Gold Market Report – April 17, 2024

Last Night’s Activity

Gold remained choppy overnight as it traded between $2373 – $2395.  It slipped to its $2373 low during Asian and early European hours against a firmer US dollar (DX from 106.26 – 106.44).  The dollar was helped by Powell’s hawkishness yesterday continuing to resonate – which some analysts described as another pivot.  The DX was able to advance despite a slightly firmer yen (154.71 – 154.60).  The yen was helped by:

  • Better Japanese Balance of Trade (366.5B vs -377.8B last) swinging to a surplus
  • Which overcame a miss on the Tankan Index (9 vs 10 last).

Later during European time, gold surged to its $2395 high, but it failed in front of resistance at $2398-00 (yesterday’s high, options).  The move was helped by a pullback in the DX (106.07).  The greenback was weighed by:

  • Stronger pound ($1.2417 – $1.2481)
  • Higher UK Inflation YoY (3.2% vs exp 3.1%, 3.4% last)
  • Higher UK Core Inflation YoY (4.2% vs exp 4.1%, 4.5% last)
  • Firmer euro ($1.0606 – $1.0650)
  • Eurozone Core Inflation YoY (final) unch (2.9% vs exp 2.9%, 3.1% last)
  • Lack of decline takes heat off exp for ECB to begin cutting rates in June

A small pullback from the recent firming in bond yields was also gold supportive, with the US 2yr from 4.964% – 4.951%, and the US 10yr from 4.66% – 4.636%.  Firmer equities were a modest headwind for hold however, with S&P futures up 24 to 5117.  Stocks were helped by gains in United Air (reported smaller than exp loss), Eli Lilly (Zepbound shows potential vs sleep apnea), and Alcoa (Biden Admin proposes tripling tariff rate on Chinese imports to 25%). 

Geopolitical tensions continued to be a bullish factor for gold:

  • Russia launched missile attack on Ukrainian city of Chernihiv
  • Russia testing new military equipment, including robotic vehicles
  • Ukrainian media company 1+1 reportedly attacked, suspending broadcasts
  • Iranian President Raisi warns of “massive and harsh” response if Israel launches the “tiniest invasion”
  • Israel continues to weigh potential responses to Iran’s attack last Saturday
  • Netanyahu says Israel will make its own decisions on responding to Iran
  • Hezbollah and the IDF exchange attacks across the Lebanese border
  • US to impose new sanctions on Iran, including its missile and drone program

NY Time

A lack of US Economic reports and FedSpeak today left markets without ST drivers.  A further decline in US bond yields into mid-day (US 1yr down to 4.924%, US 10yr down to 4.584%) was unable provide a lift for stocks.  The S&P turned negative by late morning, and was off 35 to 5016.  Losses in IT (2.5% drop in Street’s darling, Nvidia)  Energy, Consumer Discretionary, and Industrials led the decline.  A drop in oil (WTI off $2.80 to $82.56, some of the Israel-Iran war premium unwinds, larger than expected build in US oil inventories reported by EIA) weighed on the Energy Sector.  The DX churned sideways in a range of 106.10 – 106.25, and held support ahead of yesterday’s 106.07 low.  Gold softened, with the war premium / overbought conditions weighing, and slipped to $2361, with yesterday’s $2363 low essentially holding.  However, as we’ve witnessed time and again recently, dip buying emerged to take the market back up to either side of $2370.  Markets will await the Fed’s Beige Book at 2PM.


