Gold Traders' Report - May 23, 2018

Gold remained nervous and choppy overnight, trading either side of unchanged in a range of $1289.30 - $1297.90. It directionally continued to trade against the US dollar, but at times, it held its own against strength in the greenback.

It rose to $1295.50 early during Asian hours, boosted by a dip in the DX to 93.51 - but was capped by resistance at yesterday’s $1296 high. The dollar was pressured by strength in the yen (110.90 – 109.54) from a move back to the safe haven currency on fears of the US-China trade deal and the US-North Korea summit unraveling, with Trump’s negative comments yesterday still resonating.

During early European time, however, gold retreated to its $1289.30 low, as the DX bounced to 93.99. The dollar was fueled by plunges in the euro ($1.1768 - $1.17, fresh 6-month low, miss on Eurozone PMI’s to 18-month lows, continued Italian political concerns), sterling ($1.3440 -$1.3305, fresh 5-month low, miss on UK CPI), and a collapse in the Turkish lira, which was pounded by an outflow of investor capital and concerns over Erdogan’s ability to manage the situation.

Late during European hours, though, gold came roaring back with an out-sized up move to take out $1296 to reach its high of $1297.90, but resistance in front of $1300 held.

This was as the DX retreated to 93.71 off of a brief bounce back in the euro to $1.7145. Much weaker global equities were a tailwind for gold, with the NIKKEI down 1.2% (PMI at 9-month low), the SCI off 1.4%, Eurozone shares were off 0.7% - 1.4% (Eurozone PMI at 18-month lows), and S&P futures fell another 0.6%.

A dive in the US 10-year bond yield from 3.065% to 3.003% also reflected investor fears, and were gold supportive. Just ahead of the NY open, the DX snapped back to reach a new 5-month high at 94.12. Gold, a bit overextended on the upside, sold off sharply. It took out the overnight low to reach $1288, where support at yesterday’s low held.

US stocks pared losses at their open (S&P -2 to 2722), helped by better than expected readings on US Market PMI’s (Manufacturing 56.6 vs. exp. 56.5, Services 55.7 vs. exp. 55). The 10-year yield bounced back to 3.03%, and the DX charge up to 94.12  - making another 5-month high. Gold was resilient though and held support at $1288.

Later in the morning, US stocks retreated (S&P -14 to 2709) off of a weaker report on US New Home Sales (662k vs. exp.. 678k), and a dip in oil (WTI to $71.16) from a surprise build in US oil inventories (5.8 M bbl build vs. exp. 1.6M bbl draw).

Also, equities focused on some negative aspects of a Trump tweet on US-China trade “will probably have to use a different structure in that this will be too hard to get done and to verify results after completion” and ignored his “moving along nicely” comment. The 10-year yield pulled back to 3.008%, and the DX slipped to 93.92. Gold climbed in response, trading up to $1294.

Into the afternoon, markets became steady ahead of the release of FOMC minutes from the 5/2 meeting with the S&P hovering around 2715 (-8), and the 10-year yield around 3.01%. The DX firmed a bit to 94 – 94.10, and gold slipped to the $1290-91 level.

Open interest was off 3.5k contracts, showing a net of short covering from yesterday. Volume was lower but still very robust with 347k 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 this afternoon’s release of the minutes from FOMC’s 5/2 meeting for near-term guidance.

In the news:

10 Reasons to invest in gold

Resistance levels: 

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

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

$1298 – 5/23 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 – 20-day moving average

$1308– 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 

$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 – 40 day moving average

$1322-23 – 5/10 and 5/14 highs

$1323 – 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 – double bottom, 5/22 and 5/23 lows

$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