Gold Traders' Report - February 13, 2018

Jim Pogoda, Trader, Gold Bullion International 
FEB 13, 2018

Gold rose last night in a range of $1321.65 - $1330.80, taking out resistance at yesterday’s $1327 high, but was capped ahead of the $1332 peak from 2/6.  It climbed against a weakening dollar, which broke below the key 90 level in the dollar index (90.18 – 89.65).

The greenback was pressured by a stronger yen (108.78 – 107.44, 5-month high, firmer Japanese PPI and Machine Tool Orders, uncertainty if ultra-dove Kuroda would be reappointed), a stronger pound ($1.3839 - $1.3924, higher than expected UK CPI and PPI), and continued strength in the euro ($1.2284 - $1..2356).

Gold was also boosted by a pullback in the US 10-year bond yield (2.862% - 2.822%), and mostly weaker global stocks.  The NIKKEI was off 0.65%, the SCI was +1%, Eurozone shares ranged from -0.5% to +0.1%, and S&P futures were off 0.7%.  Further weakness in oil (WTI from $59.73 - $58.87) weighed on equities. 

At 6AM, a stronger than expected reading on US NFIB Small Business Optimism Index (106.9 vs. exp. 105.7) helped push up S&P futures (2636 – 2649), and lifted the 10-year yield to 2.839%.  The dollar halted its slide, and gold backed off to $1327.

A little later, at 8AM, the usually hawkish Fed’s Mester stuck to her hawkish view, saying the recent stock market sell-off and jump in volatility will not impact the economy’s overall strong prospects, and “there is more salient upside risk to the forecast than we’ve seen in awhile”.

S&P futures slid to back to 2635, the 10-year yield climbed further to 2.849%, and the DX rebounded to 89.85.  Gold fell in response, but found support at $1322.85 – just ahead of the overnight low. 

Later in the morning, though US stocks rebounded off of their opening lows, and the 10-year yield climbed to 2.853%, the dollar turned down.  Continued strength in the euro ($1.2371) knocked the DX back below its overnight low to reach 89.61, and gold rallied.  The yellow metal climbed to $1329.50, but was capped by resistance at the overnight high. 

In the afternoon, US stocks turned positive (S&P +11 to 2666, financials lead gainers), aided by a bounce in crude ($58..40 - $59.45, IEA forecast strong global demand).  However, the 10-year yield drifted down to 2.826%.

The dollar – caught in the cross currents - hovered near its earlier lows between 89.65 – 89.76.  Gold ticked higher to $1330, but again resistance at the overnight high held.  Gold was $1329 bid at 4PM with a gain of $6.50.  

Open interest was off 0.6k contracts, showing a small net of new longs from yesterday’s gain. Volume was much lower with only 225k contracts trading. 

Bulls were pleased with another up day, given the advance in stocks and the US 10-year yield remaining near 4-year highs.  They’ll look for a continuation of dollar weakness to help take gold past resistance at $1331-32 (double top, down trendline from 1/25 $1366 top) and then see a vacuum up to the $1346 high from 2/6. 

Bears see gold’s bounce from $1307 - $1330 as a brief short-term correction within an intermediate term downtrend. They are expecting further gains in equities and the US 10-year bond yield to take the DX past its triple top at 90.57-60 which will pressure gold lower.

They’ll be gunning for more long liquidating sell stops under the triple bottom at $1306-7, $1300-01 (50% retracement of up move from 12/12/17 $1236 low to 1/25/18 $1366 high), and then the 100-day moving average at $1293. 

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 Japanese GDP, German GDP, CPI, Eurozone GDP, Industrial Production, US MBA Mortgage Applications, CPI, Retail Sales, Business Inventories, and Oil Inventories for near-term guidance.

In the news:

VIX Manipulation Costs Investors Billions, Whistle-Blower Says

China’s love affair with gold heating up on property riches

 

Resistance levels: 

$1327 - 29 – quadruple bottom - 1/19, 1/22, 2/2 ,and 2/5 lows

$1331-32 – double top, 2/7 and 2/13 highs

$1332 – down trendline from 1/25 $1366 high

$1335 – 20 day moving average

$1338 – 11/9 election night high

$1347 – down trendline from 8/2013 weekly chart

$1350 – 52 – triple top – 1/29 , 2/1, and 2/2 highs

$1350 – options

$1356-58 – 5 tops 1/26/18, 9/8/17, 8/10/16, 8/14/16, 8/18/16 highs

$1365-67 – 5  tops 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:

$1322 – 2/13 low

$1322-23 – double top 2/8 and 2/9 highs

$1320 – 40 day moving average

$1311 – 2/9 low

$1309 – down channel line

$1308-09 – double bottom 1/9 and 1/10 lows

$1306-7 – triple bottom, lows 1/3, 1/4, 2/8

$1307 – 50 day moving average

$1304 – 1/2 low

$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

$1294 – 100-day moving average

$1287 – 12/28 low

$1282– 200-day moving average

$1281 – 12/27 low

$1281 – 50% retracement of up move from 7/10/17 $1205 low to 9/8/17 $1357 high