Gold Traders’ Report - July 31, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
JUL 31, 2019

The gold market was fairly steady last night with other financial markets, awaiting the much anticipated FOMC announcement on rates later today.  It traded either side of unchanged in a relatively narrow range of $1427.75 - $1433.  Gold slid to its $1427.75 low during early Asian time against a move up in S&P futures (+8 to 3020, strong earnings report from Apple) and a firmer US dollar (DX to 98.11).  The yellow metal rebounded to its $1433 high during late Asian and early European time, where resistance at $1433-34 $1433-34 (double top 7/25 and 7/30 highs) capped the advance.  The move was helped by a retreat in S&P futures (+2 to 3014) on reports that the US-China trade talks ended prematurely without any clear progress, a dip in the DX to 98, and news the North Koreans launched 2 more short range missiles.  Gold retreated to $1430 during later European hours, on a report that China’s Global Times called the US –China talks an “efficient and constructive deep exchange” and that the sides agreed to meet again in September to extend the talks – which helped S&P futures rebound to 3018.  A rebound in the DX (98.13) was also a headwind for gold, which got a boost from weakness in the euro ($1.1162 - $1.1142, Eurozone GDP lower, miss on German Retail Sales, Eurozone CPI, German 10-year yield down to near record low -0.417% ). 

At 8:15 AM, the US ADP Employment Report was better than anticipated (156k vs. exp. 150k), with a 10k positive revision to last month’s report.  S&P futures advanced (+8 to 3019), while the US 10-year bond yield moved up to 2.061%.  The DX hovered between 98.10-12, and gold pulled back to $1429. 

At 9:45, a big miss on the Chicago PMI (44 vs. exp. 51) tugged US stocks lower (-7 to 3008), and knocked the 10-year bond yield back to 2.044%.  The DX fell back to 98.01, and gold spiked to $1434 – where the double top resistance held again.

Shortly thereafter, an upbeat statement from the White House describing the US –China trade talks (“constructive”, discussed topics of forced technology transfer, IP rights, services, non-tariff barriers, and said China pledged to buy more US farm goods) took US stocks back up to unchanged (3014), but the 10-year yield continued to decline (2.041%).  The DX popped back to 98.12, and gold fell to $1427, where support from the overnight low held.  

US stocks climbed into mid-day (S&P +2 to 3016), with strength in the Energy, Real Estate, and IT sectors leading the gains.  An advance in oil (WTI to $58.78) from a larger than expected draw in US Oil Inventories aided the move.  The 10-year yield continued to soften, however, amid a retreat in other global bond yields (German 10-year to record low -0.438%, UK 10-year to -0.609% - 3-year low).  The DX was caught in the cross currents but traded higher as the euro continued to soften ($1.1127) making an intraday high at 98.15.  Gold - also caught in cross currents – remained steady, and traded narrowly between $1427-$1428.50. 

Into the afternoon, the US stocks drifted back to near unchanged (S&P +1 to 3015), but bond yields continued to soften (US 10-year to 2.03% - 1week low, German 10-year to -0.442%).  The DX climbed, however, against a further decline in the euro ($1.1120).  Gold fell below its overnight low and through some light stops under $1425 to reach $1422, where support from yesterday’s low held.

Ahead of the 2PM FOMC statement, US stocks hovered around unchanged (S&P 3014) while the US 10-year yield continued to slide to 2.023%.  The DX pulled back to 98.10, and gold recovered to $1426.50.  At 2PM, the initial view of the FOMC statement was seen as a bit a hawkish:  cut of only 25 bp, 2 dissenters (George and Rosengren) who opined to leave rates unch, labor market remains strong, economic activity rising at a moderate rate, household spending picked up.  The S&P sold off (-10 to 3003) while the 10-year yield popped back up to 2.035%.  The DX soared to 98.47 (26-month high), and gold sank to $1416.  However, after a closer look, the statement had something for the doves (ended the balance sheet reduction 2 months early (this month, not Sep), cited implications of global developments and muted inflation pressures, and reiterated that they would act as appropriate to sustain the expansion), and the S&P clawed back to unchanged.  The 10-year yield slipped further (2.013%), and the DX pared gains to 98.35.  Gold was nervous and choppy, spiking back to $1431 before sliding to $1425.

Open interest was down 8.9k contracts, showing a net of short covering along with a fair amount of position close outs (not rolling into Dec) from yesterday.  Volume was lower, but still quite healthy, with 354k contracts trading, still boosted by the Aug-Dec futures contract rollover. 

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 Powell’s Press Conference this afternoon and then reports tomorrow on Japan’s NIKKEI Manufacturing PMI, China’s Caixin Manufacturing PMI, Eurozone PMIs, UK’s BOE Rate Decision, US Challenger Job Cuts, IU Claims, Markit Manufacturing PMI, ISM Manufacturing and Construction Spending for near term direction. 

 

In the news:

Gold price eyes Fed, but gold volatility hints at upside:   https://www.dailyfx.com/forex/market_alert/2019/07/30/gold-price-eyes-fed-but-gold-volatility-gvz-hints-at-upside.html

Why the US dollar is grinding higher ahead of rate cuts – BAML:   https://www.forexlive.com/news/!/why-the-us-dollar-is-grinding-higher-ahead-of-cuts-baml-20190730

Here’s what changed in the new Fed statement:   https://www.cnbc.com/2019/07/31/july-federal-reserve-meeting-what-changed-in-the-new-fed-statement.html

 

Resistance levels: 

$1430-31 – triple top 7/22, 7/23, and 7/24 highs

$1428 – 7/29 high

$1433-34 – double top 7/25 and 7/30 highs

$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 – down trendline from 7/18 $1453 high

$1425 – options

$1422 – 7/30 low

$1419 – up trendline from 5/30 $1275 low

$1417– 20-day moving average

$1417 – 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

$1393 - 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

$1373 – 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

$1332 – 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 – 200-day moving average

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

$1300 – psychological level, options

*$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