Gold Traders' Report - June 6, 2018

Jim Pogoda, Trader, Gold Bullion International 
JUN 6, 2018

Gold was a little choppy last night, trading either side of unchanged in a modest range of $1294 - $1300. It rose to its $1300 high during early European time, buoyed by softness in the dollar (DX from 93.90 – 93.63).

The greenback was pressured by hawkish comments from the ECB’s Praet that the Bank would debate ending bond buys next week, which took the euro up from $1.1715 - $1.1765.

However, a lack of follow-through buying and some shorts selling into strength knocked gold quickly back to its $1294 low.

Later during the European session, better than expected readings on German Construction PMI and Eurozone Retail PMI lifted the common currency to $1.1779, and took the DX down to 93.56.

Gold rebounded, but only managed to claw back to $1297. A move up in global bond yields (US 10-year bond (2.915% to 2.964%, German Bund 0.39% - 0.45%, UK Gilts 1.31% - 1.35%) in response to Praet’s comments was a headwind for gold, as were firmer global stocks.

The NIKKEI rose 0.4%, the SCI was flat, European shares were up from 0.3% to 0.4%, and S&P futures were +0.2%. A slight dip in oil (WTI from $65.50 - $65.03, API showed surprise large build in US gasoline inventories), weighed on stocks.

At 8:30 AM, a weaker report on US Productivity (0.4% vs. exp. 0.7%) outweighed a slightly better than expected report on Unit Labor Costs (2.9% vs. exp. 2.8%), and a smaller Trade Gap (-$46.2B vs. exp. -$49.1B).

S&P futures dipped to 2753, and the 10-year bond yield ticked down to 2.948%.

The DX fell to 93.42, pressured also by continued strength in the euro ($1.1795) and pushed gold higher.

The yellow metal took out the overnight high at $1300 to reach $1301.70, but was capped there by resistance at the double top (6/1 and 6/5 highs) and the 50% retracement of up move from 12/12/17 $1236 low to 1/25/18 $1366 high.

Later in the morning, US stocks were tugged further down (S&P to 2748 - unch) by a plunge in oil (WTI from $65.40 - $64.28, EIA shows surprise sizeable build in oil and gasoline inventories, US production reaches 10.8M bpd).

However, the 10-year yield moved up to 2.96% (along with further increases in other global bond yields), and the DX bounced to 93.55. Gold, caught in the cross currents, dipped to $1298.75. 

Into the afternoon, US stocks turned higher (S&P +13 to 2762), boosted by bank shares and Boeing.

Some optimistic comments from White House Economic Advisor Kudlow on trade were also supportive. The US 10-year yield continued to climb (2.981%, 1-week high) as did the dollar, with the DX reaching 93.65. Gold worked lower, but found support at $1295.

Open interest was off 1.7k contracts, showing a small net of short covering from yesterday’s gain. Volume was higher with 278k contracts trading. 

All markets will continue to focus on the volatility in the equity and bond markets, geopolitical events (especially Italy, Spain, and North Korea), developments with the Trump Administration (especially on US-China trade), corporate earnings, oil prices, and will turn to reports tomorrow on Japan’s Leading Index, German Factory Orders, Eurozone GDP, and US Jobless Claims for near-term direction.

In the news:

Resistance levels: 

$1297 – 6/4 high

$1299 – 20-day moving average

$1300 – psychological level, options

$1301 -02–triple top 6/1, 6/5, and 6/6 highs

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

$1304 – 5/30 high

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

$1308– 200-day moving average

$1313 – 40 day moving average

$1315 – 5/15 high

$1317 – 50 day moving average

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

$1322-23 – 5/10 and 5/14 highs

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

$1325 – options

$1325 – 100-day moving average

$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

$1365 – 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:

$1294 – down trendline from 4/11 $1365 top

$1294 – 6/6 low

$1291  - up trendline from 12/15/16 $1123 low

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

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

$1275 – options

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

$1267 – up trendline from 1/6/17 $1171 low

$1265 – 12/22 low