Gold Traders’ Report - May 30, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
MAY 30, 2019

Gold softened last night, trading lower in a relatively narrow range of $1275.10 - $1280.40.  Gold was pressured by a continued firming in the US dollar (DX from 98.08 – 98.24).  The dollar was aided by a pullback in the safe-haven yen (109.48 – 109.83), and further weakness in the euro ($1.1143 - $1.1124), and the pound ($1.2639 - $1.2611).  A bounce in the US 10-year yield (2.282%) and mostly firmer global equities were also headwinds for the yellow metal.  The NIKKEI and the SCI were both off 0.3%, while European markets were up from 0.4% to 0.5%, and S&P futures were +0.4%.  Stocks managed a rebound despite a further escalation in the trade dispute between the US and China overnight, with the US looking to impose further tariffs on Chinese made kegs and mattresses, while China’s Vice Foreign Minister Hanhui saying that US provocations were “economic terrorism”, and reports that China was halting soy purchase from the US.  Oil prices were firmer (WTI from $58.83 to $59.70) and a tailwind for stocks, helped by the API’s report of a larger than expected drawdown in US Oil Inventories. 

 Just ahead of and through the NY open, S&P futures sold off (+4 to 2785), and the US 10-year bond yield sank to 2.26%.  The DX edged down to 98.10, and gold rebounded to $1280 – where resistance at the overnight high held.  

The 8:30 AM US economic data was a mixed bag.  The revision to US Q1 GDP (3.1% vs. exp. 3.0%), Personal Consumption (1.3% vs. exp. 1.2%), and the Goods Trade Balance (-$72.12B vs. exp. -$72.3B) were slightly better than expected, and reports on Retail Inventories (0.4% vs. exp. 0.2%) and Wholesale Inventories (0.7% vs. exp. 0.1%) were also stronger.  However, the Core PCE was a large miss (1.0% vs. exp. 1.3%), and there were slight misses on the GDP Price Index (0.8% vs. exp. 0.9%), Jobless Claims (215k vs. exp. 214k), and the GDP Price Index (0.8% vs. exp. 0.9%).  Reaction in the markets was likewise mixed and muddied with S&P futures advancing (2791), but the 10-year yield ticked down to 2.25%.  The DX slipped to 98.09, and gold took out its overnight high to reach $1282.75.  

US stocks opened higher (S&P +15 to 2798), with gains in the Consumer Discretionary, Real Estate, and Industrials sector leading the advance. The 10-year yield bounced to 2.273%, and the DX took out its overnight high to reach 98.26.  The greenback was also boosted by further weakness in the euro ($1.1116, US warns of sanctions against Europe’s INSTEX which allows trade with Iran) and the pound ($1.2599, 5-month low).  Gold came off its high, but found support at $1280.

Equites pared gains back to near unchanged into mid-day (S&P-1 to 2781), hurt by a tumble in oil (WTI to $56.96, larger than expected build in US gasoline inventories). The 10-year yield took out its overnight low to reach 2.245%.  The DX sank to 98.12, and gold rallied.  Buys stops were hit above the prior high and $1285-87 (5 tops – 5/23, 5/24, 5/27, 5/28, and 5/29 highs) to reach $1289, where resistance there from the 5/17 high held. 

In the afternoon, US stocks traded either side of unchanged, but finished on the plus side (S&P +6 to 2789).  Stocks were helped a bit from some slightly dovish comments from the Fed’s Clarida (acknowledged that signs of slowing global growth and weaker than expected US inflation data could call for more accommodative policy).  The 10-year yield slipped to 2.217%, but held yesterday’s 20-month low of 2.213%.  The DX remained fairly steady between 98.11 – 98.15, and gold was similarly stable between $1287-89.  Gold was $1288 bid at 4PM with a gain of $8. 

Open interest was off 50.9k contracts, reflecting a hefty amount of position close outs (not rolling from June to August) from yesterday.  Volume was lower but still very robust with 405k contracts trading - still inflated by the ongoing June-August contract rollover. 

All markets will continue to focus on geopolitical events (especially Brexit news), developments with the Trump Administration (especially on US-China trade, potential legal issues), Q1 corporate earnings, oil prices, and will turn to reports tomorrow on Japan’s Jobless Rate, CPI, Industrial Production, Retail Sales, Consumer Confidence and Housing Starts, China’s PMI, German Retail Sales and CPI,  Italian GDP, US Personal Income, Personal Spending, PCE Deflator, Chicago PMI, University of Michigan Consumer Sentiment, Baker Hughes Rig Count, Commitment of Traders, and comments from the Fed’s Williams for near term direction. 

In the news: 

George Milling-Stanley – we’re in for a period of a lot more volatility:   https://finance.yahoo.com/video/gold-strategist-period-lot-more-153925880.html

YTD Performance


12/31/2018

5/30/2019

Change
% Change
Gold


1282.5

1288

5.5

0.429%

DX


96.06

98.15

2.09

2.176%

S&P


2505

2789

284

11.337%

JYN


109.63

109.60

-0.03

-0.027%

Euro


1.1466

1.1131

-0.0335

-2.922%

US 10-year bond yield


2.69%

2.219%

-0.0047

-17.386%

Oil (WTI)


45.45

56.51

11.06

24.334%

 

Resistance levels: 

$1289 – double top - 5/17 and 5/30  highs

$1295 – down trendline from 2/20 $1347 high

$1297– 100-day moving average

$1299 – 5/16 high

$1300 – psychological level, options

$1301 – double top 5/13 and 5/15 highs

$1304  - 5/14 high

$1309 - 12 - triple top – 3/28, 4/10 and 4/11 highs

$1307 – 50% retracement of down move from 2/20 $1347 high to 4/23 $1266 low

$1319 - 3/27  high

$1322 -3/26 high

$1325 – options

$1325 – 3/25 high

$1327 – 2/28 high

$1330 – double top – 2/27 and 2/26 highs

$1333 –double top 2/22 and 2/25 highs

$1342 – double top - 2/19 and 2/21 highs

*$1346-47 – double top 2/20 and  4/20/18 highs

*$1350 – down trendline from 8/25/13 $1433 high

$1353-56 – triple top – 4/12/18, 4/18/18 and 4/19/18 highs

*$1365-67– triple top – 8/2/16, 1/25/18 and 4/11/18 highs

*$1373-75 – double top – 7/6/16 and 7/11/16 highs

Support levels:

$1288 – 50-day moving average

$1285-87 – 5 tops – 5/23, 5/24, 5/27, 5/28, and 5/29 highs

$1284 - 40-day moving average

$1284 – 20-day moving average

$1279 – 5/29 low

*$1277 – up trendline from 8/16/18 $1160 low

$1276 – 5/28 low

$1275 – options

$1274-75 – double bottom  – 5/17 and 5/20 lows

$1273 – 5/22 low

$1269-70– triple bottom - 4/24, 5/3, and 5/21 low

$1265-67 – 5 bottoms - 12/25, 12/26, 12/27, 4/23, and 5/2  lows

*$1261 – 200-day moving average

$1259 – 12/24 low

$1254 – 12/21 low

$1253 – 50% retracement of up move from 8/16/18 $1160 low to 2/20 $1347 high

$1250 – options

$1242-43 – double bottom – 12/19 and 12/20 lows