Gold Traders’ Report - October11, 2019

 
OCT 11, 2019

Gold Softens Further on Optimism in Both Us-China Trade and Brexit - Gold Today October 11, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 

 

Overnight – remained choppy, trading between $1480 -$1504

·        Gold retained its choppy tone last night, trading in a range of $1480 - $1504. 

·        It held fairly steady between $1491 – 97 during Asian time – despite a further rise in S&P futures off of upbeat comments last evening from Trump (China talks went very well today, meeting at White House tomorrow, we had a very, very good negotiation), and prospects for getting a deal on Brexit. 

·        However, gold spiked to its $1504 high during early European time on news that an Iranian oil tanker was hit by two missiles. 

·        The news launched oil briefly to $54.85, knocked back S&P futures (2948), and pushed the US 10-year bond yield to 1.642%. 

·        However, oil quickly retreated back to $54.15 ahead of the NY open. 

·        S&P futures bounced back (+32 to 2973) over increasing optimism for a US-China trade deal, and the US 10-year bond yield climbed to 1.717%. 

·        The DX retreated, however, under pressure from a continued strong rally in the pound ($1.2425 - $1.2681, 3-month high) off of further optimism of a Brexit deal (EU’s Barnier given go –ahead to enter into detailed discussions with the UK government) and the euro ($1.1001 - $1.1060), along with some technical selling under 98.69 (up trendline from 6/25 95.84 low).

·        Gold tumbled – despite the weakness in the greenback as many longs went to gold as a safe haven against a no-deal Brexit –tripping sell stops under $1500, $1492 (yesterday’s low), $1487-88 (double bottom - 10/7 and 10/8 lows) to reach $1480.  A fair amount of long liquidation was seen.

 

Gold tumbles to $1474 on more upbeat comments on US-China trade from Trump, stronger U. Michigan Sentiment Report

·        US stocks opened stronger, and climbed into the mid-morning (S&P +47 to 2985, high since 10/1), helped by further upbeat comments from Trump (Good things are happening at China Trade Talk Meeting. Warmer feelings than in recent past, more like the Old Days. I will be meeting with the Vice Premier today. All would like to see something significant happen), a much stronger than expected reading on the University of Michigan Consumer Sentiment Report (96 vs. exp. 92), and China’s securities regulator announcing a timetable to remove a requirement that foreign financial companies must have a Chinese investor. 

·        The rally was led by sharp (2%+) gains in the Financials, Industrials, and Materials sectors. 

·        The US 10-year bond yield rose to 1.75%  - its high since 10/1, and broke back over the yield of the 3-month T-bill. 

·        The DX was choppy between 98.19-98.41, still being pressured by strength in both the pound ($1.2705) and the euro ($1.1063). 

·        Gold was knocked lower, briefly breaching support at $1475 (options, 10/2 low) to reach $1474 – its low since 10/1. 

 

Fed announces extension of overnight funding, purchase of short term Treasury bills, gold bounces to $1482

·        Later in the morning, news from the Fed that they will continue their overnight funding operations at least through January and will be buying $60B/month of T-bills/month beginning 10/15 to Q2 2020 to relieve pressure in ST funding lifted US stocks further (S&P +55 to 2993). 

·        The 10-year yield ticked down to 1.739%, and the DX moved back to 98.20. 

·        Gold got a lift from this news to $1482 – though Powell was adamant it was not QE – as some market participants couldn’t help but see it as such. 

 

Gold improves to $1485 on announcement that the US will send additional forces to Saudi Arabia

·        Near mid-day, US stocks pared gains (S&P +40 to 2978) as Trump announced the US would send an additional 1800 troops and missile defense systems to Saudi Arabia as tensions increase with Iran

·        The 10-year bond yield hovered around 1.75%, and the DX was either side of 98.30. 

·        Gold continued its rebound, and traded up to $1486. 

 

Futures volume and open interest

·        Open interest was off 5.2k contracts, showing a net of long liquidation from yesterday’s decline. 

·        Volume was much higher with 431k 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 to comments later today by the Fed’s Rosengren and Kaplan, this afternoon’s Commitment of Traders Report, and reports Monday on China’s New Yuan Loans, Aggregate Financing, and Trade Balance for near term direction.  

  

YTD Performance




12/31/2018
10/11/2019
Change
% Change
Gold




1282.5
1485
202.5
15.789%
DX




96.06
98.25
2.19
2.280%
S&P




2505
2978
473
18.882%
JYN




109.63
108.43
-1.2
-1.095%
Euro




1.1466
1.105
-0.0416
-3.628%
US 10-year bond yield




2.69%
1.740%
-0.0095
-35.220%
Oil (WTI)




45.45
54.33
8.88
19.538%
 
 
 
 
 
 
 
 

























Resistance levels: 

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

$1492 – 10/10 low

$1500 – psychological level, options

$1500 – 10/9 low

$1501 – 20-day moving average

$1504 – 10/11 high

$1507– 50-day moving average

$1508 - 40-day moving average

$1509- double top - 10/7 and 10/8 highs

$1515-17 – triple top – 10/4, 10/9 and 10/10 highs

$1518 – down trendline from 9/4 $1557 high

$1520 – 10/3 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:

$1475 – 10/2 low

$1474 – 10/11 low

$1472 – 8/7 low

1465 – 9/30 low

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

$1450 – options

$1445 – 100-day moving average

$1438 – 8/5 low