Gold Traders’ Report - July 15, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
JUL 15, 2019

Gold traded either side of unchanged last night, retaining its choppy tone in a range of $1410 - $1418.  It weakened to its low during Asian hours against a modest early firming in the US dollar (DX 96.83 – 96.90), and a move higher in the US 10-year bond yield 2.132%.  Gold was also softened by stronger global equities that were lifted by stronger Chinese Industrial Production and Retail Sales reports which were helped by PBOC stimulus that overshadowed an as expected Q2 GDP report (6.2%, lowest in 27 years).  The NIKKEI was closed, the SCI rose 0.4%, European markets were unchanged to +0.2%, and S&P futures were +0.1%.  Firmer oil (WTI from $60.22 - $60.49, demand picture helped by stronger Chinese data), were supportive of stocks, along with reports that the US may approve licenses for companies to restart new sales to Huawei in as little as two weeks.  Later during European time gold climbed to $1417, fueled by a retreat in the US 10-year yield (2.11%), and a decline in the DX (96.74, falls back below 96.77 100-day moving average).  The dollar was pressured by strength in the euro ($1.1263 - $1.1283) and a rebound in the yen (107.80). 

Ahead of the NY open, stronger earnings from Citigroup helped lift S&P futures further (+5 to 3021), while the DX bounced to 96.85.  Gold retreated, but found support around $1414.

At 8:30 AM, a stronger than expected reading on the Empire State Manufacturing Index (4.3 vs. exp. 2.0) took S&P futures to 3023, but the US 10-year yield pulled back to 2.106%.  The DX was caught in the cross currents but traded higher (96.90), and gold retreated to support at the overnight low of $1410. 

After a softer opening, US equities turned slightly higher (+1 to 3015), while the 10-year yield ticked up to 2.101%.  The DX rose and took out the overnight high to reach 96.97, helped by further weakness in the pound ($1.2509, Brexit uncertainties and speculation the BOE will join other central banks with easing), and the euro ($1.1253).  Gold retreated, and took out its overnight low to reach $1408. 

Into mid-day, US stocks turned back down (S&P -5 to 3008), with losses in the Energy, Financials, and Industrials weighing.  A fall in oil (WTI to $59.37, Gulf storm threat passes) contributed to the decline.  The 10-year yield slipped to 2.09%, and the DX pulled back to 96.90.  Gold rebounded, and climbed back to $1413.50. 

In the afternoon, upbeat comments from Treasury Secretary Mnuchin on the debt ceiling and budget negotiations (have been productive, getting closer) lifted the S&P back to unchanged (3014).  The 10-year yield ticked up to 2.097%, and the DX rose to its previous 96.97 high.  Gold dipped to $1410.50 where support from bargain hunting buying held. 

Later in the afternoon, finished slightly higher (S&P +1 to 3014, all 3 major indices posted record high closes), while the 10-year yield made an intraday low at 2.087%.  The DX ticked down to 96.93, and gold climbed to $1415.  The yellow metal was $1415 bid at 4PM – unchanged.  

Open interest was up 7.1k contracts, showing a decent chunk of new longs from Friday’s $10 rally.  Volume was much lower but still healthy with 324k contracts trading. 

Bulls were disappointed that gold couldn’t advance today, given the pullback in the US 10-year bond yield.  However, bulls are encouraged that gold has put in 4 consecutive sessions of higher lows, continues to be bought aggressively on dips, and is holding the redrawn up trendline ($1402) from the 5/30 $1275 low.  Even below this, most bulls are comfortable with the price continuing to consolidate in the $1380-$1440 channel, eventually expecting an upside breakout.  Bulls remain ecstatic with gold’s sharp $169 (13.31%) rally from the $1270 low on May 21 to the $1439 6-year high on 6/25.  With the further dovish lean from Powell’s testimony last week, bulls feel that a series of future Fed rate cuts (FedWatch still has solid 100% probability of a 25bp rate cut at the July meeting, an 85.9% chance of 2 hikes by the October meeting, and a 58.4% likelihood of 3 cuts by the December meeting) will put downside pressure on the entire rate curve and on the US dollar – allowing gold to move significantly higher.  In addition, bulls feel escalating fears / uncertainty of a protracted trade war with China (despite the trade truce achieved at the G20) will continue to impede global growth,  will put downward pressure on interest rates (US 10-year made fresh 32-month low last week at 1.941%) and will keep the Fed and most other Central Banks positioned dovishly.  Bulls also see current geopolitical tensions – especially between the US and Iran (UK also involved in a tanker incident last week) - as another tailwind for gold.  Bulls will look for the market to continue its rally, and expect a test of initial resistance at $1423 -24 (double top, 7/4 and 7/5 highs) followed by $1425, $1427 (7/11 high), then $1436-39 (triple top – 6/25 7/2, and 7/3 highs). 

