Gold Traders' Report - May 16, 2018

Jim Pogoda, Trader, Gold Bullion International 
MAY 16, 2018

Gold was a little choppy overnight in a range of $1287 - $1297, largely fading movements in the US dollar. It recovered from yesterday’s $21 thrashing to its $1297 high during Asian and early European hours, as the DX pulled back from the 5-month peak it reached yesterday (93.46) to 93.13.

The greenback was pressured by some strength in the yen (110.40 – 110.07, stronger Japanese Industrial Production and safe have bids overcome miss on GDP).

A re-escalation of tensions on the Korean Peninsula (North cancelled high-level talks with the South yesterday, and threatened to walk away from a planned summit with Trump to protest South Korean and US military exercises) was also gold supportive.

Later during European time, the DX bounced back strongly, and took out yesterday’s 93.46 high to reach 93.63 - fueled by a drop in the euro ($1.1854 - $1.1767, fresh 5-month low, lower reading on Eurozone CPI, Italian political concerns).

Gold was pressed lower, and it took out is $1289 low from yesterday to reach $1287, where support at the 12/28 low held. Global equities were mixed with the NIKKEI off 0.4%, the SCI shed 0.7%, Eurozone shares were flat to +0.3%, and S&P futures were flat.

A modest pullback in oil (WTI from $71.15 - $70.90, API report on US Inventories showed a larger than expected build) weighed on stocks.

At 8:30 AM, a miss on US Housing Starts (1.287M vs. exp. 1.310M) overshadowed a slightly higher reading on Building Permits (1.352M vs. exp. 1.35M).

This was followed by offsetting reports on Industrial Production (slightly better, 0.7% vs. exp. 0.6%) and Capacity Utilization (miss, 78% vs. exp. 78.4%) at 9:15 AM.

S&P futures were knocked back to 2704, and kept the US 10-year yield near its overnight low of 3.058%. The DX retreated to 93.28, and allowed gold to bounce to $1291.80.

Later in the morning and into mid-day, US stocks strengthened (S&P +17 to 2728), aided by a jump in the retail sector led by strong earnings by Macy’s.

A rally in oil (WTI to $71.30, EIA reported unexpected large draw in US crude stocks), also contributed to the move up in equities.

The 10-year yield climbed to match yesterday’s 7-year high at 3.095%, and the dollar recovered to 93.54. Gold declined in response, but found support at $1287.50.

In the afternoon, US stocks pared some gains (S&P +12 to 2723), while the 10-year yield ticked down to 3.08%. The DX pulled back to its mid-morning low of 92.38, and gold clawed back to $1293.

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 comments later this evening from the Fed’s Bullard, and reports tomorrow on Japanese Machine Orders, Retail Sales, Eurozone Construction Output, US Jobless Claims, Philly Fed, Leading Indicators, and comments tomorrow from the Fed’s Kaplan for near-term direction.

In the news:

 Resistance levels: 

$1294 – 12/29 low

$1297 – 5/16 high

$1300 – psychological level, options

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

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

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

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

$1307– 200-day moving average

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

$1311 – 5/10 low

$1313 – 5/14 low 

$1317 – 20-day moving average

$1318 – double bottom  5/11 and 5/14 lows

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

$1320 – down trendline from 4/11 $1365 top

$1322-23 – 5/10 and 5/14 highs

$1325-27 – quadruple  top, 4/26, 4/27, 4/30, and 5/11 highs

$1325 – options

$1327 – 50 day moving average

$1328 – 100-day moving average

$1328 – 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:

$1289 – 5/15 low

$1287 – double bottom, 12/28 and 5/16  lows

$1284  - up trendline from 12/15/16 $1123 low

$1281 – 12/27 low

$1275 – options

$1273 – double bottom, 12/25 and 12/26 lows

$1265 – 12/22 low