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Gold Traders' Report - April 26, 2018

Jim Pogoda, Trader, Gold Bullion International 
APR 26, 2018

Gold was fairly steady overnight in a narrow range of $1321.50 - $1326.50, and fading some modest movements in the US dollar. It rose to its high of $1326.50 during Asian time as the DX traded down to 91.07, weighed by some strength in the yen (109.47 – 109.24).

During European time, gold retreated to its $1321.50 low as the greenback rallied back (DX to 91.33 – fresh 3-month high), aided by weakness in the euro ($1.2188 - $1.2156 – miss on German GfK).

A pullback in the US 10-year bond yield (2.988%) was gold supportive, but mostly firmer global equities weighed on the yellow metal.

The NIKKEI rose 0.5%, the SCI fell 1.4%, European shares were up from 0.2% to 0.5% ,and S&P futures were up 0.3%. Firmer oil prices (WTI from $67.96 - $68.57, concerns on Iran sanctions) aided the strength in stocks.

At 8:30 AM, a barrage of US economic data was accompanied by a press conference by the ECB’s Draghi.

Markets initially focused on dollar bullish reports on Jobless Claims (209k vs. exp. 230k, lowest since 1969), and Durable Goods (2.6% vs. exp. 1.6%), and some dovish comments from Draghi (reiterated rates will remain unchanged well after asset purchase program ends, headline inflation around 1.5% for rest of the year).

The DX rose to 90.28 as the euro dropped to $1.2146. Gold was pressured to $1321.70, where support in front of the overnight low held.

Later on, markets seized on Draghi’s comments that the recent bout of Eurozone weakness were due to temporary factors and that the ECB expects solid and broad based expansion of the euro area economy.

That turned the euro sharply higher ($1.209), and sent the DX down below 91 (90.95). Gold popped higher in response, and traded up to $1325.50.

US stocks opened stronger (S&P + 21 to 2660), helped by stronger earnings from Facebook and AMD.

Some comments from White House Economic Advisor Kudlow (will be accompanying Mnuchin, all disputes to be discussed, has “high hopes” for outcome, met with Apple’s Cook who made some helpful suggestions) also helped boost stocks, and take the 10-year yield down to 2.981%.

The DX ran to 91.51 (fresh 3-month high), helped also by a tumble in the euro ($1.2105, plunge in German Bund yield from 0.621% - 0.585%) and sent gold lower.

Gold took out support at the overnight low at $1321.50, the 100-day moving average at $1320 and yesterday’s $1319 low to reach $1317.

During the late morning and into the afternoon, equities continued to climb (S&P +30 to 2676), while the 10-year yield remained below 3%. The DX added to its earlier gains to reach 91.64 (another fresh 3-month high).

Gold was forced lower, but dip buying emerged to limit the downside to $1315, and led a bounce to the $1317-1318 area.

Later in the afternoon, US stocks pared some gains but went out firm (S&P +28 to 2667), while the 10-year yield hovered around 2.99%.

The DX pulled back a tad to 91.57, and gold traded narrowly between $1316.50 - $1318. It was $1317 bid at 4PM with a loss of $5.

Open interest was up 0.4k contracts, showing near even amount of long liquidation and new shorts (but also some bottom fishing new longs) from yesterday’s decline. Volume was a little lighter with 282k contracts trading.

Bulls have little to cheer about with gold having fallen $50 in the past 11 sessions, and having breached its up trendline from the $1236 12/12 low and 100-day moving average.

However, some believe the market is approaching oversold (14-day RSI = 40) and the bottom end of its well-worn range of the last 4 months ($1303 - $1366), and will be looking to buy scale down and await a bounce.

Despite the recent price action, bulls still believe the intermediate – longer-term trend in the dollar is still lower, and that the recent strength in the greenback will reverse and fuel a rebound in gold. They look for a break back above the 100-day moving average at $1320 and a test of the former support in the low $1330’s.

Some bears have taken profits on their shorts as gold has moved down to the lower end of the recent trading range. Others are looking for a bigger score, and are targeting a breach of $1307-10 (quadruple bottom – 3/16, 3/19, 3/20, and 3/21 lows) to trigger some liquidating sell stops to bring into play the 200-day moving average at $1304, and the 3/1 low at $1303. If these levels fail, the bears expect a test of support in the low $1290’s and high $1280’s.

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 the BoJ Rate Decision and Outlook Report, Japan’s Jobless Rate, CPI, Retail Sales and Industrial Production, German Unemployment Change, Eurozone Consumer Confidence, UK Q1 GDP, US Q1 GDP, GDP Price Index, Core PCE, University of Michigan Consumer Sentiment, Baker Hughes Rig Count, Commitment of Traders Report, and comments from the BOE’s Carney for near term guidance.

In the news:

 Resistance levels: 

$1319 – 4/25 low

$1320 – 100-day moving average

$1321-23 – quadruple bottom, 3/29, 4/5, 4/6 and 4/23 low

$1325 - options

$1332 – 40 day moving average

$1332 – 50 day moving average

$1332-33 – double top - 4/24 and 4/25 highs

$1333 – up trend line from 12/12 $1236 low

$1335 – 4/23 high

$1334-35 triple bottom – 4/12, 4/13, and 4/20 lows

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

$1337 – 20-day moving average

$1338 – 4/17 low

$1341 – 4/19 low

$1345 – down trendline from 8/2013 weekly chart

$1346 – 4/20 high

$1350 – options

$1352 – down trendline from 1/25/18 $1366 high

$1355 - 57 – quadruple top, 3/26, 3/27, 4/18, and 4/19 highs

$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:

$1315 – 4/26 low

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

$1303 – 3/1 low

$1304– 200-day moving average

$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

$1294 – 12/29 low

$1287 – 12/28 low

$1281 – 12/27 low