Bears were disappointed that gold held up despite US stocks finishing at record highs again, and with a modestly firmer US dollar.   However, some bears will take the push given the pullback in the US 10-year bond yield.  While many bears were stopped during gold’s rebound to $1427 last week, other bears with stronger hands were able to get short(er) at better levels.  Bears see a market that remains overbought. It has risen $169 (13.31%) from the 5/20 $1270 low, its 14-day RSI still remains elevated at 60.6, and bears expect a more significant pullback to resume.  While bears acknowledge the further dovishness from Powell and growing concern over lower rates – both the in the long end (10-year near 32-month lows) and the short end (FedWatch predicting earlier Fed cuts), they feel that markets are a bit over their skis on rate cut predictions - especially now that there is some lessened uncertainty with the US-China trade truce in place.  They feel that the downward pressure on bond yields is also getting overdone, and a modest reversal should allow the recently oversold US dollar to continue to rebound against other currencies as they feel the dollar still remains the “cleanest dirty shirt in the laundry basket”, with the US as the sole global growth engine. Recent soft data for both Germany and the Eurozone (including last week’s miss on German Industrial Production, Wholesale Price Index and Eurozone Sentix Investor Confidence) that drove the German 10-year yield further into negative territory over the past months (record low bund yield two weeks ago -0.409%) underscores this view.  Bears feel a US-China trade deal is in both sides’ best interests, and feel that recent trade truce is the first step toward this end.  This they feel will help drive equities higher, and will put further pressure on the yellow metal.  Bears look for gold to resume its decline, and expect some significant long liquidation selling to materialize if it can get a close under $1402 (up trendline from 5/30 $1275 low), $1381-84 (triple bottom – lows 6/24, 7/1, and 7/2, lower channel line from 6/21 $1383 low) and then $1348 (downtrend line from 8/25/13 $1433 high).  

 

In the news: 

Heraeus precious appraisal – taxing time for gold in India: https://www.heraeus.com/media/media/hpm/doc_hpm/precious_metal_update/en_6/Appraisal_20190715.pdf

Gold speculator bullish best take a breather after strong 5-week run:   https://www.investing.com/analysis/gold-speculator-bullish-bets-take-a-breather-after-strong-5week-run-200439501

 

YTD Performance


12/31/2018

7/15/2019

Change
% Change
Gold


1282.5

1415

132.5

10.331%

DX


96.06

96.95

0.89

0.927%

S&P


2505

3014

509

20.319%

JYN


109.63

107.87

-1.76

-1.605%

Euro


1.1466

1.1257

-0.0209

-1.823%

US 10-year bond yield


2.69%

2.089%

-0.006

-22.226%

Oil (WTI)


45.45

59.28

13.83

30.429%

 

 

Resistance levels: 

$1417, 18 – 7/12 and 7/15 highs

$1423 -24 – double top, 7/4 and 7/5 highs

$1425 – 6/28 high

$1425 – options

$1427 – 7/11 high

$1436 – upper channel line from 6/25 $1439 high

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

$1446 – 5/12/13 high

$1450 – options

$1479 – 5/5/13 high

$1488 – 4/28/13

$1496 – 4/14/13 high

$1500 – options

$1591 – 4/7/13

 

Support levels:

$1412 – double bottom – 6/25 and 7/3 lows

$1408 – 7/15 low

$1403– 20-day moving average

$1403 – 7/12 low

$1402 - up trendline from 5/30 $1275 low

$1401 – 7/11 low

$1400 – options

$1392 – 7/8 low

$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

$1381 – lower channel 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

$1358 – 6/20 low

$1357 - 40-day moving average

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

$1352 -  50% retracement of up move from 5/2 $1266 low to 6/25 $1439 high

$1348 – 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

$1343 – 50-day moving average

$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

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

$1319– 100-day moving average

$1309-12 - triple top – 3/28, 4/10 and 4/11 highs

$1301 – double top 5/13 and 5/15 highs

$1300 – psychological level, options

$1300 – 50% retracement of up move from 8/16/18 $1160 low to 6/25 $1439 high

*$1291 – up trendline from 8/16/18 $1160 low

$1289 – double top - 5/17 and 5/30  highs

*$1289 – 200-day moving average

$1285-87 – 5 tops – 5/23, 5/24, 5/27, 5/28, and 5/29 highs

$1285– down trendline from 2/20 $1347 high

$1279 – 5/29 low

$1276 – 5/28 low

$1275 – options

$1274-75 – double bottom  – 5/17 and 5/20 lows

$1273 – 5/22 low

$1269-70– triple bottom - 4/24, 5/3, and 5/21 low

$1265-67 – 5 bottoms - 12/25, 12/26, 12/27, 4/23, and 5/2  lows

$1259 – 12/24 low

$1254 – 12/21 low

$1250 – options

$1242-43 – double bottom – 12/19 and 12/20 lows