Gold Traders' Report - May 30, 2018

Jim Pogoda, Trader, Gold Bullion International 
MAY 30, 2018

Gold traded either side of unchanged last night in a range of $1296 - $1303. It rose to its $1303 high early during Asian hours – despite the DX remaining somewhat steady around 94.80.

The yellow metal was boosted by weakness in Asian equites (NIKKEI off 1.5%, SCI off 2.55%), which were hurt by concerns over US-China trade talks (US said it would proceed with tariffs on $50B in Chinese imports and investment restrictions), and the ongoing political instability in Italy.

During European time, the euro rebounded ($1.1648) from 10-month lows reached yesterday, as did Eurozone stocks and S&P futures (+0.2 to 0.6%), while Italian bond yields dipped back to 2.85% on reports that the Italian parties were seeking “a point of compromise on another name” for economy minister.

Stronger readings on German Retail Sales and CPI aided the strength in the common currency. This knocked the DX down to 94.30, but gold also came off, dipping to its $1296 low in response to lessening of the perceived political instability.

At 8:15 AM the US ADP Employment Report was lower than expected (178k vs. exp. 190k), with a 41k downward revision to last month’s gain.

This was followed at 8:30 AM by a lower than expected 1st Revision on Q1 GDP (2.2 vs. exp. 2.3%), a weaker GDP Price Index (1.9% vs. exp. 2.0%), and a lower Core PCE (2.3% vs.exp. 2.5%).

The US 10-year bond yield dipped from 2.87% to 2.821%, and the DX slipped to 94.23. Gold rallied back in response, but topped out at $1302 in front of resistance at $1303 - the overnight high and the down trendline from 4/11 $1365 top.

US stocks opened stronger and firmed into mid-day (S&P +35 to 2725, financials and energy sectors leading advancers), with some continued strength in Eurozone stocks and a rebound in oil (WTI to $68.40) aiding the move.

The US 10-year yield climbed to 2.864%, but the DX, under pressure from a rebounding euro ($1.1675), dipped to 94.03. Gold briefly breached resistance at $1303 to reach $1304.35, but a lack of follow-through buying brought it quickly back to the $1300-01 area.

Into the afternoon, markets were fairly steady ahead of the Fed’s Beige book, with the S&P ticking up to 2728 and the 10-year yield trading either side of 2.85%. The DX traded narrowly between 94.10-94.15, and gold remained between $1301 -02.

Open interest was up 10.4k contracts, reflecting a chunk of new longs on the early move to $1306, followed by some new shorts later in yesterday’s session. Volume was a whopping 762k contracts – with much of it from the June-August contract rollover.

All markets will continue to focus on the volatility in the equity and bond markets, geopolitical events (especially Italy, Spain, and North Korea), developments with the Trump Administration (especially on US-China trade), corporate earnings, oil prices, and will turn to this afternoon’s Fed’s Beige Book and reports tomorrow on Japanese Industrial Production and Housing Starts, Chinese PMI, Eurozone Unemployment and CPI, US Challenger Job Cuts, Personal Income, Personal Spending, Jobless Claims, Chicago PMI, Pending Home Sales, Oil Inventories, and comments from the Fed’s Bullard, Brainard and Bostic for near-term guidance.

In the news:

Resistance levels: 

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

$1303 – down trendline from 4/11 $1365 top

$1304 – 5/30 high

$1304 – 20-day moving average

$1306 – 5/29 high

$1307-08 – double top – 5/24 and 5/25  highs

$1308– 200-day moving average

$1318 – 40 day moving average

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

$1322-23 – 5/10 and 5/14 highs

$1322 – 50 day moving average

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

$1325 – options

$1326 – 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:

$1300 – psychological level, options

$1296 – 5/30 low

$1293 – 94 – double bottom – 5/24 and 5/29 lows

$1288 – double bottom, 5/22 and 5/23 lows

$1288  - 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

$1267 – up trendline from 1/6/17 $1171 low

$1265 – 12/22 low