Jim Pogoda, Senior Gold Trader, Gold Bullion International
APR 25, 2019
Gold remained a bit choppy overnight, trading either side of unchanged in a relatively narrow range of $1273.40 - $1278.70. It slipped to its $1273.40 low during early Asian hours as the US dollar had a modest rebounded (DX from 98.03 -98.15). Later during Asian hours and early European time, gold advanced to its $1278.70 high, where resistance at $1278-80 (quadruple top - 4/17, 4/18, 4/22, and 4/24 highs) held yet again. It was lifted by a dip in the DX back to 97.99, which was pressured by strength in the yen (112.23 – 111.74, shrugs off dovish commentary from the BOJ’s Kuroda) and modest gains in the euro ($1.1143 - $1.1162) and the pound ($1.2893 - $1.2916). During later European hours, however, gold dipped back to $1276 as the DX surged to a fresh 23-month high at 98.30. The greenback was helped by a tumble in the euro ($1.1121, fresh 22-month low) over ongoing concerns about German economic slowdown and the pound ($1.2866, 2-month low) on concerns that the Brexit talks have stalled. Global equities were mostly weaker and helped lift gold with the NIKKEI up 0.5%, the SCI was down 2.4% (concerns that China was pulling back on stimulus measures), European markets were off from 0.1% to 0.4%, and S&P futures were flat. Higher oil prices (WTI from $65.75 to $66.25, some buyers suspend Russian imports on quality issues, compounding existing supply concerns) were supportive of stocks.
At 8:30 AM, a much stronger than expected reading on US Durable Goods (2.7% vs. exp. 0.8%) overshadowed a miss on Jobless Claims (230k vs exp. 200k) lifted S&P futures higher (+5 to 2935), and took the US 10-year yield up to 2.538% (after it had made a fresh 2-week low at 2.516% overnight). The DX climbed further to 98.34, helped by further weakness in the euro ($1.1118, dovish remarks from the ECB’s VP Guindos) and gold was knocked back to $1275.
US stocks turned and opened weaker however, and softened into the mid-morning hours with a poor earnings report from 3M overcoming stronger reports last night from Microsoft and Facebook (S&P -14 to 2913). A dip in oil (WTI to $65.65) contributed to the decline. The US 10-year bond edged down to 2.518%, and the DX tumbled back to 98.02. Gold shot higher, and broke through resistance at $1278-80 (bringing the $1280 option into play ahead of today’s expiry) to reach $1283. Some decent short covering was seen.
Into mid-day, US stocks turned positive (S&P +6 to 2933), led by gains in the Communication Services, Health Care, Financials, and Utilities sectors. The 10-year yield recovered to 2.533%, while the DX rebounded to 98.18. Gold slid down to $1277.50 in response - unable to hold above the former resistance at $1280.
In the afternoon, equities pared some gains (S&P +3 to 2930) while the 10-year yield ticked up to 2.54%. The DX hovered around 98.13-98.18, and gold was steady between $1276.50 - $1278.
Open interest was up 1.8k contracts, showing a net of new longs from yesterday’s advance. Volume was much lower but still healthy with 254k contracts trading.
Bulls cheered gold’s advance today, again in the face of fresh 23-month highs in the US dollar, and stronger US stocks. However, some bulls were a bit disappointed with gold’s failure to hold over key resistance at $1277-80 (quadruple top - 4/17, 4/18, 4/22, and 4/24 highs). Bulls feel that the recent selling has been overdone ($45 the drop from $1311 on 4/10 to Tuesday’s $1266 low) and is approaching oversold (14-day RSI =39). Similarly, they feelthat 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 again disappointed with gold’s ability to advance today, given the advance in equities and strength in the dollar to 23-month highs. However, bears are encouraged that gold has failed to have a meaningful bounce (that has held) 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 (another 23-month high today) – despite the surprise dovishness from the Fed at their last meeting - given the recent lousy Eurozone data (forced the German 10-year bund yield back into negative territory yesterday). 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 Japan’s Jobless Rate, CPI, Industrial Production, Retail Sales, Housing Starts, and Construction Orders, US Q1 GDP, Personal Consumption, GDP Px Index, Core PCE, University of Michigan Consumer Sentiment, Baker Hughes Rig Count and Commitment of Traders Report for near term direction.
In the news:
China’s gold consumption slightly up in Q1: http://www.china.org.cn/china/Off_the_Wire/2019-04/25/content_74721521.htm
March Swiss gold exports almost back to normal: https://www.sharpspixley.com/articles/lawrie-williams-march-swiss-gold-exports-almost-back-to-normal_292387.html
Dubai – gold worth billions smuggled out of Africa: https://www.reuters.com/investigates/special-report/gold-africa-smuggling/
$1278-80 – quadruple top - 4/17, 4/18, 4/22, and 4/24 highs
$1283 – 4/25 high
$1286 – up trendline from 12/28 $1274 low
$1287 – 20-day moving average
$1289 – 4/16 high
$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
$1295 – 40-day moving average
$1296 – 4/12 high
$1300 – psychological level, options
$1301 – 4/10 low
$1301 – 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)
*$1303 – 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
$1275 – options
$1273 – quadruple bottom - 4/16, 4/17, 4/22, and 4/25 lows
$1271 – 4/18 low
$1269 -4/24 low
$1265-67 – quadruple bottom - 12/25, 12/26, 12/27, and 4/23 lows
*$1263 – 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
*$1252 – 200-day moving average
$1250 – options
$1242-43 – double bottom – 12/19 and 12/20 lows