Jim Pogoda, Senior Gold Trader, Gold Bullion International
APR 30, 2019
Gold advanced last night, trading in a range of $1280 - $1286.40. It rose from $1280-$1284 during Asian hours against an adverse reaction in stocks (S&P futures to 2936) and a dip in the US 10-year yield to 2.505% on the release of weaker Chinese PMI data – despite the US dollar remaining fairly steady. During European time, the yellow metal climbed further to its $1286.40 high where resistance at yesterday’s $1287 peak capped the rally. The move was fueled by a decline in the DX (97.49, 1-week low) which was pressured by strength in the euro ($1.1174 - $1.1223, stronger German GfK and CPI and Eurozone GDP) and the pound ($1.2930 - $1.3018, upbeat comments on Brexit negotiations between the Government – serious and constructive).
Just ahead of and through the NY open, however, gold tumbled back to its overnight low of $1280. It was pressured by a rebound in S&P futures (2945) on stronger earnings report from McDonald’s, GE, Mastercard, Merk and Pfizer. A spike in oil (WTI to $64.72 aided the move). The US 10-year bond yield rose to 2.549%, but the DX - still under pressure from the climbing euro and pound only managed to tick up to 97.57.
US stocks turned down and opened lower (S&P -9 to 2933), hurt by weakness in Google (weaker revenue announced last night) pressuring tech stocks and a much worse than expected reading on the Chicago PMI (52.6 vs. exp. 59). The 10-year yield slipped to 2.514%, and the DX fell to 97.46. Gold rebounded sharply, trading back up to $1285.
At 10AM, stronger than expected reports on US Consumer Confidence (129.2 vs. exp. 126.8) and Pending Homes Sales (3.8% vs. exp. 1.5%) took US stocks briefly higher (S&P -4 to 2938), while the 10-year yield ticked up to 2.518%. The DX recovered to 97.64, and gold fell back to $1280.50
Later in the morning, US stocks resumed their slide (S&P -18 to 2924), hurt by some cautious comments from OBM’s Mulvaney on the US-China trade talks (likely to be resolved one way or another over next two weeks, talks can’t go on forever, US won’t make a deal unless a great deal for US). Losses in Communication Services led the decline. The 10-year yield sank to its overnight low of 2.505%, and the DX slipped to 97.51. Gold moved higher, but topped out at $1284.50.
Into mid-day, US stocks rebounded (S&P -2 to 2940) helped by upbeat comments from Pelosi and Schumer on their talks with Trump on an infrastructure spending deal ($2T). The 10-year yield moved back up to 2.518%, and the DX returned to 97.65. Gold was pressured down, but support emerged at $1282.50.
In the afternoon, stocks got a further boost from some dovish tweets from Trump:
China is adding great stimulus to its economy while at the same time keeping interest rates low. Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening. We have the potential to go...
....up like a rocket if we did some lowering of rates, like one point, and some quantitative easing. Yes, we are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records &, at the same time, make our National Debt start to look small!
The S&P traded back up into positive territory and finished up 3 to 2946. The 10-year yield edged down to 2.504%, and the DX slipped to 97.45. Gold was caught in the cross currents and remained steady between $1283 - $1284.25. It was $1284 bid at 4PM with a gain of $3 .
Open interest was off 2.0k contracts, showing a net of long liquidation from yesterday’s decline. Volume was much lower with 217k contracts trading.
Most bulls will gladly take gold’s $3 gain today, given the strength in US stocks (S&P record high close). However, other bulls were disappointed that gold couldn’t take out yesterday’s $1287 high – given the DX had pulled back below 97.50, and the US 10-year yield was back flirting with 2.50%. Bulls are encouraged that the yellow metal put in another higher low, to extend its streak to 5 straight sessions since 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 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 will accept gold’s advance today, given the softness in the dollar (which they see as a modest correction off of its 23-month highs) and the pullback in the US 10-year yield to near 2.50%. 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, new record highs, better than expected Q1 earnings so far). Bears also feel that the strength in the US dollar has legs 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 Japan’s PMI, UK Consumer Credit and PMI, US MBA Mortgage Applications, ADP Employment Change, Markit PMI, ISM Manufacturing, Construction Spending, Oil Inventories and the much awaited FOMC meeting statement and Powell Press Conference for near term direction.
Soc Gen resigns as London gold market maker: https://in.reuters.com/article/gold-societegenerale/societe-generale-resigns-as-london-gold-market-maker-idINKCN1S61KU?rpc=401&
Silver Institute – global silver demand up 4% in 2018: https://www.silverinstitute.org/wp-content/uploads/2019/04/SNApr2019.pdf
Healthy PGM picture benefits platinum – WPIC: https://www.platinuminvestment.com/files/473200/WPIC_Platinum_Perspectives_March_2019.pdf
$1286 – up trendline from 12/28 $1274 low
$1286-7 – double top - 4/29 and 4/30 highs
$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
$1299 – 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
$1280 – 4/30 low
$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
*$1253 – 200-day moving average
$1250 – options
$1242-43 – double bottom – 12/19 and 12/20 lows