Gold Traders’ Report - July 29, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
JUL 29, 2019

Gold moved modestly higher last night, trading in a range of $1417.50 - $1424.30, still retaining its nervous and choppy tone.  It rose to its high early during Asian time, where resistance at Friday’s $1425 high capped the advance.  The up move was helped by a pullback in the US dollar (DX from 98 to 97.90) and a dip in the US 10-year bond yield (2.076% to 2.058%). Mostly weaker global equities were also a tailwind for gold with the NIKKEI off 0.4%, the SCI off 0.1% (large miss on China’s Industrial profits), European markets ranged from -0.3% to +1.1%, and S&P futures were -0.1%.  Gold retreated to its $1417.50 low during European time, where support at $1417 (redrawn up trendline from 5/30 $1275 low) held.  Gold was pressured from a rebound in the US dollar (DX to 98.11, fresh 2-month high), which was helped by weakness in the pound ($1.2390 - $1.2304, low since 3/2017, Johnson’s government ramping up preparations for no-deal Brexit) and the euro ($1.1127 - $1.1118, expectations of significant further easing package).  Ahead of the NY, open, however, gold managed to recover to the $1420 area with some bargain hunting buying seen.  The move was helped by a further tick down in the US 10-year bond yield (2.049%) but despite the DX rising further (98.16), and S&P futures turning a tad higher (+0.1%).

US stocks fell on their open (S&P -11 to 3014) hurt from some tweets from Trump hinting at only a 25bp cut this Wednesday (with very low inflation, our Fed does nothing - and probably will do very little by comparison, a small rate cut is not enough).  The 10-year yield climbed to 2.062%, while the DX remained firm between 98.10-98.15.  Gold fell briefly through support at $1417 to reach $1415.50, but yet again, bargain hunting buying emerged to take the market quickly back to $1420. 

Equities trimmed losses into mid-day (S&P -3 to 3022), while the 10-year yield ticked up to 2.065%.  The DX rose to 98.17, and gold softened to $1418.50. 

Into the afternoon, US stocks turned back lower (S&P -7 to 3019), and the 10-year yield edged down to 2.051%.  The DX ticked lower (98.03), with a rebound in the euro ($1.1149) outweighing a further tumble in the pound ($1.2215).  Gold tripped some buying over its overnight high and $1425 to reach  $1428.

Later in the afternoon, US stocks finished with a modest decline (S&P – 5 to 3021) while the 10- year yield climbed to 2.063%.  The DX hovered between 98 – 98.05, and gold dipped to $1425.  Gold was $1426 bid at 4PM with a gain of $8.

Open interest was up 5.4k contracts, showing net of new longs from Friday’s advance.  Volume was lower, but still quite robust with 441k contracts trading – still inflated by the ongoing Aug-Dec contracts rollover.  

Bulls were encouraged with gold’s significant advance today, given the slight declines in US stocks, the 10-year yield and the DX.  They were pleased that gold held $1415 (up trendline from 5/30 $1275 low, up trendline from 7/9 $1386 low, and quadruple bottom - 7/18, 7/23, 7/24 and 7/26 lows).  The bulls remain ecstatic with gold’s sharp advance that has extended to $183 (14.4%) from the $1270 low on May 21 to the $1453 6-year high on 7/18.  With the recent dovish comments from Williams (even though clarified) on top of the dovish lean from Powell’s recent testimony, bulls feel that a series of future Fed rate cuts (FedWatch still has solid 100% probability of a 25bp rate cut at next week’s meeting with a 25% chance for a 50bp cut, an 82.2% chance of 2 hikes by the October meeting, and a 55% 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 will continue to impede global growth,  will put downward pressure on interest rates (US 10-year made fresh 32-month low three weeks ago 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/UK and Iran and North Korea - as another tailwind for gold.  Bulls will look for the market to resume its rally, and expect a retest of initial resistance at $1434 (7/25 high), followed by $1436-39 (triple top – 6/25 7/2, and 7/3 highs), $1446 (5/12/13 high), $1450 (options), $1453 (7/18 high), $1479 (5/5/13 high), $1488 (4/28/13), and then $1496 (4/14/13 high). Bullish technicians are quick to point out that there is a vacuum between $1496 and $1591 - the high from 4/7/13.  

