Gold Traders’ Report - October 2, 2019

 
OCT 2, 2019

Gold Extends Its Rebound to Recapture $1500 Against Tumble in Equities, the Dollar, and Bond Yields - Gold Today October 2, 2019 

Jim Pogoda, Senior Gold Trader, Gold Bullion International

 

Overnight – Gold continued its rebound to $1488

·        Gold continued to rebound overnight, trading higher but in a choppy fashion in a range or $1475 - $1488. 

·        It fell to its $1475 low during Asian time against an early recovery attempt in S&P futures from yesterday’s selloff inspired by a poor reading on the US ISM report. 

·        During European time, gold rallied to its $1488 high- taking out its $1487 top  from yesterday.

·        The move was fueled by a tumble in global equities (NIKKEI off 0.5%, China still closed, European markets were off from 1.2% - 1.7%, and S&P futures fell 0.7%), with the weak US manufacturing data increasing fears of a global economic recession. 

·        After earlier session rebounds, dips in the US 10-year bond yield (1.663% to 1.622%), and a pullback in the US dollar (DX 99.42 – 99.20) were also tailwinds for gold. 

·        The dollar was pressured by a recovery in the pound ($1.2226 - $1.2295, rebounded after weak UK PMI, EU stands ready to extend 10/31 Brexit deadline), and the euro ($1.0903 - $1.0935). 

·        News that North Korea test fired a ballistic missile from a submarine added to geopolitical tensions and was also gold supportive.

 

Weak US ADP Employment report contributes to slowing growth fears, ignites heavy selling in stocks, gold rallies to $1498

·        At 8:15 AM, a worse than expected US ADM Employment Report (135k vs. exp. 140k, last month’s reading revised down by 38k jobs, Manufacturing adds only 8k – adds to concerns of manufacturing sector) knocked S&P futures lower (-29 to 2908), and took the US 10-year bond yield down to 1.616%. 

·        The DX fell to 99.11, and gold rallied. 

·        The yellow metal climbed with both short covering and news longs seen to $1498, where resistance at Monday’s high capped the advance. 

 

Stocks continue to plummet into mid-day, Fed’s Williams dovish comments fail to sooth, gold reaches $1503

·        US stocks opened weaker and plunged into the late morning hours (S&P -52 to 2887), with heavy (greater than 2%) losses in the IT, Materials, and Industrials sectors leading the decline. 

·        A tumble in oil (WTI to $52.56, 2-month low, EIA reported a larger than expected build in US Oil Inventories) contributed to the move.  

·        Some seemingly dovish commentary from the Fed’s Williams (We have seen signs of the economy slowing somewhat…Looking ahead, there are a number of crosscurrents, if you will, that are leading to slower U.S. growth…We’ve seen the effects of the trade tensions and other geopolitical tensions lead to higher uncertainty about the future, and that seems to have contributed to a pullback in business investment…we’re seeing a pullback in international trade as well) that would have typically lifted equities, failed to do so, with his words adding to the concerns of an economic slowdown. 

·        The 10-year bond yield fell to 1.597% (1-month low), and the DX sank to 99.00. 

·        The dollar was also weakened from a further rebound in the pound ($1.2317), as PM Johnson laid out a detailed plan the DUP supports, spokesman said they’re ready for an intense period of Brexit negotiations with the EU, and will be holding talks today.  

·        Gold climbed higher, taking out $1498 (9/30 high) and $1500 to reach $1503.

 

Gold claws back to $1505 as stocks soften further

·        Into the afternoon, US stocks fell further (S&P -66 to 2874), as did the 10-year bond yield (1.584%). 

·        The DX, after a modest bounce to 99.10, retreated back to 98.97. 

·        Gold, after a dip to $1498 off of the brief dollar bounce, rallied to reach $1505.

 

Futures volume and open interest

·        Open interest was off 5.5k contracts, showing a net combination of early long liquidation down to yesterday’s $1459 low followed by short covering on the bounce to $1487. 

·        Volume was a little higher and remained very robust with 470k contracts trading.  However, the DX had a modest rebound to 99.10,

 

In the news: 

Gold climbs 1%; weak US data feeds economic fears:   https://uk.reuters.com/article/global-precious/precious-gold-climbs-1-weak-u-s-data-feeds-economic-fears-idUKL3N26N2NZ?rpc=401&

Gold is breaking out as oil may be ready to move higher – Fidelity:   https://www.bloomberg.com/news/videos/2019-10-01/gold-is-breaking-out-as-oil-may-be-ready-to-move-higher-fidelity-s-gagliardi-says-video

 

Looking ahead

All markets will continue to focus on geopolitical events (especially Brexit news and Saudi - Iran tensions, Hong Kong protests), developments with the Trump Administration (especially on US-China trade, potential legal / impeachment issues), oil prices, and will turn to reports tomorrow on Eurozone Services PMIs, PPI and Retail Sales, US Challenger Job Cuts, Jobless Claims, Markit Services PMI, ISM Services, Durable Goods, Factory Orders, and comments from the ECB’s Guindos, and the Fed’s Evans, Quarles, Mester, Kaplan, and Clarida for near term direction. 

 

YTD Performance




12/31/2018
10/2/2019
Change
% Change
Gold




1282.5
1504
221.5
17.271%
DX




96.06
98.98
2.92
3.040%
S&P




2505
2879
374
14.930%
JYN




109.63
107.08
-2.55
-2.326%
Euro




1.1466
1.0963
-0.0503
-4.387%
US 10-year bond yield




2.69%
1.589%
-0.011
-40.841%
Oil (WTI)




45.45
52.64
7.19
15.820%

 

 

Resistance levels: 

$1505 – 10/2 high

$1507 – 9/27 high

$1510– up trendline from 5/30 $1275 low

$1510 - 40-day moving average

$1512 – 9/26 high

$1525 – options

$1535-36 – double top – 9/25 and 9/25 highs

$1553 – 9/5 high

$1557 – 9/4 high

$1591 – 4/7/13 high

$1600 – options

$1604 – 3/31/13 high

$1614 – 3/24/13 high

 

Support levels:

$1501 – double bottom - 9/25 and 9/26 lows

$1501 – 20-day moving average

$1500 – psychological level, options

$1497– 50-day moving average

$1484 - 86 – 4 bottoms - 9/10, 9/11, 9/13, and 9/18 lows

$1480 – 8/13 low

$1475 – 10/2 low

$1472 – 8/7 low

1465 – 9/30 low

$1457-59 – double bottom - 8/6 and 10/1 lows

$1450 – options

$1438 – 8/5 low

$1427 – 100-day moving average