Gold Traders' Report - March 14, 2018

Jim Pogoda, Trader, Gold Bullion International 
MAR 14, 2018

Gold traded either side of unchanged overnight in a range of $1323.50 - $1330.15.  It rose to its $1330.15 high during Asian hours after tripping some light buy stops over the double top at $1328-29.

It was fueled by a drop in the dollar (DX took out yesterday’s low at 89.59 to reach 89.56), which was pressured by some strength in the yen (106.38 – stronger Japanese Machine Orders).

Weakness in the NIKKEI (-0.9%) and the SCI (-0.6%) also contributed to gold’s upside on news that the US was seeking to impose tariffs of up to $60 billion on Chinese imports -- increasing concerns that a trade war could erupt.

Gold gave up its gains during European time, however, and dipped to its low of $1323.50 as the dollar rebounded. The DX clawed back to 89.86 off of euro weakness (euro from $1.2410 - $1.2360), from Draghi’s comments that the ECB needs to see more evidence of inflation before lifting rates.

At 8:30 AM a weaker than expected report on US Retail Sales (-0.1% vs. exp. 0.3%) overshadowed an in line report on PPI (0.2% as expected).  S&P futures sold off (2782 – 2776), and the US 10-year bond yield dipped from 2.853% - 2.839%.  The DX fell to 89.62, and gold rallied to $1328.50. 

US stocks continued to fall during the late morning (S&P off 8 to 2757, materials, industrials, and consumer staples lead decliners), with fears of a trade war escalating.

Trump’s tweet, “We cannot keep a blind eye to the rampant unfair trade practices against our country”, seemed to add fuel to the fire.

Also, a drop in oil (WTI to $60.10) from a larger than expected build in US oil inventories (5M bbl build vs. exp. 2M bbl build) weighed on stocks.

The yield on the 10-year fell to 2.801% on a flight to safety, but the dollar held firm.  Further weakness in the euro ($1.2346) off of the earlier dovish commentary led the DX to tick up to 89.89. Gold softened in response and dipped to $1321.70.

Into the afternoon, US stocks slid further (S&P - 18 to 2746).  Strength in the safe haven yen (106.07) overcame weakness in the euro to tug the DX down to 89.68.

Gold rebounded in response and traded up to $1325.50.

Later in the afternoon, however, news that Larry Kudlow (free trade proponent) will replace Gary Cohn as Trump’s top economic advisor led US stocks to pare gains (S&P -3 to 2762).

The US 10-year yield rebounded to 2.8212%, while the DX ticked up to 89.74.  Gold drifted lower to $1323.50.

Open interest was up huge yesterday – 20k contracts – showing a combination of new longs (bargain hunting on the initial dip to $1314 after yesterday’s CPI, momentum following longs after breaching $1325), along with new shorts scale-up selling in front of $1325.

Volume ballooned with 380k contracts trading.

All markets will continue to focus on the volatility in the equity and bond markets, geopolitical events, developments with the Trump Administration (especially tariffs), oil prices, and will turn to reports tomorrow on US Empire State Manufacturing Index, Import Prices, Export Prices, Jobless Claims, Philly Fed, and the NAHB Housing Market Index for near-term direction. 

In the news:

Resistance levels: 

$1328 -30 – triple top, 3/8, 3/13, and 3/14 highs

$1329 – 20-day moving average

$1331 – 50 day moving average

$1332 – down trend line from 2/16 $1362 high

$1333 – 40 day moving average

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

$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:

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

$1322 – 3/14 low

$1313-15 – quadruple bottom, lows 3/2, 3/9, 3/12, 3/13

$1313 – up trend line from 12/12 $1236 low

$1304 – 100-day moving average

$1303 – 3/1 low

$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