Gold Traders’ Report - April 24, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
APR 24, 2019

Gold was a little nervous and choppy last night, trading either side of unchanged in a range of $1268.85 - $1274.50.  It dipped to its low during Asian hours against a moderately stronger US dollar (DX from 97.55 – 97.70) from some yen weakness (111.80 – 111.98, lessening safe haven demand) and early strength in equities (S&P futures to 2939).  Later during European time, however, gold rebounded to its $1274.50 high against a retreat in S&P futures (2931) and from a continued decline in global bond yields (Japan’s 10-year JGB from -0.031% to -0.041%, German 10-year bund back into negative territory -0.01%, UK 10-year Gilt from 1.225% to 1.18%, US 10-year from 2.57% to 2.533%).  Gold was able to advance despite the dollar firming further (DX to 97.77) – seeing some stronger dip buying near 4-month lows.  The DX was aided by a weaker euro ($1.1224 - $1.1195, miss on German IFO) and pound ($1.2943 - $1.2914, reports that talks between Conservative and Labour are close to collapsing).  Global equities were mixed with the NIKKEI off 0.4%, the SCI was up 0.1%, and European markets ranged from -0.3% to +0.7%.  A pullback in the scalding hot oil market (WTI from $66.33 - $65.77, API reported larger than expected build in US Oil Inventories) weighed on stocks.

 Just prior to and through the NY open, S&P futures rallied back to its overnight high (2939), helped by stronger earnings reports from Anthem, Biogen, and Domino’s.  The US 10-year yield continued to soften, however, dipping to 2.525% -  a 2-week low.  The DX climbed to 97.84 (fresh 22-month high), helped by continued softness in the euro ($1.1181 – 3 week low).  Gold slipped in response, but found support at $1270. 

 US stocks turned down after their open (S&P -5 to 2928), with the Energy and Communication Services Sectors lagging.  The 10-year yield continued to soften (2.522%), while the DX was lower though choppy between 97.66 – 97.82.  Gold advanced and took out its overnight high to reach $1275.  

 After a modest recovery during the mid-morning (S&P to 2936), equities softened into mid-day (S&P -6 to 2926), hurt by a further decline in oil (WTI to $65.64, EIA confirmed API report of a larger than expected build of US Oil Inventories) and a dip in Goldman Sachs (report DOJ pushing for guilty plea in the 1MDB corruption case).   The 10-year yield continued to edge lower (2.52%), while the DX remained choppy around 97.75.  Gold advanced, tripping some buying over $1275 to reach $1279 where resistance at $1278-80 – (triple top - 4/17, 4/18, and 4/22 highs) held.  

 Into the afternoon, US stocks pared some losses (S&P to 2933), while the 10-year yield stabilized between 2.52% - 2.525%.  The DX turned sharply higher (98.19, fresh 23 month high), however, lifted by continued weakness in the euro ($1.1153, 22-month low, German bund yield dips to -0.014%).  Gold came off its high but was fairly resilient, and found support at $1275.

 Later in the afternoon, US equities finished just above its intraday low (S&P -6 to 2927) while the 10-year yield remained steady around 2.52% - 2.525%.  The DX ticked lower to 98.05, and gold edged up to $1276.50.  Gold was $1276 bid at 4PM with a gain of $4 .

 Open interest was up 1.5k contracts, showing a small net of new shorts and bargain hunting longs from yesterday’s decline – overshadowing the sizeable long liquidation seen.  Volume ballooned with 306k contracts trading.  

 Bulls were encouraged gold’s $4 rebound today, especially in defiance of the US dollar making a fresh 23-month high, and with the S&P within spitting distance of its all-time 2940 high.  Bulls feel that the recent selling has been overdone ($45 in its previous 8 sessions) and is approaching oversold (14-day RSI =38).  Similarly, they feel 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 (up trendline at $1262).  They look for the strong rally over the past 7 months to carry further, expecting volatility in equity markets along with the recent dovish pivot from the Fed to keep downward pressure on US interest rates and the dollar which should help drive gold higher.   Bulls also point to last Friday’s Commitment of Traders Report (as of 4/16) that showed the large funds cutting their net long position to just 56k contracts, and increasing their gross short position to 127k 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 $1270’s and then mount a re-test of initial resistance at $1277-80.

 Bears were disappointed with gold’s ability to advance today, given the strength in the dollar to 23-month highs.  However, bears are encouraged that gold has failed to have a meaningful bounce while making lower highs 7 of the past 9 sessions while dropping $45 from $1311 - $1266.  While some bears took profits on the way down toward the $1271 and $1267 support levels in the past few sessions, other bears feel the downside still has legs.  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, better than expected Q1 earnings so far).  Bears also feel that the strength in the US dollar has legs (23-month high today) – despite the surprise dovishness from the Fed at their last meeting - given the recent lousy Eurozone data (today’s weak German IFO Report) that forced the German 10-year bund yield back into negative territory today.  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 continue and look for a retest of initial support at $1265-67 (quadruple bottom 12/25, 12/26, 12/27, and 4/23 low) followed by $1262 – the up trendline from 8/16/18 $1160 low.  Below this key trendline, bears expect to trip heavier long liquidation that will bring the low-mid $1250’s into play, and a test of the 200-day moving average at $1251.  

 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 the BOJ’s Rate Decision, US Durable Goods, Jobless Claims, Kansas City Fed Manufacturing Index and tomorrow’s CME gold options expiration for near term direction. 

In the news: 

RBI may join global peers in buying more gold:   https://economictimes.indiatimes.com/markets/commodities/news/rbi-may-join-global-peers-in-buying-more-gold/articleshow/69028247.cms

Romanian parliament passes gold repatriation bill:   https://www.romania-insider.com/romania-parliament-gold-repatriation

Scotiabank flow update – who owns what:   https://www.gbm.scotiabank.com/content/dam/gbm/market-insights/2019/april/Metals-flow-update_who-owns-what-min.pdf

Resistance levels: 

$1278-80 – quadruple top - 4/17, 4/18, 4/22, and 4/24 highs

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

$1285 – up trendline from 12/28 $1274 low

$1289 – 4/16 high

$1289 – 20-day moving average

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

$1292– 100-day moving average

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

$1296 – 4/12 high

$1296 – 40-day moving average

$1300 – psychological level, options

$1301 – 4/10 low

$1302 – 50-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)

*$1304 – down trendline from 2/20 $1347 high

$1306 – 4/9/high

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

*$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

*$1350 – down trendline from 8/25/13 $1433 high

$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:

$1275 – options

$1273 – triple bottom - 4/16, 4/17, and 4/22  lows

$1271 – 4/18 low

$1269 -4/24 low

$1265-67 – quadruple bottom - 12/25, 12/26, 12/27, and 4/23 lows

*$1262 – up trendline from 8/16/18 $1160 low

$1259 – 12/24 low

$1254 – 12/21 low

$1253 – 50% retracement of up move from 8/16/18 $1160 low to 2/20 $1347 high

*$1251 – 200-day moving average

$1250 – options

$1242-43 – double bottom – 12/19 and 12/20 lows