Overnight Activity:
Gold retained a nervous and choppy tone last night but traded directionally lower in a range of $2312 – $2331. It rose to its $2331 high during Asian time, but was unable to take out yesterday’s $2334 high. The yellow metal faded a slightly softer US dollar (DX from 105.70 – 105.64), which was pressed by early yen strength (154.85 – 154.74). Gold softened during European time and took out support at $2320-29 (4/10, 4/11 lows, 4/22 lows, options) reach its $2312 low as the dollar rebounded (DX to 105.94). The greenback was aided by:
- Pullback in the yen (154.96, fresh 34-yr low)
- BOJ has signaled they’re in no rush to hike rates (they meet Fri)
- With US on hold, no rapid narrowing in US / Japan int rate differentials, with currency traders poised to probe 155yen/dollar level
- Early euro strength ($1.0638 – $1.0696) from a stronger German Ifo Business Climate Reading (89.4 vs exp 88.9, 87.9 last) reverses to reach $1.0653
- ECB’s Nagel: while concerned about stubborn inflation, he still gave a nod toward a June ECB rate cut
A move back up in US bond yields after yesterday’s pullback also weighed on gold with the US 2yr from 4.905% – 4.952%, and the US 10yr from 4.599% – 4.653%. Stronger equities were an additional headwind for gold, with S&P futures up 16 to 5122. Gains in Tesla (lousy quarter, but plans to produce affordable EV), Boeing (narrower than exp loss), Biogen (earnings beat), TI (earnings beat), and Visa (earnings beat) led the advance.
NY Time
Gold retained a nervous and choppy tone last night but traded directionally lower in a range of $2312 – $2331. It rose to its $2331 high during Asian time, but was unable to take out yesterday’s $2334 high. The yellow metal faded a slightly softer US dollar (DX from 105.70 – 105.64), which was pressed by early yen strength (154.85 – 154.74). Gold softened during European time and took out support at $2320-29 (4/10, 4/11 lows, 4/22 lows, options) reach its $2312 low as the dollar rebounded (DX to 105.94). The greenback was aided by:
- Pullback in the yen (154.96, fresh 34-yr low)
- BOJ has signaled they’re in no rush to hike rates (they meet Fri)
- With US on hold, no rapid narrowing in US / Japan int rate differentials, with currency traders poised to probe 155yen/dollar level
- Early euro strength ($1.0638 – $1.0696) from a stronger German Ifo Business Climate Reading (89.4 vs exp 88.9, 87.9 last) reverses to reach $1.0653
- ECB’s Nagel: while concerned about stubborn inflation, he still gave a nod toward a June ECB rate cut
A move back up in US bond yields after yesterday’s pullback also weighed on gold with the US 2yr from 4.905% – 4.952%, and the US 10yr from 4.599% – 4.653%. Stronger equities were an additional headwind for gold, with S&P futures up 16 to 5122. Gains in Tesla (lousy quarter, but plans to produce affordable EV), Boeing (narrower than exp loss), Biogen (earnings beat), TI (earnings beat), and Visa (earnings beat) led the advance.
Technicals
Support:
$2312 (4/24 low), $2300-03 (4/8 low, options), $2292 (4/23 low), $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:
$2320-29 (former support: 4/10, 4/11 lows, 4/22 lows, options), $2334-47 (4/23, 4/24 highs), $2350 (options), $2375 (options), $2389 (4/22 high), $2393-2400 (4/16, 4/17, 4/18 highs, options), $2418-25 (4/19 high, options), $2432 (4/12 ATH)
Overbought Condition Finally Wanes:
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 the 4/12 blow off top price action (rally to ATH $2432 was followed by a $100 pullback), the market surged back to flirt with $2400 through last Friday, remaining overbought (72). From 3/1-4/19, the 14-day RSI was only below 70 for a scant 6 sessions, underscoring the market’s relentless (but perhaps irrational?) strength. The sharp pullback seen over the past three sessions knocked the RSI down to 56, a level it hasn’t seen since 2/29.
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 last Wed, 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%), but today’s softer PMI data brought a rate cut in July (47.7%) back into play. Additionally, markets also reduced their expectation of cuts from 3 to 2 for the remainder of the year.
FF Probabilities:
May: 4.0% 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: 69.5% prob of cut to 5% or lower
Nov: 35.3% prob of cut to 4.75% or lower
Dec ’24: 53.8% prob of a cut to 4.75%, or lower, only 20.1% 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 4/16 showed the large funds cutting 1.0k contracts of longs and reducing 0.5k contracts of shorts to lower the Net Fund Long Position by just 0.5k contracts to 201.9k contracts. This was done on gold’s advance rally from $2352 on 4/9 – $2383 on 4/16. At 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 825-33 tonnes (833 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:
Q1 Earnings Season – 40% of S&P announce this week
Fed quiet period ahead of 5/1 FOMC Meeting
Thurs: Japan’s Leading Index, Coincident Index, German GfK Consumer Confidence, US Q1GDP, Jobless Claims, Wholesale Inventories, Pending Home Sales, KC Fed Index
Fri: Japan’s BOJ Interest Rate Decision, US PCE, Personal Income, Personal Spending, University of Michigan Consumer Sentiment, COT
Gold 4/24/24
by Jim Pogoda
Senior Trader / Analyst
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