Gold Traders' Report - May 11, 2018

Jim Pogoda, Trader, Gold Bullion International 
MAY 11, 2018

Gold traded higher overnight in a range of $1318.50 to $1325.95 to reach a 2-week high. It took out yesterday’s $1323 high, but ran into resistance at $1324-26 ($1324-25 – double top, 4/27 and 4/30 highs, $1325 – options, $1326 – 100-day moving average, $1326 – 20-day moving average).

Gold initially dipped to its $1318.50 low during Asian time, pressured by an early move up in the dollar (DX to 92.84).

During European time, the yellow metal was driven to its $1325.95 high by a pullback in the dollar (DX from 92.84 – 92.45) which was pressured by a recovery in the euro ($1.1890 - $1.1949) and the pound ($1.3501 - $1.2582).

A decline in the US 10-year bond yield (2.97% - 2.948%) was a tailwind for gold, while global equites were mixed.

The NIKKEI was up 1.2%, the SCI fell 0.4%, Eurozone shares were off from 0.1% - 0.4%, while S&P futures were +0.2%. A slight decline in oil weighed on equities with WTI coming off its 3 ½ year at $71.84 made yesterday to $71.13.

At 9:15 AM, the euro rallied further ($1.1968) from some comments from the ECB’s Draghi (urges more area integration, and proposes a fund as a crisis buffer). The DX weakened more, dipping to 92.36 (1-week low), but gold was unable to rally further, as the confluence of resistance between $1324-26 held.

At 10 AM, a stronger than expected reading on the University of Michigan Consumer Sentiment Index (98.8 vs. exp. 98.4) aided an already positive opening to US stocks. The S&P traded +10 to 2733, with the telecom sector leading gainers.

The 10-year yield climbed to 2.982%, and the DX rebounded to 92.60.. Gold retreated to $1320, where it found support ahead of the old resistance at $1318-19.

Into the afternoon, US stocks pulled back to unchanged, with some uncertainty surrounding this afternoon’s speech by Trump to curb drug prices along with some week-end profit taking. The 10-year yield ticked down to 2.973%, and the DX pulled back to trade narrowly between 92.45 – 92.55. Gold remained steady, and traded between $1320-22.

Open interest was up 11.1k contracts, showing mostly new longs (but some new shorts selling strength) from yesterday’s rally. Volume was lower but still quite healthy with 399k contracts trading.

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 this afternoon’s Commitment of Traders Report and reports Monday on Germany’s Wholesale Price Index, US MBA Mortgage Foreclosures and Delinquencies, and comments from the Fed’s Mester for near-term direction.

In the news:

Resistance levels: 

$1323 – 5/10 high

$1324-25 – double top, 4/27 and 4/30 highs

$1325 – options

$1326 – 5/11 high

$1326 – down trendline from 4/11 $1365 top

$1326 – 100-day moving average

$1326 – 20-day moving average

$1328 – 50 day moving average

$1329 – 40 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:

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

$1318 – 5/11 low

$1311 – 5/10 low

$1307-10 – five bottoms – 3/16, 3/19, 3/20, 3/21 and 4/30 lows

$1307– 200-day moving average

$1304 – 06 – quadruple bottom  5/2, 5/3, 5/8, and 5/9 lows

$1302 - 03 – triple bottom - 1/1, 3/1, 5/1 lows

$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

$1287 – 12/28 low

$1281 – 12/27 low