Gold Traders’ Report - September 10, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
SEP 10, 2019

  • Gold’s retracement continues to $1487 against rising bond yields
     
    Overnight – gold declines to 1-month low of $1487 in choppy trading
  • ·        Gold continued to soften last night, trading lower in a range of $1487 - $1500, still retaining its nervous and choppy tone of a market near multi-year highs
  • ·        Fell to its $1487 low (1-month low) during early Asian hours, tripping long liquidating sell stops under support at $1493-4 (5 bottoms 8/14, 8/19, 8/20, 8/22, 8/23 lows). 
  • ·        The move was against an early rise in S&P futures (+7 to 2985), and a further climb in the US 10-year bond yield (1.656%, 3-week high). 
  • ·        Gold rallied back during early European hours, as S&P futures retreated (-12 to 2965) and the US 10-year yield dipped back to 1.62% following the release of a weaker reading on China’s PPI (off 0.8%, weakest in 3-years, trade war with US weighing on demand for factory products), and China’s People’s Daily slamming US Trade Advisor Navarro’s comments from Sunday on China’s “7 trade sins” as unconstructive lies that hinder progress of trade talks.  
  • ·        A weaker dollar also helped gold rebound (DX from 98.40 - 98.26), as the greenback was pressured from strength in the pound ($1.2340 - $1.2379) over growing optimism over a softer Brexit (PM Johnson lost vote on early election) and strong UK employment data and the euro ($1.1039 - $1.1059) after German Finance Minister Scholz confirmed German will have a balanced budget in 2020 with no new debt. 
  • ·        However, gold slid back to $1489 ahead of the NY open, fading a move up in S&P futures (2977 unchanged) and the US 10-year yield to 1.654%.  Gold was also pressured by a rebound in the DX (98.47), which shrugged off a slight miss in the US NFIB Small Business Optimism Index (103.1 vs. exp. 103.5).
  • ·        US stocks opened softer (-20 to 2958), hurt by a miss in the JOLTS Job Openings Report (7217 vs. exp. 7331), a decline in tech shares and a credit downgrade of Ford by Moody’s. 
  • ·        Gains in the energy sector fueled by an extended rally in oil (WTI to $58.73) on continued optimism that the new Saudi energy minister Abdulaziz will encourage producers to extend and enforce output cuts to support prices.  
  • ·        The US 10-year yield probed higher, however (1.664%), along with other global yields (Germany’s 10-year to -0.543%, 1-month high, UK 10-year to 0.639%, 6-week high). 
  • ·        The DX was caught in the cross currents but traded lower to 98.34
  • ·        Gold rallied - took out its overnight high to reach $1501. 
  • ·        Later in the morning and into mid-day, US equities had a modest bounce (S&P-8 to 2970), helped by a report that China offered to buy more US agricultural goods in exchange for a delay in a series of US tariffs and a tweet from Trump that he fired hawkish National Security Advisor John Bolton. 
  • ·        Oil tumbled (WTI to $57.27, fears of conflict in the Middle East eased), and limited the rebound in equities.
  • ·        The US 10-year yield climbed further to 1.683%, and the DX –which had dipped further to 98.27 – bounced to 98.36. 
  • ·        Gold softened, but found support at $1489.50, ahead of last night’s low. 
  • ·        Later in the afternoon, US stocks rallied back to just over unchanged (S&P +1 to 2979), helped by a gain in Apple (unveiled new products / subscription service)
  • ·        The US 10-year yield reached 1.73%  - a whopping 27bp over its $1.429 9/3 low just a week ago
  • ·        The DX ticked up to 98.40, and gold slid back to its overnight low at $1487 where bargain hunting buying held once again. 
  • ·        Gold was $1487 bid at 4PM with a loss of $11. 
  • ·        Open interest was up 0.7k contracts, showing a modest net of new bargain hunting longs and some new shorts just outpacing the long liquidation and profit taking from shorts during yesterday’s decline. 
  • ·        Volume was much lower but still very healthy with 336k contracts trading
  • ·        Disappointed with gold’s $11 decline today, despite unchanged US stocks and a stable US dollar
  • ·        Not thrilled that support at  $1493-4 – 5 (bottoms 8/14, 8/19, 8/20, 8/22, 8/23 lows) failed to hold
  • ·        Concerned that gold has made 4 consecutive lower lows and lower highs, dropping $70 and probing 1-month lows 
  • ·        Despite today’s pullback, bulls remain pleased with the strength and consistency of bargain hunting buying on price declines, which has limited the degree of the price corrections in this 4-month old rally. 
  • ·        Remain ecstatic with gold’s sharp advance that has extended to $275 (22.1%) from the $1275 low on May 30 to the $1557 6-year high on 9/4 that has brought in momentum following players.  
  • ·        Encouraged with the steady and significant purchases by global central banks
  • ·        Benefitted from the recent escalation of the ongoing trade war between the US and China that led to both sides increasing tariffs recently along with increasing tough rhetoric, including the recent exchange between Navarro and the China’s People’s Daily
  • ·        Despite the recent agreement between the US and China Wednesday to meet next month, bulls feel that this issue won’t be solved anytime soon, and instead expect further escalation to ensue.  They feel this will add to further uncertainty, and increase the probability of a more severe global economic slowdown
  • ·        Powell’s dovish tone recently at Jackson Hole (though tempered Friday with his upbeat economic assessment) will only increase chances the Fed (and other central banks) 

