Gold Traders' Report - March 8, 2018

Jim Pogoda, Trader, Gold Bullion International 
MAR 8, 2018

Yesterday afternoon’s Beige Book was taken by markets as mildly hawkish, as the Fed cited persistent labor market tightness and accelerating wage gains.

Gold was pressured to a fresh low of $1322.40 as the US 10-year yield rose to 2.888%.

Overnight, gold traded modestly higher in a range of $1323.70 - $1329.05.  It rose during Asian hours to its $1329.05 high, climbing against a slight decline in the dollar (DX from 89.60 – 89.39).

During European time, however, the greenback rebounded (DX to 89.86) against some euro softness ($1.2415 - $1.2369, weaker than expected German Factory Orders), and pressed gold to its low of $1329.05.

Mostly firmer global equities were a headwind for gold, as the NIKKEI advanced 0.5%, the SCI gained 0.5%, Eurozone shares ranged from -0.5% to +0.3%, and S&P futures were +0.3%. 

At 7:45 AM, the ECB left rates unchanged, but their statement was viewed as hawkish as it dropped the previous easing bias ("if the outlook becomes less favorable, or if financial conditions become inconsistent" with respect to its aim of an inflation rate that sits just below 2%, "the Governing Council stands ready to either increase the size and pace of its QE program”).

The euro shot higher ($1.2446), which knocked the DX back to 89.53. Gold popped higher, but was capped at $1326.

At 8:30 AM, a higher than expected reading on US Jobless Claims (231k vs. exp. 220k) combined with some commentary from Draghi and knocked the euro back to $1.2325 (underlying inflation remains subdued, protectionist policies a risk to growth) to lift the dollar higher.

The DX raced up to 90.17, taking out Tuesday’s 90.07 high. Gold slipped lower in response, and tripped some light stops under support at the past two day’s lows at $1321-22 to reach $1319.10.

Into the afternoon, markets became steady awaiting an announcement from Trump on tariffs scheduled for 3:30PM.

Some rumors that they will grant Canada and Mexico and perhaps others short term exemptions lifted US stocks modestly (S&P +3 to 2730), despite some weakness in oil (WTI to $60.10).

The 10-year yield hovered around 2.855%, while the dollar pulled back to 90.08, and gold recovered to $1322.

Open interest was off 50 contracts, showing a fair amount of new shorts and some bottom fishing new longs to offset a good chunk of long liquidation from yesterday.

Volume expanded further, with 345k contracts trading.

All markets will look to Trump’s announcement on tariffs at 3:30, and 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 tomorrow on Chinese CPI, the BOJ meeting, German Trade Balance, Industrial Production, US Payroll Report, Wholesale Sales, Wholesale Inventories, Baker-Hughes Rig Count, Commitment of Traders Report, and commentary from the Fed’s Rosengren and Evans for near-term direction.

In the news:

Resistance levels: 

$1329 – 50 day moving average

$1329 – 3/8 high

$1330 – 20-day moving average

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

$1334 – 40 day moving average

$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 – 3/2 low

$1311 – 2/9 low

$1303 – 3/1 low

$1302 – 1/1 low

$1302 – 100-day moving average

$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

$1289– 200-day moving average

$1287 – 12/28 low

$1281 – 12/27 low