Gold Traders' Report - February 28, 2018

Jim Pogoda, Trader, Gold Bullion International 
FEB 28, 2018

Gold firmed slightly overnight, attempting to consolidate after the $14 Powell induced selloff yesterday. It traded in a tight range of $1316.85 - $1321.40, and continued to work against movement in the US dollar - which was similarly steady between 90.30 – 90.55.

After drifting down to its low during Asian hours, the greenback improved during European time, bolstered by a softer euro ($1.2240 - $1.2199) from weaker than expected reports on German GfK and Unemployment.

Gold was supported, however, by a pullback in the US 10-year bond yield (2.912%- 2.879%), and mostly weaker global equities – following the selloff in US stocks yesterday.

The NIKKEI was down 1.4%, the SCI shed 1% (Chinese PMI data disappoint), Eurozone markets were off 0.3% - 0.5%, but the S&P bounced from earlier lows to reach +0.1%.

Weaker oil prices (WTI to $62.53, concerns over Chinese demand, larger build in US gasoline inventories from API report) weighed on stocks.

 At 8:30AM, the revision to US Q4 GDP was 2.5% as expected, but the Personal Consumption component was a little hotter at 3.8% (exp. 3.6%).

This helped boost the 10-year yield to 2.897%, and took the DX to resistance at 90.60.  Gold sold off, but support at $1316 – which had held since yesterday afternoon – provided a floor again.

Bargain hunting buying quickly emerged, and in an absence of offers, ran the market up to $1322.

Later in the morning, weaker reports on the Chicago PMI (61.9 vs. exp. 64.6) and Pending Home Sales (-4.7% vs. exp. 0.5%) were only speedbumps to advancing US stocks (S&P +13 to 2761, tech leads gainers), while the 10-year yield was steady around 2.89%.

However, currency traders used the minor dips in the dollar to get long, and took the DX to 90.70 - where the double top from 1/19-1/22 held.  Gold traded lower in response, but found support again at $1316.

At 10:30 AM, the EIA showed larger than expected builds of US inventories in oil and gasoline, which sent oil tumbling to $61.73.  US stocks sold off to 2740, and the 10-year yield ticked down to 2..882%.  The DX pulled back to 90.47, and helped gold snap back to $1320.50 by mid-day.

In the afternoon, US stocks turned higher (S&P +13 to 2758, real estate, Netflix, Apple and Amazon lead) while the 10-year yield moved down to 2.875%.

The DX, caught in the cross currents, drifted up to 90.63. Gold took another dip down to $1316, but for the third time today, was well supported there.

Open interest was up only 211 contracts, showing a near balance of long liquidation, some profit taking by shorts, and some new bargain hunting longs from yesterday’s decline.

Volume surged with 359k 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 Chinese Caixin Mfg PMI, Japanese Consumer Confidence, Eurozone Unemployment, US Vehicle Sales, Personal Income, Personal Spending, PCE Deflator, IU Claims, Markit Manfacturing PMI, Construction Spending, and ISM Manufacturing for near term direction. 

In the news:

EUR/USD, GBP/USD Slip at Support as USD Touches Fresh February Highs

Scotiabank pulls plug on sale of metals business

CPM – the gold market

Resistance levels: 

$1319 – 22 – quadruple bottom, 2/13, 2/14, 2/21, and 2/22 lows

$1322 – 2/28 high

$1325 – 50 day moving average

$1326-27 – double bottom 2/23 and 2/26 lows

$1327 – up trendline from 12/12 $1236 low

$1328 – 2/20 low

$1332 – double top 2/22 and 2/23 highs

$1332 – 20 day moving average

$1333 – 40 day moving average

$1334 – down trendline from 2/16 $1362 high

$1336 – 2/21 high

$1336 – 50% retracement of down move from 1/25 $1366 high to 2/8 $1307 low

$1337 – 2/27 high

$1338 – 11/9 election night high

$1341 – 2/26 high

$1347 – down trendline from 8/2013 weekly chart

$1347 – 2/20 high

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

$1350 – options

$1351 – 2/19 high

$1356-58 – triple top, 2/15, 2/14, 1/26 highs

$1360 – down trendline from 1/25 $1366 top

$1362 – 2/16 high

$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:

$1316 – 2/12 ,2/28  lows

$1313 – 2/27 low

$1311 – 2/9 low

$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

$1300 – 100-day moving average

$1294 – 12/29 low

$1287 – 12/28 low

$1287– 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