Gold Traders’ Report - June 12, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
JUN 12, 2019

Gold rebounded last night, advancing in a range of $1326.10 - $1338.40.  It tripped some buying over yesterday’s $1330 peak to reach its high, where resistance at $1338 (6/10 high) held.  Gold was lifted by weakness in global equities, which were hurt by continuing trade tensions (Trump says he’s holding up the deal, not interest in moving ahead unless China agreed to major points), a 15-month high in China’s CPI, and unrest in Hong Kong (protests over contentious extradition law).  The NIKKEI fell 0.3%, the SCI was down 0.6%, European shares were off from 0.4% to 0.6%, and S&P futures were -0.2%.  Lower oil prices were a headwind for equities (WTI from $53.05 - $51.46) as the API showed a large surprise build in US Oil Inventories.  Gold was also aided by a decline in the US 10-year bond yield (2.141% - 2.115%), and a modest pullback in the US dollar (DX from 96.73 – 96.58).  The greenback was pressured by strength in the yen (108.57 – 108.21, risk off, stronger Japanese Machine Orders), euro ($1.1224 - $1.1343), and the pound ($1.2712 - $1.2758).  

Ahead of the NY open, US equity futures had a modest bounce (S&P futures to 2883) and the US 10-year bond yield recovered to 2.125%.  The DX took out its overnight high to reach 96.77, helped by a pullback in the euro ($1.1313, ECB’s Draghi and IMF’s Lagarde warn of effects on Eurozone from global trade dispute).  Gold came off in response, and slipped back to $1332.

At 8:30 AM, the US CPI report was slightly lower than anticipated.  While the headline month over month CPI was up 0.1% as expected, the year over year data (1.8% vs. exp. 1.9%) Core CPI (0.1% vs. exp. 0.2%) and the year over year Core CPI (2.0% vs. exp 2.1%) all missed slightly.  S&P moved higher (2884, weaker inflation supports case for Fed rate cuts) while the 10-year yield was choppy between 2.117% - 2.136%.  The DX sank to its overnight low of 96.58, and gold bounced to $1336.

US stocks opened firmer (S&P +4 to 2889) – still riding the lower CPI - and the 10-year yield edged up to 2.141%.  The DX climbed to 96.81, and gold retreated to $1330.  However, bargain hunting buying emerged to quickly bring the yellow metal back up to $1333.  

Equities turned and fell into mid-day, however,  (S&P -10to 2875), hurt by a drop in Facebook (reports that Zuckerberg knew of questionable privacy practices) and a confirmation from the EIA of a large build in US Oil Inventories that reversed an earlier rebound in oil (WTI from $52.29 - $51.61).  Losses in the Energy, IT, and Financials sectors led the decline. The 10-year yield fell to 2.119%, but the DX had a modest dip and then advanced to 96.85.  The dollar was aided by a drop in sterling ($1.2687) as PM frontrunner Boris Johnson said leaving no deal on the table was a “vital tool of negotiation”.  Gold was caught in the cross currents but edged higher to $1337.  

Into the afternoon, US stocks pared losses (S&P -3 to 2882), helped by some upbeat remarks from Trump (“I have a feeling that we’re going to make a deal with China”) and the 10-year bond yield ticked up to 2.129%.  The DX rose further to 96.98 (1-week high), and gold was pushed back to $1332.

Open interest was down 2.6k contracts, reflecting a net of long liquidation from yesterday’s decline.  Volume was lower with 227k contracts trading. 

All markets will continue to focus on geopolitical events (especially Brexit news), developments with the Trump Administration (especially on US-China trade, potential legal issues), oil prices, and will turn to reports tomorrow on China’s Foreign Direct Investment, Japan’s Tertiary Industry Index, German CPI, Eurozone Industrial Production, US Import Prices, Export Prices, and Jobless Claims for near term guidance. 


In the news:

Indian gold demand surged in April and May:   https://www.zerohedge.com/news/2019-06-11/indian-gold-demand-surged-april-and-may

Investors are pinning hopes on this asset again – but beware says Saxo Bank:   https://www.marketwatch.com/story/investors-are-pinning-hopes-on-this-asset-again-but-beware-says-saxo-bank-2019-06-11

YTD Performance


12/31/2018

6/12/2019

Change
% Change
Gold


1282.5

1332

49.5

3.860%

DX


96.06

96.96

0.9

0.937%

S&P


2505

2878

373

14.890%

JYN


109.63

108.49

-1.14

-1.040%

Euro


1.1466

1.1292

-0.0174

-1.518%

US 10-year bond yield


2.69%

2.122%

-0.0056

-20.998%

Oil (WTI)


45.45

51.79

6.34

13.949%

 

Resistance levels: 

$1333 –double top 2/22 and 2/25 highs

$1338 – double top - 6/10 and 6/12 highs

$1340 – 6/6 high

$1342 – double top - 2/19 and 2/21 highs

$1344 – 6/5 high

*$1346-47 – double top 2/20 and  4/20/18 highs

*$1348 – down trendline from 8/25/13 $1433 high

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

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

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

Support levels:

$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

$1320 – double bottom 6/4 and 6/11 lows

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

$1307 – 5/31 high

$1307 – 50% retracement of down move from 2/20 $1347 high to 4/23 $1266 low

$1304  - 5/14 high

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

$1300 – psychological level, options

$1300 – 20-day moving average

$1300– 100-day moving average

$1299 – 5/16 high

$1292 – 50-day moving average

$1291 - 40-day moving average

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

$1288 – down trendline from 2/20 $1347 high

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

$1279 – 5/29 low

*$1278 – up trendline from 8/16/18 $1160 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

*$1266 – 200-day moving average

$1259 – 12/24 low

$1254 – 12/21 low

$1253 – 50% retracement of up move from 8/16/18 $1160 low to 2/20 $1347 high

$1250 – options

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