Gold Traders’ Report - September 4, 2019

Jim Pogoda, Senior Gold Trader, Gold Bullion International 
SEP 4, 2019

  • Gold consolidates, then rallies to fresh 6-year highs
     
    Overnight – gold softens as geopolitical tensions ease
  • ·        Gold softened overnight, trading in a range of $1534 - $1550. 
  • ·        Ticked up to its $1550 high early during Asian time where resistance at the $1549 - $1550 triple top (8/26, 8/29, and 9/3 highs) capped the advance.
  • ·        Retreated during the rest of Asian and European hours down to its $1534 as geopolitical tensions in Hong Kong (Carrie Lamb withdrew the contentions extradition bill) and in the UK eased (UK opposition’s victory lessens chances of no-deal Brexit) – igniting strong rallies in global equities. 
  • ·        Hong Kong’s Hang Seng was up 3.9%, the NIKKEI was +0.2% ,the SCI gained 0.9% (stronger Chinese Caixin Services PMI supportive), European markets were up from 0.3% to 1.0%, and S&P futures were up 0.9%.  
  • ·        A rebound in global bond yields was also a headwind for gold (German 10-year up to -0.635% from yesterday’s -0.743% record low, UK 10-year up to 0.511% from yesterday’s 0.34% record low, US 10-year to 1.498% from yesterday’s 1.432% 3-year low).  
  • ·        Gold weakened despite a pullback in the US dollar (DX from 98.98 to 98.57) – which was pressured from strength in the pound ($1.2075 - $1.2219) from lessened chances of a no-deal Brexit, and the euro ($1.0965 - $1.1023) from stronger Eurozone Services PMIs and despite some dovish comments from the ECB’s Lagarde (prolonged period of ultra-easy policy is necessary given global challenges, weak growth, and uncomfortably low inflation) and Lane (scale of slack in Eurozone economy still extensive.  
  • ·        At 8:30 AM, the US Trade Balance was worse than expected (-$54.0B vs .exp. -$53.4B). 
  • ·        S&P futures came off of their highs (+21 to 2927) 
  • ·        US 10-year bond yield declined to 1.484%
  • ·        DX remained fairly steady, however, trading between 98.60 – 98.65 – with weakness from ongoing risk off in the yen (yen to 106.33) supporting.
  • ·        Gold climbed in response back to $1544, aided by some bargain hunting buying. 
  • ·        A little later in the morning, some dovish comments from the Fed’s Williams (low inflation is the problem of this era, remain vigilant to act as appropriate to support continuing growth, a strong labor market, and a sustained return to 2% inflation) and former Fed Chair Greenspan (only a matter of time before negative rates spread to the US) helped stabilize US stocks  - which had softened a bit on their open (S&P +14 to 2922).  
  • ·        The 10-year yield continued to decline to 1.466%, but remained above the 2-year yield (1.454%).
  • ·        The DX pulled back to 98.47
  • ·        gold extended its rebound to $1549 – however, resistance at the overnight high and triple top at $1549-50 held. 
  • ·        US stocks recovered to make intraday highs by mid-day (S&P +29 to 2935), with the advance led by the IT, Energy, Industrials, and Communication Services sectors. 
  • ·        A rally in oil (WTI to $56.19) aided the move. 
  • ·        The 10-year yield edged up to 1.472%
  • ·        DX ticked up to 98.55. 
  • ·        Gold retreated to $1544, but was met with bargain hunting bids that drove it back up to $1547. 
  • ·        Trump commented that the US didn’t want to discuss the blacklisting of China’s Huawei with China, saying it’s a national security concern. 
  • ·        US stocks pared some gains (S&P to 2935) and the US 10-year yield fell further to 1.454%
  • ·        The DX remained near its lows (98.47-50), and gold moved higher. 
  • ·        Gold broke through resistance at $1549-$1550, tripping some stops to reach $1557- a fresh 6-year high. 
  • ·         
  • ·        Open interest was up 24.9k contracts, reflecting a large chunk of new longs in from yesterday’s rally. 
  • ·        Volume exploded with 576k contracts trading. 
  •  

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 this afternoon’s Fed Beige Book along with comments this afternoon from the Fed’s Evans followed by reports tomorrow on Germany’s Factory Orders and Construction PMI, US Challenger Job Cuts, ADP Employment Change, Nonfarm Productivity, Unit Labor Costs, Jobless Claims, Markit Services PMI, Factory Orders, Durable Goods, and Oil Inventories for near term guidance. 

 

In the news: 

Private investors pile into gold: https://www.yourmoney.com/investing/private-investors-pile-into-gold/

Gold seen cracking $1600 – BNP:   https://www.bnnbloomberg.ca/gold-to-top-1-600-as-fed-cuts-rates-four-more-times-bnp-says-1.1310692

No summer holiday for central bank demand:   https://www.gold.org/goldhub/gold-focus/2019/09/no-summer-holiday-central-bank-demand

Gold speculators trimmed their bets slightly this week:   https://www.investing.com/analysis/gold-speculators-trimmed-their-bullish-bets-slightly-this-week-200460625

Jeff Christian on gold’s bull run:   http://www.cogencis.com/newssection/interview-us-president-is-golds-trump-card-says-cpm-group-head/

 

YTD Performance


12/31/2018

9/4/2019

Change
% Change
Gold


1282.5

1557

274.5

21.404%

DX


96.06

98.48

2.42

2.519%

S&P


2505

2931

426

17.006%

JYN


109.63

106.29

-3.34

-3.047%

Euro


1.1466

1.1026

-0.044

-3.837%

US 10-year bond yield


2.69%

1.452%

-0.0123

-45.942%

Oil (WTI)


45.45

56.45

11

24.202%

 

 

Resistance levels: 

$1591 – 4/7/13 high

$1600 – options

$1604 – 3/31/13 high

$1614 – 3/24/13 high

 

Support levels:

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

$1547 – 8/28 high

$1545 – 8/27 high

$1535 – 8/13 high

$1533 – 8/30 high

$1532 – 8/28 low

$1527 – 8/27 low

$1527 - 28 – double top - 8/15 and 8/16 highs

$1525 – 8/26 low

$1525 – options

$1522 – up trendline from 8/1 $1400 low

$1519 – 9/2 low

$1517 – 8/30 low

$1513 – 8/19 high

$1510– 20-day moving average

$1508 – double top - 8/20 and 8/21 highs

$1504 – 8/22 high

$1500 – options

$1497 – 8/21 low

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

$1480 – 8/13 low

$1472 – 8/7 low

$1465 - 40-day moving average

$1457 – 8/6 low

$1456 – up trendline from 5/30 $1275 low

$1454 – 50-day moving average

$1450 – options

$1438 – 8/5 low