Gold Traders’ Report - August 26, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
AUG 26, 2019

Markets were roiled last night from Trump’s announcement late Friday afternoon further increasing tariffs on China (tariffs on $250B increased to 30% from 25% on Oct. 1, remaining $300B set to go into effect on Sep 1 will be taxed at 15%, not 10%) and by his later comments that he regrets not raising them higher – in response to a question if he had second thoughts about his actions on Friday.  A lack of coordination at the G-7 meeting along with other geopolitical destabilizers (further unrest in Hong Kong, Israel attacking positions in Lebanon and Syria, North Korea tests “super large rocket) contributed to the instability.  Global equities sold off (NIKKEI off 2.2%, SCI off 1.9%, S&P futures off 1.4%), and investors flocked to the safe havens.  Global bond yields sank (Japan’s 10-year from -0.234% to -0.283% - 3-year low, German 10-year from -0.677% to -0.706%, US 10-year from 1.527% to 1.446% - 3-year low), and the yen rallied (105.44 – 104.79, 17-month high).  The US dollar remained firm (97.58 – 97.80) however, off of weakness in the yuan (7.1524, 11-year low) and other emerging market currencies.  Gold spiked higher, tripping buy stops over $1535 (8/13 high) to reach $1549.20, where resistance in front of $1550 (options) finally held.  However, subsequent comments from Trump last night that China was ready to come back to the negotiating table after an exchange of phone calls along with a statement from China’s Vice Premier Liu He saying China resolutely opposes the escalation of the US trade war turned the markets around.  S&P futures rallied (+32 to 2888), while the US 10-year bond yield rose to 1.533%.  The DX surged (98), helped also by weakness in the euro ($1.1153 - $1.1109) from a miss on Germany’s IFO Business Climate Index.  Gold retreated, and tumbled back through the prior resistance at $1535 to reach $1525.  Ahead of the NY open, gold was nervous and choppy, bouncing to $1533 before slipping back to $1529.

At 8:30 AM, a better than expected reading on US Durable Goods helped lift S&P futures (+24 to 2880) after a previous pullback, and took the 10-year yield to 1.537%.  The DX edged up to 98.08, and gold slipped back to $1526 – but held above the overnight low (dip buying seen). 

US stocks retreated into the late morning hours (S&P +9 to 2822), with some concern over Trump’s assertion that actual high level phone calls between the US and China had actually taken place (China’s Global Times Editor says that top negotiators didn’t hold phone talks in recent days).  The 10-year yield slid down to 1.508%, and the DX fell back below 98 to reach 97.93.  Gold rose in response, and briefly broke $1535 again to reach $1537.  

Near mid-day, equities rose on further positive comments on US-China trade from Trump (If there’s a deal, companies can remain in China, this is the first time I’ve seen them where  they really do want to make a deal and that is a very positive step, could possibly delay tariffs) and by Trump and Macron on the increasing possibility of beginning negotiations with Iran.  While oil sold off ($55.23 - $53.60) on the prospect of Iranian supplies coming back to the market, US stocks gained (S&P +32 to2879), with strength in the IT and Communication Services sectors leading the advance. The 10-year yield moved back up to 1.538%, and the DX rose to its high of 98.10.  Gold pulled back, but once again found support at $1526.

In the afternoon, US stocks stayed firm (S&P finished +31 to 2878), while the 10-year yield touched 1.547% before finishing at 1.538%.  The DX remained steady between 98 – 98.10, and gold was similarly stable between $1526-$1529.  Gold was $1529 bid at 4PM with a gain of $2. 

Open interest  was up big – 27.7k contracts – showing a hefty amount of new longs from Friday’s rally.  Volume surged with 501k contracts trading. 

All markets will continue to focus on geopolitical events (especially Brexit news and US / UK - Iran tensions, Hong Kong protests), developments with the Trump Administration (especially on US-China trade, potential legal issues), Q2 corporate earnings, oil prices, and will turn to reports tomorrow on China’s Industrial Profits, Germany’s GDP, US House Price Purchase Index, S&P Case-Shiller Home Price Index, Richmond Fed Manufacturing Index, and Consumer Confidence for near term direction. 

