Gold Traders’ Report - April 29, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
APR 29, 2019

Gold traded lower last night in a range of $1280 - $1286.80.  The yellow metal remained steady around $1286 during Asian hours, failing to advance against a modest decline in the US dollar (DX from 98.07 – 97.92).  However, gold slipped to its $1280 low during European time as the dollar rebounded back to its overnight high 98.07.  The dollar was lifted by a softness in the euro ($1.1167 - $1.1148, misses in Eurozone Economic and Industrial Confidence, and Business Climate data) and the pound ($1.2946 - $1.2908, lack of progress in UK cross party talks on Brexit).  Global equities were mostly weaker and gold supportive with Japan closed, the SCI of 0.8%, European shares were off from 0.1% to 0.3%, and S&P futures were flat.  Oil continued to soften (WTI to $62.46, comments from Trump saying he told OPEC to bring prices down) and weighed on stocks.

 At 8:30 AM, misses on US Personal Income (0.1% vs. exp. 0.4%), the PCE Deflator (0.2% vs. exp. 0.3%), and the Core PCE (0 vs. exp. 0.1%) were overcome by a stronger reading on Personal Spending (0.9% vs. exp. 0.7%).  After markets gyrated a bit digesting the divergent data, S&P futures advanced (+5 to 2946), and the US 10-year bond yield moved up from 2.505% to 2.531%.  The DX took out its overnight high to reach 98.11 and gold retreated to $1279.25. 

 US stocks opened higher (S&P +6 to 2946), with gains in the Financials sector and Disney (JPM upgraded after Avengers release shattered box office records) leading the advance.  A rebound in oil (WTI to $63.26) aided the move.  The 10-year yield edged down to 2.523%, and the DX pulled back to 98.05.  Gold was caught in the cross currents but softened further, reaching $1278.15.

 Equities firmed further into record territory through mid-day (S&P +8 to 2948) - shrugging off a miss in the Dallas Fed Manufacturing Index (2 vs. exp. 10) - with gains in the Communication Services sector along with further gains in Financials leading the advance. The 10-year yield pushed higher to 2.54%, but the DX continued to retreat (97.86).  The dollar was under pressure from a rebound in the euro ($1.1184) and the pound ($1.2935), with currency traders focusing more heavily on the weaker US inflation data than the strong spending gains.  Gold remained caught in the cross currents, but had a modest recovery to $1279.50.

 In the afternoon, US stocks hovered near their highs (S&P between 2747 – 2749), and the US 10-year yield ticked up to 2.541%.  The DX softened further, however, sliding to 97.83.  Gold had a modest bounce in response, and traded up to $1280. 

 Open interest was off 5.5k contracts, showing a net of short covering from Friday’s $8 gain.  Volume was stronger with 289k contracts trading. 

 Bulls were disappointed with gold’s failure to advance last night given the early dip in the dollar and with equities soft.  They were also concerned that gold couldn’t at least hold unchanged despite the subsequent further pullback in the DX later during the day.  However, other bulls are encouraged with the 4 consecutive higher lows gold has made in recovering from last Tuesday’s $1266 low.  Bulls feel that the recent selling had been overdone ($45 the drop from $1311 on 4/10 to Tuesday’s $1266 low), and that gold has successfully consolidated in the high $1260’s and is on its way back from an oversold condition.  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 $1264).  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 Friday’s Commitment of Traders Report (as of 4/23) that showed the large funds cutting their net long position to just 37k contracts, and increasing their gross short position to 139k 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 retest the now double top at $1289 (Friday’s and 4/16’s high) and then challenge its 100-day moving average at $1293, above which they expect to trip some momentum buying.  Bulls expect a further significant boost  if the down trendline at $1301 from the 2/20 $1347 high can be breached. 

 Bears cheered gold’s decline today, especially given the DX retreating back under 98.  Bears see gold’s recent bounce from $1266 last week as an opportunity to get short(er), and 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 (made successive 23 month highs in prior three sessions) 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 last Wednesday).  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 $1264 – 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 $1252.  

 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 China’s PMI, French GDP, German Import Prices, GfK Consumer Confidence, CPI and Unemployment Change, Eurozone GDP, US Employment Cost Index, Case Shiller Home Price Index, Chicago PMI, Pending Home Sales and Consumer Confidence for near term direction.  Looming ahead is the FOMC meeting statement and Powell Press conference on Wednesday, and the US Payroll Report  on Friday. 

 In the news:

LBMA’s The Alchemist:   http://www.lbma.org.uk/assets/Alchemist/Alchemist_93/Alch93Complete.pdf

 Heraeus – gold price volatility lowest in almost 20 years: https://www.heraeus.com/media/media/hpm/doc_hpm/precious_metal_update/en_6/Appraisal_20190429.pdf

 Gold speculators pared bullish bets:   https://www.investing.com/analysis/gold-speculators-pared-their-bullish-bets-to-lowest-level-since-november-200412020

 US Mint gold coin sales stronger last week :   http://www.coinnews.net/2019/04/27/gold-and-silver-log-first-weekly-gains-in-five-weeks/

YTD Performance




12/31/2018
4/29/2019
Change
% Change
Gold




1282.5
1280
-2.5
-0.195%
DX




96.06
97.85
1.79
1.863%
S&P




2505
2947
442
17.645%
JYN




109.63
111.72
2.09
1.906%
Euro




1.1466
1.1184
-0.0282
-2.459%
US 10-year bond yield




2.69%
2.54%
-0.0015
-5.436%
Oil (WTI)




45.45
63.6
18.15
39.934%

 

Resistance levels: 

$1283 – 4/25 high

$1286 – up trendline from 12/28 $1274 low

$1287 – 4/29 high

$1287 -20 day moving average

$1289 – 4/16 high

$1291 – 4/15 high

$1293– 100-day moving average

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

$1294 – 40-day moving average

$1296 – 4/12 high

$1300 – psychological level, options

$1300 – 50-day moving average

*$1301 – down trendline from 2/20 $1347 high

$1301 – 4/10 low

$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)

$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:

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

$1278 – 4/29 low

$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

*$1264 – 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