Gold Traders' Report - May 7, 2018

Gold traded either side of unchanged overnight in a range of $1310.10 to $1319. It rose to its $1319 high during Asian time, finding some buying over the last two sessions highs of $1316 and $1318.

It was boosted by some softness in the dollar (DX to 92.45), which was pressured by some modest strength in the yen (109.20 – 108.75).

Later during European hours, the DX rallied (92.98, fresh 4 ½ month high) off of a weaker euro ($1.1978 - $1.1897, miss on German Factory Orders, Eurozone Retail PMI and Sentix Investor Investor Confidence).

Gold retreated to $1310, finding support at the old 5-bottom level. Mostly stronger global equities - extending Friday’s gains in the US - were stronger and a headwind for gold, with the NIKKEI flat, the SCI +1.5%, Eurozone shares were up from 0.1% to 0.4%, (but the UK was on holiday), and S&P futures were +0.3%.

Firmer oil (WTI from $69.70 - $70.69, fresh 3 ½ year high, concerns over supplies from Venezuela, looming decision on re-imposing sanctions on Iran) were supportive of equities.

After the NY open, some dovish comments from the Fed’s Bostic, adding to his dovish slant from Friday (comfortable with “some overshoot” on inflation) helped to lift US equities (S&P +18 to 2681), and pushed the US 10-year yield down to 2.937%. The DX sank back to 92.80, and gold came off its low to trade up to $1314.

Later in the morning and into the afternoon, US stocks ticked a bit lower (S&P to 2675), but the 10-year yield drifted up to 2.959%. The dollar - caught in the cross currents – worked lower, and traded down to 92.66. Gold clawed a bit higher in response, and touched $1315.50.

In the afternoon, a tweet from Trump that he would be announcing his decision on the Iran deal tomorrow at 2PM sent stocks lower.

S&P futures tanked to 2664 before finishing +10 to 2673. The 10-year yield remained stable around 2.95%, while the DX was fairly steady between 92.70-92.78.

Gold was unable to take out its prior high, though, and stabilized between $1313 - $1314.50.. It was unchanged at $1314 bid at 4PM.

Open interest was up 2k contracts, showing a net of new longs from Friday’s advance.

Bulls were pleased that gold forged a higher high and a higher low today, despite the dollar making a 4 ½ month high at 92.98.

They feel the relatively and historically low Net Fund Long Position is preventing a cascading of support levels being tripped to trigger a significant move lower, and that recent influx spec shorts will provide fuel for an impending rally.

They feel that a base is being formed at the 200-day moving average ($1305 – which has held on a closing basis), and feel comfortable getting long at the bottom of gold’s 4-month trading range.

Additionally, they feel the dollar’s rally has been over extended, and expect a pullback in the greenback to ignite corrective rally in gold.

Bulls are looking for a quick rebound to at least $1333 - the 50% retracement level of the down move from the $1365 high on 4/11 to the $1302 low from 5/1.

Bears still maintain that a long-term bottom at 88.25 from 2/16 in the DX is in place, and expect continued strength in the greenback to fuel a further decline in the yellow metal.

Though some bears were happy to take profits below $1315, other bears are still looking for more room on the downside.

They’ll be looking for a retest the 200-day moving average at $1305, and then look to take out $1301 (50% retracement of up move from 12/12/17 $1236 low to 1/25/18 $1366 high) and $1300 to trigger more liquidating sell stops that will bring the low $1290’s and high $1280’s into play.

All markets will continue to focus on the volatility in the equity and bond markets, geopolitical events, developments with the Trump Administration (especially tomorrow’s announcement on Iran), corporate earnings, oil prices, and will turn to comments later in the afternoon by the Fed’s Kaplan, and Evans, and reports tomorrow on China’s Trade Balance, Germany’s Trade Balance and Industrial Production, US NFIB Small Business Optimism, JOLTS Job Openings, and comments tomorrow from the Fed’s Powell for near term direction.

In the news:

Central Bank gold purchases:  stunning impact on the gold market

WGC launching new low-fee fund

US Mint gold and silver eagle sales remain subdued

Resistance levels: 

$1315 – double bottom – 4/26 and 4/27 lows

$1316 – 5/4 high

$1318 – 5/3 high

$1319 – 5/7 high

$1325 – 100-day moving average

$1321-23 – quadruple bottom, 3/29, 4/5, 4/6 and 4/23 low

$1324-25 – double top, 4/27 and 4/30 highs

$1325 – options

$1329 – 50 day moving average

$1330 – 40 day moving average

$1330 – 20-day moving average

$1332-33 – double top - 4/24 and 4/25 highs

$1333 – down trendline from 4/11 $1365 top

$1335 – 4/23 high

$1334-35 triple bottom – 4/12, 4/13, and 4/20 lows

$1335 – 50% retracement of down move from 1/25 $1366 high to 3/1 $1303 low

$1338 – 4/17 low

$1341 – 4/19 low

$1345 – down trendline from 8/2013 weekly chart

$1346 – 4/20 high

$1350 – options

$1350 – down trendline from 1/25/18 $1366 high

$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:

$1310 – 5/7 low

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

$1306– 200-day moving average

$1305 – 5/3 low

$1304 – 5/2 low

$1303 – 3/1 low

$1302 – double bottom - 1/1, 5/1 lows

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

$1300 – psychological level, options

$1294 – 12/29 low

$1287 – 12/28 low

$1281 – 12/27 low