 

In the news:

Jeff Christian forecasting sharply higher gold and silver prices sooner:   https://www.fxstreet.com/analysis/jeff-christian-exclusive-were-now-forecasting-sharply-higher-gold-silver-prices-sooner-201908232030

Commerzbank’s Reichelt on Central Banks, currencies, and gold:   https://uk.finance.yahoo.com/video/commerzbanks-reichelt-central-banks-currencies-080158681.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cubWV0YWxzZGFpbHkuY29tL2xpbmsvMjk1NzIxL2NvbW1lcnpiYW5rcy1yZWljaGVsdC1vbi1jZW50cmFsLWJhbmtzLWN1cnJlbmNpZXMtZ29sZC5odG0&guce_referrer_sig=AQAAANkvb0NwcH56_22HcoNmkWcNqSDz5dRpk3ax2ufkCG5eRtuhiKQ7gS382BFloe4Y_VWe6-KkCCAxCPrOB1Ebh0ElIbtZ_O3Z2PM_-Ls-6EKgfFi5A6N-WY3JLn-EOCQxP3ACN5VliwqELwEW7-EvXNhxD7GFuFwaibmXyOMdX9YI

CFTC – gold speculators raised their bullish bets this week to highest since 2016:   https://www.investing.com/analysis/gold-speculators-raised-their-bullish-bets-this-week-to-highest-since-2016-200458291

 

YTD Performance


12/31/2018

8/23/2019

Change
% Change
Gold


1282.5

1529

246.5

19.220%

DX


96.06

98.02

1.96

2.040%

S&P


2505

2878

373

14.890%

JYN


109.63

106.06

-3.57

-3.256%

Euro


1.1466

1.2202

0.0736

6.419%

US 10-year bond yield


2.69%

1.538%

-0.0115

-42.740%

Oil (WTI)


45.45

53.75

8.3

18.262%

 

 

Resistance levels: 

$1535 – 8/13 high

$1549 – 8/26

$1591 – 4/7/13

 

Support levels:

$1527 - 28 – double top - 8/15 and 8/16 highs

$1525 – 8/26 low

$1526 - options

$1514 – pennant down trendline from 8/13 $1535 high

$1513 – 8/19 high

$1508 – double top - 8/20 and 8/21 highs

$1500 – options

$1504 – 8/22 high

$1505 – pennant up trendline from 8/13 $1480 low

$1497 – 8/21 low

$1493-4 – 5 bottoms 8/14, 8/19, 8/20, 8/22, 8/23 lows

$1490– 20-day moving average

$1480 – 8/13 low

$1472 – 8/7 low

$1457 – 8/6 low

$1453 - 40-day moving average

$1450 – options

$1442 – 50-day moving average

$1438 – 8/5 low

$1440 – up trendline from 5/30 $1275 low

$1436-39 triple top – 6/25 7/2, and 7/3 highs

$1433-34 – double top 7/25 and 7/30 highs

$1430 – 8/2 low

$1425 – options

$1422 – 7/30 low

$1414-16  – 5 bottoms - 7/18, 7/23, 7/24, 7/26, and 7/29 lows

$1411 – 7/25 low

$1400 - 01 – 4 bottoms – 7/11, 7/16, 7/17, and 8/1 lows

$1400 -  50% retracement of up move from 5/2 $1266 low to 8/13 $1535 high

$1400 – options

$1390 – 7/10 low

$1386-87 – double bottom, 7/5 and 7/9 lows

$1382 -84 – triple bottom – lows 6/21, 7/1, and 7/2

$1378 – trend line from 6/21 $1383 low

$1373-75 – double top – 7/6/16 and 7/11/16 highs

$1365-67– triple top – 8/2/16, 1/25/18 and 4/11/18 highs

$1368 – 100-day moving average

$1358 – 6/20 low

$1353-56 – quadruple top – 4/12/18, 4/18/18, 4/19/18, and 6/18 highs

$1345 – down trendline from 8/25/13 $1433 high

$1344-48 – 6 tops , 2/20 and  4/20/18, 6/5, 6/7, 6/13, and 6/17 highs

$1342 – double top - 2/19 and 2/21 highs

$1338 – double bottom -6/14 and 6/18 lows

$1338 - 40 – triple top – 6/6, 6/10 and 6/12 highs

$1332-33 – double bottom – 6/13 and 6/17 lows

$1327-30 – triple top, 6/3, 6/4, and 6/11 highs

$1325 – options

$1325-26 – triple bottom – 6/5, 6/10, and 6/12  lows

*$1326 – 200-day moving average

$1324 – double bottom 6/4 and 6/11 lows