low

$1287 – 12/28 low

$1281 – 12/27 low