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Gold Traders' Report - May 17, 2018

Jim Pogoda, Trader, Gold Bullion International 
MAY 17, 2018

Gold was choppy again last night, trading in a range of $1285.45 - $1294.40, and against movements in the USD.

The yellow metal rose to its $1294.40 top during Asian hours as the resurgent DX pulled back to 93.11, hurt by some strength in the yen (110.41 – 110.07), euro ($1.18 - $1.1838), and sterling ($1.3480 - $1.3564, hopes for Britain staying in the Customs Union).

Later on, the DX bounced to reach 93.56 - helped by an official denial from Teresa May that the UK will be leaving the Customs Union that knocked sterling back to $1.3473, and a pullback in the euro ($1.1777).

This pressured gold down to a fresh 5-month low of $1285.45, but support in front $1284 (up trendline from 12/15/16 $1123 low) held.

Another move up in the US 10-year bond yield to 3.122% was a headwind for gold, while global equities were mixed.

The NIKKEI was up 0.5%, the SCI slipped 0.5%, European markets were up from 0.2% - 0.4%, and S&P futures were -0.2%.

Oil moving to a fresh 3 ½ year high (WTI to $72.27 – Iran supply worries) were supportive of stocks.

At 8:30 AM, a worse than expected reading on US Jobless Claims (222k vs. exp. 215k) slightly overshadowed a stronger reading on the Philly Fed Index (34.4 vs.. exp. 21).

The US 10-year yield declined to 3.091%, and the dollar slipped to 93.38. Gold popped higher, but it was capped at $1291.50.

Later in the morning, US stocks turned higher (S&P +10 to 2732) after a weaker open, with the energy sector leading the gainers.

The 10-year bond yield climbed back to 3.115%, and the DX clawed back to a fresh high at 93.57. Gold was forced lower, but support emerged at $1287.50.

In the afternoon, US equities retreated (S&P -11 to 2711, finished off 2 to 2720), hurt by some comments from Trump regarding trade negotiations with China (doubts trade talks with China will succeed, China has become very spoiled) and North Korea (China may be influencing North Korea, threatened Kim Jong-un with same fate as Gaddafi if Kim doesn’t make a deal on his nuclear program).

The 10-year yield ticked down to 3.102% while the dollar sank back to 93.39. Gold bounced, but it was capped at the prior $1291.50 high. The yellow metal was $1291 bid at 4PM with a loss of $0.50.

Open interest was off 7.5k contracts, showing a net of long liquidation (but some profit taking from shorts as well). Volume was much lower but still robust with 362k contracts trading.

Bulls were not pleased that gold put in another lower low and lower high. However, with gold having dropped $80 (5.86%) since its $1365 4/11 high, and $41 (3.09%) since its $1326 top from last week, the market is approaching oversold (14-day RSI = 33.0), and bulls expect a significant recovery.

They will look for a quick rebound to $1327 (50% retracement of the down move from the $1365 high from 4/11 to today’s $1285 low, 100-day moving average).

While some bears have already taken profits and are awaiting to sell into future recovery rallies, some are looking for further strength in the dollar and the US 10-year bond yield to drive gold lower.

They’re looking for the downtrend to continue, and trip more selling under next support $1284 (up trendline from 12/15/16 $1123 low) and $1281 (12/27 low) to bring $1275 (options) and $1273 (double bottom, 12/25 and 12/26 lows) into play.

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 tomorrow on Japan’s CPI, German PPI, Eurozone Trade Balance, Baker –Hughes Rig Count, the Commitment of Traders Report, and comments from the Fed’s Mester, Brainard, and Kaplan for near-term direction.

In the news:

Resistance levels: 

$1294 – 5/17 high

$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

$1326 – 50 day moving average

$1327 – 40 day moving average

$1328 – 100-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

$1285 – 5/17 low

$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

$1265 – up trendline from 1/6/17 $1171 low