Gold Traders' Report - February 14, 2018

Jim Pogoda, Trader, Gold Bullion International 
FEB 14, 2018

Gold was choppy overnight in a range of $1329.90 - $1337, fading movements in the dollar (DX from 89.37 – 89.75).  Early during Asian hours, gold rallied to its high, taking out resistance at $1331-32 (double top, 2/7 and 2/13 highs, down trendline from 1/25 $1366 high) as the DX slid to support in front of its 2/6 low at 89.36 from a stronger yen (107.89 -106.85) - despite a miss on Japanese GDP.

During European time, gold retreated back to $1330 as the dollar strengthened (DX back to 89.75) against the euro, as the common currency was pressured by a weaker than expected reading on German GDP (euro from $1.2385 - $123.40).

A rebound in the US 10-year bond yield (2.808% - 2.844%) and mostly firmer global equities were a headwind for gold with the NIKKEI off 0.4%, the SCI up 0.5%, European markets were +0.7% - 0.8%, and S&P futures were +0.5%.

However, a pullback in oil (WTI from $59.20 - $58.59) from larger than expected builds in US oil and gasoline inventories from yesterday’s API Report weighed on equities. 

At 8:30 AM, the much awaited US CPI Report was higher than expected (CPI +0.5% vs. exp. 0.3%, Core +0.3% vs. exp. 0.2%), while Retail Sales disappointed (-0.3% vs. exp. +0.2%).  FedWatch showed the probability of Fed rate hikes increasing substantially from yesterday:

-          March from 76.1% - 83.1%

-          June from 51.2% - 63.8%

-          September from 32.3% to 43.2%

-          December (4th hike) from 17% to 25.1%

Markets had an initial violent reaction (heavy algorithmic activity), as the S&P futures collapsed  (2675 – 2628), and the 10-year yield spiked  to 2.891%.  The DX shot to 90.13, and gold was whacked down to $1319.  However, within two hours, US stocks recovered (S&P +15 to 2678), with banks and tech leading the rebound.

US 10-year yield continued to climb, though, and reached a fresh 4-year high at 2.904%.  The dollar turned down sharply, taking out its overnight low and support at 89.36 to reach 89.23.

Gold rocketed past mild resistance at $1331-32, and then ran through a vacuum to another patch of mild  resistance at $1346 (2/6 high).  It pushed through that to reach $1349 by late morning, where resistance at the triple top at $1350-52 (1/29, 2/1, and 2/2 highs) held. 

Into the afternoon, US stocks continued to advance (S&P +27 to 2690), helped by a rebound in oil (WTI from $58.19 - $59.78, EIA reported a smaller than expected build in US oil inventories).

The 10-year yield ticked up further to 2.911% (another 4-year high), but the DX sank to 89.05, pressured by a firmer euro ($1.2441) and pound ($1.4006).  Gold continued to climb, and took out resistance at $1350-52 to reach $1355.65, just shy of its 1/26 top at $1357. 

Open interest was up 1.6k contracts, showing a net of new longs from yesterday’s gain.  Volume was lower with just 213k contracts trading.

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 Industrial Production, Eurozone Trade Balance, US Empire State Manufacturing Index, Jobless Claims, PPI, Philly Fed Index, Industrial Production, Capacity Utilization, and the NAHB Housing Market Index for near term direction. 

In the news:

Dalio’s Bridgewater boosts holdings in gold

Russia may now be world #2 gold miner

Resistance levels: 

$1356-58 – 6 tops 2/14/18, 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:

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

$1350 – options

$1347 – down trendline from 8/2013 weekly chart

$1346 – 2/6 high

$1338 – 11/9 election night high

$1336 – 20 day moving average

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

$1329 – down trendline from 1/25 $1366 high

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

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

$1323 – 40 day moving average

$1322 – 2/13 low

$1311 – 2/9 low

$1309 – down channel line

$1309 – 50 day moving average

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

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

$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

$1295 – 100-day moving average

$1294 – 12/29 low

$1287 – 12/28 low

$1283– 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