Gold Traders’ Report - September 18, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
SEP 18, 2019

  • Gold edges higher ahead of FOMC
     
    Overnight – gold steady and either side of unchanged awaiting FOMC rate decision
  • ·        Gold was quietly steady overnight along with other financial markets trading either side of unchanged in a narrow range of $1499.60 - $1503.60, and awaiting the FOMC rate decision, statement, and press conference from Fed Chair Powell.  
  • ·        After edging up to its $1503.60 high during Asian time, the yellow metal retreated to its $1499.60 low during European time against an increase in the US dollar (DX from 98.19 – 98.50).
  • ·        The greenback was supported by declines in the pound ($1.2506 - $1.2438) on a lower reading on UK CPI and the euro ($1.1076 - $1.1035) from soft EU auto registrations and a miss on Eurozone CPI.
  • ·        Global equities were mixed (NIKKEI of f0.2%, the SCI up 0.3%, European markets were up from 0.1%-0.2%, and S&P futures were flat)
  • ·        But a decline in the US 10-year bond yield (1.817% to 1.765%) helped by a concern over the overnight repo market (Fed has trouble keeping the effective Fed Funds rate between 2-2.25%, forced to inject liquidity into the markets for the first time in 10-years) was gold supportive. 
  • ·        At 8:30 AM, reports on US Housing Starts (1.364M vs. exp. 1.250M) and Building Permits (1.419M vs. exp. 1.300M) were much stronger than anticipated
  • ·        But were overshadowed by a tweet from Trump saying he has instructed Treasury to substantially increase sanctions on Iran in response to the attacks on the Saudi oil facility. 
  • ·        S&P futures edged lower (-9 to 2999), with energy shares leading the decline as oil tumbled (WTI to $58.02, reduced fears of immediate military response)
  • ·        The US 10-year yield slipped to 1.763%, and the DX retreated to 98.33
  • ·        Gold took out its overnight high to reach $1506.50, where resistance from yesterday’s $1507 high held. 
  • ·        Later in the morning, the Saudis announced that the drones used in Saturday’s attack were Iranian Delta-wings and came from the north to the south (not from Yemen) – proving Iran was “unquestionably responsible”
  • ·        The S&P – which had briefly rallied back to 3001 – sank back to 2996, weighed also by a weaker earnings report and a cut in forward guidance by FedEX, with losses in the Industrials, Energy, and Communication Services sectors leading the decline.  
  • ·        The US 10-year yield kept slipping to reach 1.755% while the DX softened to 98.30. 
  • ·        Gold took out yesterday’s high to reach $1511, where resistance ahead of $1512 (Monday’s high) held.  
  • ·        Open interest was up 6.0k contracts, showing a net of new longs from yesterday’s advance. 
  • ·        Volume was slightly lower with 358k contracts trading.

 

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 issues), oil prices, and will turn to this afternoon’s FOMC statement and Powell Press Conference and reports tomorrow on Japan’s Rate Decision and All Industry Activity Index, UK Retail Sales, US Jobless Claims, Philly Fed, Existing Home Sales, and Leading Index for near term guidance.  

 

In the news:

Fed loses control of its own interest rate:   https://www.cnbc.com/2019/09/18/fed-loses-control-of-its-own-interest-rate-on-day-of-big-decision-this-just-doesnt-look-good.html

Gold firms above $1500 ahead of Fed decision:   https://uk.reuters.com/article/global-precious/precious-gold-holds-above-1500-eyes-fed-decision-idUKL3N26938L

Oil price jump highlights gold’s lower volatility:   https://www.gold.org/goldhub/gold-focus/2019/09/oil-price-jump-highlights-gold%E2%80%99s-lower-volatility

 

Resistance levels: 

$1511 – 9/18 high

$1512 – 9/16 high

$1515 – 9/9 high

$1516 – down trendline from 9/4 $1557 high

$1519 – 20-day moving average

$1524 – 9/12 high

$1525 – options

$1528 – 9/6 high

$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:

$1507 – 9/17 high

$1500 – psychological level, options

$1500 9/18 low

$1494-96 – double bottom – 9/16 and 9/17 lows

$1495 – up trendline from 5/30 $1275 low

$1491 - 40-day moving average

$1489 – double bottom - 9/12 and 9/13 lows

$1485 - 86 – triple bottom - 9/10, 9/11, and 9/13 lows

$1480 – 8/13 low

$1476 – 50-day moving average

$1472 – 8/7 low

$1457 – 8/6 low

$1450 – options

$1438 – 8/5 low