Gold Traders’ Report - June 5, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
JUN 5, 2019

Gold continued to rally overnight, trading in a range of $1324.70 - $1340 and making its 6th straight higher high.  The yellow metal tripped buys stops over$1327-29 (triple top, 6/3, 6/4, and 2/28 highs), $1330 (double top – 2/27 and 2/26 highs), $1333 (double top 2/22 and 2/25 highs) on the way to its $1340 high (14-week high).  Gold was lifted by a decline in the US 10-year bond yield (2.131% - 2.092%) and some weakness in the US dollar (DX from 97.15 – 96.92) - which was pressured by strength in the euro ($1.1249 - $1.1289, better PMI data overshadows EU triggering disciplinary process against Italy for debt) and the pound ($1.2690 - $1.2724, better UK PMI and Retail Sales, Trump said US will have very substantial trade deal with the UK).  Gold was able to advance despite continued strength in global equities as the main driver – Powell’s perceived dovishness from yesterday – is also gold bullish.  The NIKKEI was up 1.8%, the SCI was flat (miss on China’s Caixin PMI Services), European markets were up from 0.5% to 0.6%, and S&P futures were up 0.6%.  A decline in oil (WTI from $53.48 - $52.80) from a surprise large both US oil and gasoline inventories from the API report last night were a headwind for stocks. 

Ahead of the NY open, some moderately hawkish commentary from the Fed’s Kaplan (no longer need to stimulate the economy, too soon to support rate cuts, would take evidence of “further deceleration” in economy to push him into the rate-cut camp) helped push S&P futures down to 2818, and brought the US 10-year yield back up to 2.131%.  The DX rebounded to its overnight high of 97.15, and gold slid back to $1333.50, where support ahead of the former resistance at $1333 held. 

At 8:15 AM, a much worse than expected ADP Employment Report (27k vs. exp. 183k, 9-year low) drove S&P futures further down (+5 to 2810), and took the 10-year bond yield down to 2.081%.  The DX slumped to 96.74 (2-month low), and gold popped higher.  Gold bulls - smelling a rate cut - drove the market through buy stops over last night’s $1340 high and $1342 (double top - 2/19 and 2/21 highs) to reach $1344 (15-week high).  A combination of short covering and new longs were seen.  Some modestly dovish comments from the Fed’s Evans (low inflation itself is grounds to weigh more accommodation, need to defend 2% symmetric inflation target very strongly) contributed to the move.

US stocks firmed after their open (S&P +15 to 2818), helped by a stronger than expected reading on US ISM Services (56.9 vs. exp. 55.5), and despite a further drop in oil (WTI to $51.21, 5-month low, EIA reports much larger than expected builds in oil, gasoline and distillate inventories).  The 10-year yield climbed back to 2.123%, and the DX rebounded to the overnight high at 97.15.  Gold fell in response, with selling accelerating through the prior resistance levels of $1342, $1340, $1333 and $1330 to reach $1327 – where support at the old resistance level finally held.

Equities remained firm into the afternoon (S&P +20 to 2823), with gains in the IT (Apple says hasn’t been targeted by China) Utilities, Real Estate, and Consumer Staples sectors leading the up move.  Stocks were  boosted by upbeat remarks from Senate Finance Chair Grassley that the US and Mexico would strike a deal to avoid tariffs on Mexican imports threatened by Trump.  The 10-year yield edged up to 2.13%, and the DX climbed to 97.29 (closing in on a key reversal day).  Gold was fairly resilient, however, and ticked up to $1329.

Open interest was up 4.8k contracts, reflecting a net of new longs from yesterday’s advance.  Volume was lower but still very healthy with 329k 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 this afternoon’s Beige Book followed by reports tomorrow on German Factory Orders and Construction PMI, Eurozone Employment and GDP, ECB Rate Decision, US Challenger Job Cuts, Non-Farm Productivity, Unit Labor Costs, Jobless Claims, Trade Balance, and comments from the ECB’s Draghi, and the Fed’s Kaplan  and Williams for near term direction. 

In the news:

GLD turnaround very positive for gold:   https://lawrieongold.com/2019/06/05/lawrie-williams-gld-turnaround-very-positive-for-gold/

ABN – we remain positive on gold:   https://insights.abnamro.nl/en/2019/06/precious-metals-watch-we-remain-positive-on-gold/

Venezuela defaults on $750 M gold backed swap with Deutshe Bank:   https://www.zerohedge.com/news/2019-06-04/venezuela-defaults-750-million-gold-backed-swap-deutsche-bank

YTD Performance


12/31/2018

6/5/2019

Change
% Change
Gold


1282.5

1329

46.5

3.626%

DX


96.06

97.27

1.21

1.260%

S&P


2505

2823

318

12.695%

JYN


109.63

108.34

-1.29

-1.177%

Euro


1.1466

1.1233

-0.0233

-2.032%

US 10-year bond yield


2.69%

2.125%

-0.0056

-20.886%

Oil (WTI)


45.45

51.87

6.42

14.125%


Resistance levels: 

$1327-29 – triple top, 6/3, 6/4, and 2/28 highs

$1330 – double top – 2/27 and 2/26 highs

$1333 –double top 2/22 and 2/25 highs

$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:

$1325 – options

$1325 – 6/5 low

$1322 -3/26 high

$1320 – 6/4 low

$1319 - 3/27  high

$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

$1299 – 5/16 high

$1298– 100-day moving average

$1292 – down trendline from 2/20 $1347 high

$1292 – 20-day moving average

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

$1288 – 50-day moving average

$1287 - 40-day moving average

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

$1279 – 5/29 low

*$1276 – 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

*$1263 – 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