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Gold Buyers Active in the Dips

26 March 2021


Gold spent the week in a downward trend, testing the U$1720-25 level regularly, mainly as the Dollar Index strengthened. Gold felt as if buyers were active on dips, however as the price neared the top of the trend channel, selling emerged and recent arrivals on the long side exited quickly.

Bonds remain in their bearish trend, however yields softened this week, partly as 10 year yields peaked at 1.74 pct, almost a 50 percent retracement of the move from the November 2018 high to the March 2020 lows, and partly in response to Fed Chair Jerome Powell’s assurances that the Fed would continue policies that are supportive of the economy until the recovery is almost ‘all but assured.’
 
Positioning showed a small inflow into Managed Money gold longs and a significant reduction of Managed Money shorts (-11 percent) as the rising prices of the week ending the 18th forced shorts to cover. Open Interest has increased slightly since last Friday, with OI in the gold contract peaking on Tuesday the 23rd, which suggests that some fresh buying came in early in the week and then reduced, making a tentative judgement basis recent price action.
The decline in ETF length continues, with ETFs declining about 627,000 Tozs (c. 20 mt) over the last week. That is a 221 mt reduction in ETF holdings since 2021 maximum on January the 12th. That compares with an outflow of 115 mt over the period 12th January to the 16th of March, or 316 mt in total over the same span of time.  
Tonight’s Core CPE and Revised UMich numbers will be closely watched. The Core CPE is expected to be 0.1 percent and UMich consumer sentiment is expected at 83.60.

Prices and key supports / Resistances

Key support at US$1670-1690. Interim support at US$1723 and US$1708.  Resistance at the Daily Ichimoku Standard line at US$1746, and the Weekly Cloud base at US$1760.

Silver

The price weakened this week after closing below trend line support. The price drop rejected the US$24.41 level sharply. There is stronger support at the top of the Weekly Cloud, which currently lies at US$23.91.
  
Positioning

Silver Managed Money longs sold about 0.25 million in the week ending Tuesday the 16th of March. Shorts added by selling around 8.415 million, taking their position to 153 million, the shortest the shorts have been since January 2020. (This is not a significant short, as the average short over the last 250 periods (roughly 5 years) is 180 million, and the maximum over the last 500 reports was 522 million.
Since the 16th of March Open interest initially increased by about 2,000 lots, or 10 million Tozs, which looked like fresh buying at the time, and then declined by 2,566 lots (12.83 million Tozs) which looks like further long liquidation judging by the decline in silver prices over that period.
Silver ETFs declined to 928.40 million by the 25th of March, a decline of around 8 million Tozs since Friday the 19th.
 
The Australian Dollar
 
The AUD continues its decline after rejecting recent highs. The positive impact from dividend season appears to have faded out, and with reports that the RBA is looking to continue with another A$100 billion of QE by October of this year. The positive uptrend is still intact based on the growth narrative in 2021 and the AUD has a history of ‘outperformance’ when global economic conditions are recovering. However the actual price activity (see chart) suggests some serious work has to be done by the Aussie over the next two months to determine whether the currency forges ahead.

Gold Weekly 

Gold cycles up until trend channel resistance and the Daily standard line intervenes to cap the recovery.




Silver Weekly 




AUD

The AUD: a recent rejection of recent highs carries on. Support at 0.75. Looked at on a monthly basis the February candle hit the top of the Monthly Ichimoku cloud and formed an ‘inverted hammer’ which suggests a trend reversal. Look to where the AUD closes in March…