Gold Traders' Report - March 2, 2018

Jim Pogoda, Trader, Gold Bullion International 
MAR 2, 2018

Late yesterday afternoon, the US stock market selloff accelerated (S&P finished -36 to 2677) from concerns that Trump’s announcement of steel and aluminum tariffs would ignite a global trade war. The flight to quality continued to push down the yield of the US 10-year bond to 2.795%.

The dollar, which was previously well bid at 90.75, finally broke down and slid to 90.20.  Gold galloped ahead to reach $1321, where the old quadruple bottom at $1319-22 capped the advance. 

Overnight, gold firmed further in a range of $1315.30 - $1324.  It continued to advance against a weaker dollar, with the DX making a dip below 90 to 89.89. The greenback was pressured by strength in the yen (105.25, 15-month high, Kuroda said the BOJ would consider an exit from ultra-easy monetary policy).

A further decline in the US 10-year yield to 2.793% (3-week low) along with declines in global bond yields (German bund from 0.649% to 0.605%, UK Gilts from 1.471% to 1.419%), and a washout in global equities were also gold supportive.

The NIKKEI fell 2.5%, the SCI dropped 0.6%, Eurozone markets were down 1% - 2.22%, and S&P futures slipped another 0.5% as the Trump’s planned steel (25%) and aluminum (10%) roiled stocks.  A drop in oil prices (WTI to $60.56) also weighed on equities. 

US stocks opened weaker (S&P -31 to 2647, industrials and consumer discretionary leading decliners), while the 10-year yield rebounded to 2.844%. The DX, caught in the cross currents, gyrated between 90.07 and a dip to a fresh low at 89.87.

Gold climbed on the dollar’s dip, and touched off some buy stops over the upper end of resistance at $1322 to reach $1325.65. At 10AM, a better than expected report on the University of Michigan Consumer Sentiment Index (99.7 vs. exp. 99.5) helped turn US stocks higher, with the S&P reaching positive territory (+2 to 2679) by mid-day. 

The 10-year bond yield continued to climb, and touched 2.87%.  The DX rose to 90.09, and gold retreated to $1317.50. 

Into the afternoon, US stocks added to their gains (S&P finished +12 to 2690, health care leads gainers), while the US 10-year yield hovered between 2.85% - 2.868%.

The dollar - again caught in the cross currents – moved a bit lower, and back below 90. Gold drifted higher in response, and was $1322 bid at 4PM with a gain of $5.

Open interest was down big – 17.9k contracts – reflecting a sizeable chunk of long liquidation from yesterday’s plunge.  Volume ballooned with 460k contracts trading.

The CFTC’s Commitment of Traders Report as of 2/27 showed the large funds cutting 5.2k contracts of longs and adding 7k contracts of shorts to reduce their net long position to 178k contracts.  This reduction was largely done on the move down to $1313 last week.

In the past three sessions, approximately another 20k net longs have been reduced, bringing the current net fund long position down to around 160k contracts.  This has substantially reduced the bearish long spec overhang that existed from last week’s COT Report.

All markets will continue to focus on the volatility in the equity and bond markets, geopolitical events, developments with the Trump Administration, corporate earnings, oil prices, and will turn to reports Monday on Japan’s Leading Index, US New Home Sales, Dallas Fed Index, and commentary from the ECB’s Draghi, the Fed’s Bullard and Quarles for near term direction. 

In the news:

Dollar suffers as trade tensions ramped up by Trump steel, aluminum import duties

BoE’s Carney – Time has come for cryptocurrency crackdown

Resistance levels: 

$1325 – 50 day moving average

$1326-27 – double bottom 2/23 and 2/26 lows

$1327 – up trendline from 12/12 $1236 low

$1328 – 2/20 low

$1330 – 20 day moving average

1332 – double top 2/22 and 2/23 highs

$1333 – 40 day moving average

$1334 – down trendline from 2/16 $1362 high

$1336 – 2/21 high

$1336 – 50% retracement of down move from 1/25 $1366 high to 2/8 $1307 low

$1337 – 2/27 high

$1338 – 11/9 election night high

$1341 – 2/26 high

$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:

$1322 – 2/28 high

$1319 – 22 – quadruple bottom, 2/13, 2/14, 2/21, and 2/22 lows

$1316 – 2/12 ,2/28  lows

$1313 – 2/27 low

$1311 – 2/9 low

$1306-7 – triple bottom, lows 1/3, 1/4, 2/8

$1304 – 1/2 low

$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

$1300 – 100-day moving average

$1294 – 12/29 low

$1287 – 12/28 low

$1287– 200-day moving average

$1281 – 12/27 low

$1281 – 50% retracement of up move from 7/10/17 $1205 low to 9/8/17 $1357 high