Gold Traders’ Report - October 9, 2019

 
OCT 9, 2019

Gold Trades Either Side of Unchanged, Awaiting FOMC Minutes and US-China Trade Developments - Gold Today October 9, 2019  

Jim Pogoda, Senior Gold Trader, Gold Bullion International


Overnight – gold choppy between $1500 - $1511

·        Gold moved either side of unchanged last night, trading in a range of $1500 - $1511, and retaining its choppy tone. 

·        It climbed to its $1511 high during Asian and early European time, taking out the double top resistance from the prior two sessions, but lacked follow through to challenge next resistance at $1515.

·        Gold faded a modest pullback in the US 10-year bond yield (1.536% - 1.529%) and the US dollar (DX from 99.13 – 98.89). 

·        The dollar was pressured by a bounce in the pound ($1.2198 - $1.2291) and the euro ($1.0955 - $1.0990 from reports of an EU concession of a time limit on the Irish backstop issue. 

·        News that Turkey’s military crossed into Syria was also gold supportive. 

·        The yellow metal retreated to its $1500 low later during European time, pressured by a climb in S&P futures (+29 to 2921) on news that China was still open to a partial trade deal –despite the recent rancor - offering to increase purchases of agricultural goods in exchange for the US not imposing additional tariffs. 

·        The accompanying firming in the US 10-year bond yield (1.563%) and a rebound in the DX (99.06) were also headwinds for gold. 

·        The DX was helped by a decline in the yen (107.11 – 107.44, risk on) retreat in the pound ($1.2205, DUP rejected the EU Brexit concession) and the euro ($1.0973). 

·        However, as we’ve seen many times in the recent past, bargain hunting buying emerged before the NY open to lift gold back to unchanged at $1506. 

 

Gold climbs to $1509 off of weaker JOLTS and Wholesale Inventories

·        US stocks trimmed some gains after their open (S&P +14 to 2907), hurt by a weaker than expected reading on the US JOLTS Job Openings Report (7051 vs. exp. 7265k, lowest since 3/18), and Wholesale Inventories (0.2% vs. exp. 0.4%).  

·        However, the 10-year bond yield climbed to 1.565%, along with an uptick in other global bond yields (German 10-year from -0.59% to -0.549%, Japan’s 10-year from -0.213% to -0.195%). 

·        The DX was caught in the cross currents but edged down to 99. 

·        Gold ticked higher, but failed at the $1509 double top from the prior two sessions.

 

Firming US stocks press gold down to $1503 near mid-day

·        Into mid-day, US equities edged up (S&P +32 to 2925), taking out their opening highs.  Gains in the IT, Energy, Consumer Discretionary, and Financials sectors led the advance. 

·        The rally was helped by more somewhat dovish comments from Fed Chair Powell (Fed’s job to keep economy in a good place as long as possible, discussed yesterday’s bond buying program) - but no matter how he tries to explain it is not QE, markets seem to perceive it as such.  

·        Firmer oil prices (WTI to $53.72) from larger than expected draws in US Gasoline and Distillate Inventories that overcame a larger than expected build in Oil Inventories, and the military action in Syria aided the move.   

·        The 10-year yield rose further to 1.59%, and the DX climbed to 99.15. 

·        Gold retreated in response, and dipped to $1503.

 

Gold recovers to $1508 ahead of FOMC minutes

·        US equities pared some gains in the early afternoon, but remained fairly firm ahead of this afternoon’s release of the minutes from the 9/18 FOMC meeting. 

·        The 10-year yield ticked down to 1.579%, and the DX pulled back to 99.05. 

·        Gold moved higher to $1508, with more bargain hunting buying seen.

 

Futures volume and open interest

·        Open interest was up 2.4k contracts, reflecting a net of new longs from yesterday’s rally. 

·        Volume was much higher with 387k contracts trading. 

 

Looking ahead

All markets will continue to focus on geopolitical events (especially Brexit news and Saudi - Iran tensions, Hong Kong protests, Turkey’s incursion into Syria), developments with the Trump Administration (especially on US-China trade, potential legal / impeachment issues), oil prices, and will turn this afternoon’s release of the Sep 18 FOMC Minutes followed by reports tomorrow on Japan’s Machine Orders, China’s New Yuan Loans, Aggregate Financing, Germany’s Trade Balance, UK Construction Output, Industrial Production, GDP, and Trade Balance, US CPI, Jobless Claims, Real Earnings, and comments from the Fed’s Mester for near term guidance.

 

In the news:

BNP Paribas – the outlook for gold as Fed rates fall:   https://www.gold.org/goldhub/research/gold-investor/bnp-paribas-outlook-gold-fed-rates-fall

WGC – gold backed ETF holdings hit record highs in September:  file:///C:/Users/Jim.Pogoda/Downloads/2019-September-fund-flows.pdf

  

YTD Performance




12/31/2018
10/9/2019
Change
% Change
Gold




1282.5
1508
225.5
17.583%
DX




96.06
99.10
3.04
3.165%
S&P




2505
2919
414
16.527%
JYN




109.63
107.47
-2.16
-1.970%
Euro




1.1466
1.0977
-0.0489
-4.265%
US 10-year bond yield




2.69%
1.579%
-0.0111
-41.214%
Oil (WTI)




45.45
52.69
7.24
15.930%

 

 

Resistance levels: 

$1509-11 – triple top - 10/7, 10/8, and 10/9  highs

$1510 - 40-day moving average

$1512 – 9/26 high

$1515 – 10/4 high

$1520 – 10/3 high

$1520 – down trendline from 9/4 $1557 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:

$1505– 50-day moving average

$1501 – 20-day moving average

$1500 – 10/9 low

$1500 – psychological level, options

$1496 – double bottom - 10/3 and 10/4 lows

$1487-88 – double bottom - 10/7 and 10/8 lows

$1475 – 10/2 low

$1472 – 8/7 low

1465 – 9/30 low

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

$1450 – options

$1440 – 100-day moving average

$1438 – 8/5 low