 

Looking ahead

All markets will continue to focus on geopolitical events (especially Brexit news and US / UK - Iran tensions, Hong Kong protests), developments with the Trump Administration (especially on US-China trade, potential legal issues), oil prices, and will turn to reports tomorrow on China’s Foreign Direct Investment and New Yuan Loans, US PPI, Wholesale Trade Sales, Wholesale Inventories and Oil Inventories for near term direction. 

 

In the news:

Citigroup says cuts in Fed rates, global recession risks could propel gold above $2000: https://www.scmp.com/print/business/money/wealth/article/3026521/citigroup-says-cuts-fed-rates-global-recession-risks-could

Gold trading volumes continue to rise:   https://www.gold.org/goldhub/gold-focus/2019/09/gold-trading-volumes-continue-rise

BlackRock Gold ETF assets jump to record: https://www.bnnbloomberg.ca/blackrock-gold-etf-assets-jump-to-record-in-bet-on-metal-s-rally-1.1313545

 HANetf and The Royal Mint sign agreement to develop gold ETC:   https://www.etfworld.co.uk/hanetf-the-royal-mint-sign-historic-agreement-to-develop-gold-etc/

  

YTD Performance


12/31/2018

9/10/2019

Change
% Change
Gold


1282.5

1487

204.5

15.945%

DX


96.06

98.40

2.34

2.436%

S&P


2505

2979

474

18.922%

JYN


109.63

107.53

-2.1

-1.916%

Euro


1.1466

1.1042

-0.0424

-3.698%

US 10-year bond yield


2.69%

1.730%

-0.0096

-35.592%

Oil (WTI)


45.45

57.51

12.06

26.535%

 

Resistance levels: 

$1493-4 – 5 bottoms 8/14, 8/19, 8/20, 8/22, 8/23 lows

$1498 – 9/9 low

$1500 – psychological level, options

$1501 – 9/10 high

$1503 – 9/6 low

$1506 – 9/5 low

$1515 – 9/9 high

$1519 – 20-day moving average

$1517-20 (triple bottom – 8/29, 8/30 and 9/2 lows, 20-day moving average)

$1528 – 9/6 high

$1525 – options

$1535 – 8/13 high

$1549 - $1550 –triple top - 8/26, 8/29, and 9/3 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:

$1487 – 9/10 low

$1484 - 40-day moving average

$1480 – 8/13 low

$1479 – up trendline from 5/30 $1275 low

$1472 – 8/7 low

$1476 – up trendline from 5/30 $1275 low

$1457 – 8/6 low

$1469 – 50-day moving average

$1450 – options

$1438 – 8/5 low