Technicals

Support:

$2361-63 (4/16-4/17 lows), $2350 (options), $2320-26 (4/10, 4/11 lows, options), $2300-03 (4/8 low, options), $2266-67(4/3, 4/5 lows), $2247-50 (4/2 low, options), $2208 (50% retracement of up move from 2/14 $1984 low to 4/12 $2432 ATH),  $2229 (4/1 low), $2187 (3/28 low), $2174-75 (3/27 low, options, $2157-68 (3/22, 3/25, 3/26 lows, $2146-50 (3/18, 3/19, 3/20 lows)

Resistance:

$2375-78 (4/11, 4/15 highs, options), $2395-2400 (4/16, 4/17 highs, options), $2432 (4/12 ATH)

Remains Overbought:

After rallying $211 (10.6%) from its 2/14 $1984 low to $2195 on 3/8, and $160 from 2/28-3/8, gold’s 14-day RSI shot to a white hot 85 – a level it hasn’t seen since March 2022 (Russian invasion).  After a pullback over the subsequent 7 sessions to the 67 –  70 level, it surged back up to an overbought 75 on the rally to the $2222.  After another dip to $2157 on 3/22, the market surged $275 to a fresh ATH at $2432 by putting in 13/14 sessions of new highs.  This took the14-day RSI back to the white hot overbought level of 85.  Despite Friday’s blow off top price action (rally to ATH $2432 was followed by a $100 pullback), the market put in two consecutive gains followed by today’s modest decline and leaves its RSI still overbought at 72.

FedWatch:

Recent stronger US Economic Data, including the most recent robust US Payroll Report, hotter CPI, and stronger Retail Sales have combined with a generally more hawkish narrative from recent Fed Speakers, including Chair Powell today, to push back on the rapid and deep rate cut narrative that was prevalent just a couple of months ago. 

The door is essentially shut on the Fed beginning to cut rates in June (prob down to under 20%), and July (46%), and now expect them to begin in Sep (71.3%).  Additionally, markets also reduced their expectation of cuts from 3 to 2 for the remainder of the year.

FF Probabilities:

May: 4% prob of cut to 5% or below

June: 16.9% prob of cut to 5% or below

July: 44.4% chance of cut to 5% or below

Sep:  71.1% prob of cut to 5% or lower

Nov: 37.4% prob of cut to 4.75% or lower

Dec ’24: 57.9% prob of a cut to 4.75%, or lower, only 22.9% chance of a cut to 4.5% or lower, reflecting expectations of only two 25bp cuts by yr end. 

This compares to the most recent FOMC Dot Plot where 10 members are looking for 3 cuts to 4.5%, and 9 members are expecting 2 25bp cuts to 4.75%


Market Positioning

Last Friday’s CFTC’s COT Report as of 4/9 showed the large funds trimming 1.6k contracts of longs and adding 3.2k contracts of shorts to surprisingly reduce the Net Fund Long Position by 4.8k contracts to 202.4k contracts.  This was done on gold’s sharp rally from $2280 on 4/2 – $2352 on 4/9.  Since then, this position is out at least 10-15k contracts on gold’s rally to $2432.  At well over 200k contracts, this position is significantly large, and will be a significant  bearish factor going forward.

GLD holdings:

After reaching 883 tonnes on 11/17/23, holdings became surprisingly steady / lower, sliding to just 815 tonnes on 3/12 – its lowest level since July 2019.  This is despite gold’s $200+ move ($1980 – $2080) during that period.  Though gold has rallied another $350+ since then, GLD holdings have only increased by around 15 tonnes to 825-30 tonnes (830 tonnes last).  This continues to reflect a fair amount of profit taking from GLD longs into the rally, along with some diversification of AI assets into bitcoin ETFs (Bitcoin continues to surge, trading either side of  $70k). This level for GLD holdings remains toward the lower end of the 730 tonne low in mid-2018, and 1350 tonne high from 12/2012, and can be viewed as a modest bullish factor going fwd.


Reports / Events

Today: US Fed’s Beige Book, Net LT TIC Flows

Thurs: Eurozone Construction Output, US Jobless Claims, Philly Fed, Existing Home Sales

Fri: Japan’s Inflation, Tertiary Industry Index, UK Retail Sales, COT


Gold 4/17/24

by Jim Pogoda

Senior Trader / Analyst


We hope you found this report informative and useful in understanding current market conditions. To check your holdings, activate auto-investment via MetalStream, or to start a new investment in physical gold or silver, log in to your account today.


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