Gold Traders' Report - March 12, 2018

Jim Pogoda, Trader, Gold Bullion International 
MAR 12, 2018

Gold traded lower overnight in a range of $1315.25 - $1324.25. It ticked up to its $1324.15 high during Asian hours, as yen strength (106.97 – 106.36, suspected Japanese cronyism scandal) pressed the DX down to its low of 89.91.

However, resistance in front of Friday’s $1325 high capped the advance. During European time, the DX strengthened (90.18), helped by renewed weakness in the euro ($1.2340 - $1.2290, ECB’s Smets said inflation target will take longer to reach).

Gold was pressed to its $1315 low, also hurt by rallies in global equity markets following the strength in US markets from the stronger Payroll Report Friday. The NIKKEI rose 1.8%, the SCI gained 0.6%, European exchanges were flat to +0.8%, and S&P futures tacked on another 0.3%. 

After the NY open, the dollar softened (DX to 89.96) against a stronger pound ($1.3841 - $1.3905) on reports that the UK was close to getting a transition deal with the EU.

Gold climbed in response, reaching $1319.75. A weaker opening for US stocks (S&P -7 to 2779) aided gold’s move higher.

Later in the morning news that Larry Kudlow (a noted free-trader) was a leading contender to replace Gary Cohn as Trump’s top economic advisor lifted US stocks into positive territory (S&P +3 to 2788).

The US 10-year bond ticked up from 2.879% - 2.888%, and the DX recovered to 90.07.  Gold was pressed lower, but found support at $1317.50.

Into the afternoon, US equities turned back down (S&P off 3  to 2783), hurt by weaker oil prices (WTI to $60.63).

The US 10-year yield slipped to 2.866%, and the DX fell to 89.84.  Gold rose in response, but was capped at the overnight high of $1324.25. It was $1324 bid at 4PM with a gain of $1.

Open interest was off 1.6k contracts, showing a small net of short covering from Friday’s advance. Volume was much higher with 396k contracts trading.

Bulls were hoping for more than a $1 gain today, given that the DX pulled back, equities we apprehensive and the 10-year yield retreated. They still feel that the dollar’s recent bounce from the 2/16 3-year low at 88.25 is a minor correction within its year-old downtrend, and expect a retest of that level to drive gold higher.

Bulls will need to overcome initial resistance at the double top at $1324-25 followed by the 3/9 $1329 high to be able to breach the down trendline from the $1362 high from 2/16 at $1335. Above here, they expect buy stops to propel the market past the triple top at $1341.  

 Bears remain comfortable selling into strength, and expect renewed strength in equities, higher bond yields and a continued bounce from the 88.25 low in the DX to pressure gold lower.

They’ll be looking for significant long liquidating sell stops below $1303 (100-day moving average, 50% retracement of up move from 12/12/17 $1236 low to 1/25/18 $1366 high,3/1 low) to lead to a test of the 200-day moving average at $1290. 

All markets will continue to focus on the volatility in the equity and bond markets, geopolitical events (especially the planned North Korean talks), developments with the Trump Administration, oil prices, and will turn to reports tomorrow on Japan’s Tertiary Industry Index, US NFIB Small Business Optimism Index, and CPI for near-term guidance. 

In the news:

Chinese central bank officially adds zero to gold reserves in February

Here’s the ideal amount of gold to keep in your investment portfolio

EUR/USD drops to support, USD range expands ahead of CPI, FOMC

Resistance levels: 

$1324-25 – double top - 3/9 and 3/12 highs

$1329 – 3/8 high

$1330 – 20-day moving average

$1330 – 50 day moving average

$1333 – 40 day moving average

$1335 – 50% retracement of down move from 1/25 $1366 high to 3/1 $1303 low

$1336 – down trend line from 2/16 $1362 high

$1338 – 11/9 election night high

$1341 – triple top 2/26, 3/6, and 3/7 highs

$1347 – down trendline from 8/2013 weekly chart

$1347 – 2/20 high

$1350 – 52 – triple top – 1/29 , 2/1, and 2/2 highs

$1350 – options

$1351 – 2/19 high

$1356-58 – triple top, 2/15, 2/14, 1/26 highs

$1360 – down trendline from 1/25 $1366 top

$1362 – 2/16 high

$1365-67 – 5 tops 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:

$1321-22 - double bottom, 3/6 and 3/7 lows

$1318-19 – double bottom 3/5 and 3/8 lows

$1315 – 3/11

$1313 – 3/9 low

$1311 – up trend line from 12/12 $1236 low

$1303 – 3/1 low

$1303 – 100-day moving average

$1302 – 1/1 low

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

$1300 – psychological level, options

$1294 – 12/29 low

$1290– 200-day moving average

$1287 – 12/28 low

$1281 – 12/27 low