Gold Traders' Report - June 18, 2018

Jim Pogoda, Trader, Gold Bullion International 
JUN 18, 2018

Gold was a little choppy overnight, trading either side of unchanged and in a narrow range of $1278.65 - $1282.50 after Friday’s $23 trashing.

It rose to its $1282.50 high early during Asian hours on worries over the US-China trade dispute. However, gold dipped back during early European time to its $1278.65 low against strength in the dollar (DX to 95.05).

The greenback was helped by a decline in the euro ($1.16.10 - $1.1565, political jitters in Germany over immigration policies) and the pound ($1.3276 - $1.3225).

Later on during European time, the DX pulled back to 94.70 as the euro ($1.1624) and the pound ($1.3263) rebounded, and gold recovered to $1282.30. Mostly weaker global equities were a tailwind for gold with the NIKKEI off 0.8%, China closed, Eurozone shares were 0.4% - 1.4% lower, and S&P futures were down 0.6%.

Oil prices were a little firmer (WTI from $64.60 - $65, all awaiting the OPEC meeting on 6/22 to decide forward production policy) and were supportive of stocks.

After opening weaker (S&P -23 to 2756), US stocks pared losses during the late morning and into the afternoon (S&P -5 to 2774, telecom sector lagging), helped by a continued rise in oil (WTI to $65.95).

The US 10-year yield rose to 2.932%, with some additional selling coming after a report showing foreign debt holdings were cut by $10B in March and April (Russia’s cut in half). The DX recovered to the 94.80-85 level, and gold was pressed a little lower.

The yellow metal took out its overnight low at $1278.65 to reach $1277, but bargain hunting buying in front of Friday’s $1275.50 low supported it there.

In the afternoon, some mildly dovish comments from the Fed’s Bostic (fears over a potential trade war are dampening the prospects for above-trend economic growth, doesn’t see signs of aggressive wage growth) helped a bounce in US stocks from a previous pullback (S&P -5 to 2774).

The 10-year yield ticked down to 2.926%, and the DX was nudged down to 94.76. Gold bounced in response, and traded up to $1280.30.

Later in the afternoon, US equities finished with a modest decline (S&P -5 to 2774 ), the 10-year yield hovered around 2.93%, and the DX traded between 94.75 – 94.80. Gold drifted back to $1278, and was $1278.50 bid at 4PM with a loss of $1.

Open interest was surprisingly up -8.2k contracts - showing a sizeable net of new shorts and some new bargain hunting longs outweighing the heavy amount of long liquidation seen from Friday’s selloff. Volume ballooned with 555k contracts trading.

Some gold bulls were a bit disappointed that they didn’t get a significant bounce today, given the weakness in stocks.

However, other bulls were encouraged that the market held Friday’s $1275 low, given the firmness in the dollar, and feel a price consolidation has begun.

The bulls point to the still relatively and historically low NFLP which sets gold up to move higher, and see a market approaching oversold (14-day RSI = 33.01).

They expect gold to form a base in the $1273 (double bottom, 12/25 and 12/26 lows) - $1275 area, and will look for a rapid bounce to $1292 - the 50% retracement of the move down from last Thursday’s $1309 high to Friday’s $1275 low.

While some bears took profits during Friday’s tumble and are awaiting further strength to sell into, others are still looking for gold to decline further - with fuel from a firmer dollar providing the downside pressure.

They’re looking for a breach in the quadruple top in the DX between 95.14-95.17 to knock gold below its triple bottom at $1273. Below here, the bears expect to uncover more long liquidating stops to test next support levels at $1265 (12/22 low), $1261-63 (triple bottom - 12/19, 12/20, and 12/21 lows), and $1253 (double bottom – 12/15 ,12/18 lows).

All markets will continue to focus on geopolitical events, developments with the Trump Administration (especially on US-China trade), oil prices, and will turn to reports tomorrow on Eurozone Construction Output and Current Account, US Housing Starts, Building Permits, and comments from the ECB’s Draghi and Praet, along with the Fed’s Bullard for near-term guidance.

In the news:

Resistance levels: 

$1281-82 – double bottom, 5/21  and 12/27 lows

$1282 – 6/18 high

$1288 – double bottom, 5/22 and 5/23 lows

$1292-95 –5 bottoms – 6/6, 6/7, 6/8, 6/11, 6/12, and 6/13

$1294 - up trendline from 12/15/16 $1123 low

$1297 – 20-day moving average

$1299 – 6/13 high

$1299 – down trendline from 5/15 $1315 top

$1300 – psychological level, options

$1300 – 6/12 high

$1300 -03–7 tops 6/1, 6/5,6/6, 6/7, 6/8, 6/11, and 6/12 highs

$1301 – 50% retracement of up move from 12/12/17 $1236 low to 1/25/18 $1366 high

$1303 – 40 day moving average

$1306– 200-day moving average

$1306 -08 – quadruple top, 5/24, 5/25, 5/29, and 5/31 highs

$1307 – down trendline from 4/11 $1365 high

$1308 – down trendline from 4/23 $1336 high

$1311 – 50 day moving average

$1315 – 5/15 high

$1318 -19 – quadruple top 5/3, 5/7, 5/8 and 5/9 highs

$1321– 100-day moving average

$1322-23 – 5/10 and 5/14 highs

$1325-27 – quadruple  top, 4/26, 4/27, 4/30, and 5/11 highs

$1325 – options

$1332-33 – double top - 4/24 and 4/25 highs

$1335 – 4/23 high

$1334-35 triple bottom – 4/12, 4/13, and 4/20 lows

$1333 – 50% retracement of down move from 4/11 $1365 high to 5/1 $1302 low

$1346 – 4/20 high

$1350 – options

$1355 - 57 – quadruple top, 3/26, 3/27, 4/18, and 4/19 highs

$1364 – down trendline from 7/6/16 $1375 high

$1365-67 – 6 tops 4/11, 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:

$1277 – 6/18 low

$1275 – options

$1275 – 6/15 low

$1273 – double bottom, 12/25 and 12/26 lows

$1265 – 12/22 low

$1261-63 – 12/19, 12/20, and 12/21 lows

$1253 – double bottom – 12/15 ,12/18 lows