Bears were surprised with the strength of gold’s advance today, given just the slight pullbacks in the 10-year yield, US stocks, and the greenback.  Bears remain concerned that gold continues to attract buying on dips, as seen by the defense of the dip to $1415 earlier this morning – despite the DX regaining and holding the 98 handle.  Bears continue to see gold as an overbought market that has risen $183 (14.4%) from the 5/20 $1270 low and expect a more significant pullback to ensue.  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 with the ECB not as dovish as expected last week, that there is some lessened uncertainty with the US-China trade truce in place – with face to face talks to resume tonight, with the NY Fed having to walk back William’s hints at a 50bp cut and the recent hawkish remarks from the Fed’s Rosengren.  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 (regained 98 handle Friday, held today, up 2.35% in the past month) 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 that drove the German 10-year yield further into negative territory over the past months (German record low bund yield last Thursday -0.421%) underscores this view.  Bears feel a US-China trade deal is in both sides’ best interests, and feel that recent trade truce and the resumption of face to face negotiations are the first positive steps 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 continue to pullback from its torrid rise, and expect some significant long liquidation selling (large specs with a very large net long position) to materialize if  support at the following levels can be breached:  $1414 ($1414-16 - 5 bottoms - 7/18, 7/23, 7/24, 7/26, and 7/29 lows),  $1400 - 01 (triple bottom – 7/11, 7/16, and 7/17 lows), $1380-84 (triple bottom – lows 6/24, 7/1, and 7/2, lower channel line from 6/21 $1383 low) and $1346 (downtrend line from 8/25/13 $1433 high). 

All markets will continue to focus on geopolitical events (especially Brexit news and US / UK - Iran tensions), 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 Japan’s Jobless Rate and Industrial Production, French GDP, German GfK Consumer Confidence and CPI, Eurozone Economic Confidence and CPI, US Personal Income, Personal Spending, PCE Deflator, S&P/Case Shiuller Home Price Index, Pending Home Sales, and Consumer Confidence for near term direction.  Looming large later this week is the resumption of trade talks between the US and China beginning tonight, the FOMC meeting announcement an Powell press conference on Wednesday, and the US July Payroll Report on Friday.  

 

In the news:

LBMA the Alchemist:   http://www.lbma.org.uk/assets/Alchemist/Alchemist_94/Alch94Complete.pdf

WGC respond’s to announcement that the Central Bank Gold Agreement won’t be renewed: file:///C:/Users/Jim.Pogoda/Downloads/World-Gold-Council-responds-to-ECB-pr.pdf

CPM Group gold and pgm market update:   https://www.monex.com/cpm-gold-pgm-video/

Gold speculators raised bullish bets:   https://www.investing.com/analysis/gold-speculators-raised-bullish-bets-200446084

 

YTD Performance


12/31/2018

7/29/2019

Change
% Change
Gold


1282.5

1426

143.5

11.189%

DX


96.06

98.05

1.99

2.072%

S&P


2505

3021

516

20.599%

JYN


109.63

108.78

-0.85

-0.775%

Euro


1.1466

1.1145

-0.0321

-2.800%

US 10-year bond yield


2.69%

2.060%

-0.0063

-23.306%

Oil (WTI)


45.45

57.01

11.56

25.435%

 

 

Resistance levels: 

$1428 – 7/29 high

$1428 – down trendline from 7/18 $1453 high

$1430 – triple top 7/22, 7/23, and 7/24 highs

$1434 – 7/25 high

$1434 – 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

$1453– 7/18 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:

$1425 – options

$1425 – 7/26 high

$1417– 20-day moving average

$1415 – up trendline from 5/30 $1275 low

$1415 – up trendline from 7/9 $1386 low

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

$1411 – 7/25 low

$1400 - 01 – triple bottom – 7/11, 7/16, and 7/17 lows

$1400 – options

$1391 - 40-day moving average

$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

$1380 – lower channel line from 6/21 $1383 low

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

$1370 – 50-day moving average

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

$1360 -  50% retracement of up move from 5/2 $1266 low to 7/18 $1453 high

$1358 – 6/20 low

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

$1346 – 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

$1331– 100-day moving average

$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

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

$1307 – 50% retracement of up move from 8/16/18 $1160 low to 6/25 $1439 high

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

$1300 – psychological level, options

*$1300 – 200-day moving average

*$1297 – up trendline from 8/16/18 $1160 low

$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