Gold Traders' Report - May 22, 2018

Jim Pogoda, Trader, Gold Bullion International 
MAY 22, 2018

Gold was a little choppy overnight in a range of $1288 – $1296, largely fading movements in the US dollar.

It traded down to its $1288 low during Asian and early European time, as the DX rose to 93.74, boosted by more positive news on US-China trade.

The Chinese Finance ministry said it will slash import tariffs on passenger vehicles from 25% to 15%, and cut duties on car parts to 6%.

Shortly thereafter however, the DX retreated to 93.29, forced lower by strength in the pound ($1.3415 - $1.3490, hawkish comments from the BoE’s Vlieghe - expects interest rates to rise around 0.25-0.50% over the 3-year forecast period) and a bounce in the euro ($1.1756 - $1.1829 – falling Italian bond yields).

Gold rallied in response, and took out resistance at the past 3 sessions’ highs ($1293-94) to reach $1296 (some short covering seen). Mostly firmer global equities were a headwind for gold, with the NIKKEI off 0.2%, the SCI flat, Eurozone markets were up from 0.1% - 0.2%, and S&P futures were +0.2%. Strong oil prices (WTI to $72.75, fresh 3 ½ year high) were a tailwind for stocks.

US stocks opened firmer (S&P +9 to2741, automakers lead gainers on the overnight Chinese tariff reduction), with a stronger reading on the Richmond Fed Manufacturing Index (16 vs. exp. 8) aiding the move.

The US 10-year bond yield ticked up from 3.058% to 3.078%, and the DX climbed back to 93.62. Gold was pressured lower, and traded down to $1291.50.

However, markets reversed in the afternoon, after Trump said that he was not satisfied with the US-China trade talks, there was no deal with China on ZTE, and also remarked that the highly anticipated summit with North Korea might not happen.

US stocks sold off sharply (S&P ends down 9 to 2724), with Boeing, industrials, materials and energy leading decliners).

A fall in oil (WTI to $71.95) weighed on stocks. The 10-year yield slipped back to 3.06%, but the DX slipped just slightly (93.48), as a reversal back lower in the euro ($1.1770, political concerns in Italy) helped keep a bid in the greenback.

Gold rose to $1294.50, then drifted down to $1291.50 as the DX clawed back to 93.60. Gold was $1292 bid at 4PM – unchanged.

Open interest was off 6.7k contracts, showing a combination of early long liquidation followed by some short covering later in yesterday’s session. Volume increased with 389k contracts trading.

All markets will continue to focus on the volatility in the equity and bond markets, geopolitical events, developments with the Trump Administration (especially on US-China trade), corporate earnings, oil prices, and will turn to reports tomorrow on Japan’s Manufacturing PMI, All Industry Activity Index, Department Store Sales, and Machine Tool Orders, Eurozone PMI’s, UK CPI and PPI, US Markit PMI’s, New Home Sales, Oil Inventories, FOMC Minutes from the 5/2 meeting, and comments from the Fed’s Kashkari for near-term direction.

In the news:

Goldman – watch for signs of reversal in gold between $1275 - $1263

UK gold imports and exports – some surprises

FOMC minutes preview – no news is good news for the US, 3 things to watch out for

Blockchain will completely revolutionize how we mine gold and precious metals

Resistance levels: 

$1293 -94– triple top, highs 5/17, 5/18, and 5/21

$1296-97  – double top, 5/16 and 5/22  highs

$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

$1308– 200-day moving average

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

$1308 – 20-day moving average

$1311 – 5/10 low

$1313 – 5/14 low 

$1313 – down trendline from 4/11 $1365 top

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

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

$1322-23 – 5/10 and 5/14 highs

$1323 – 40 day moving average

$1324 – 50 day moving average

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

$1325 – options

$1327 – 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:

$1288 – 5/22 low

$1286  - up trendline from 12/15/16 $1123 low

$1281-82 – double bottom, 5/21  and 12/27 lows

$1275 – options

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

$1266 – up trendline from 1/6/17 $1171 low

$1265 – 12/22 low