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​Monthly Technical and Precious Metals Positioning Report - Gold - April 2019

24 April 2019

Gold – In Brief  

Late March and early April turned to be bearish with gold unable to challenge the closing levels of March and April of 2018, followed by a rapid break-down in the price, as fund flows left gold and US equities continued to climb. Gold experienced an almost 13% drop in Managed Money length on the CME, with markets viewing recent data as much more positive for the world economy and with greater confidence around US-China trade talks.

Ending the ‘sanctions waiver’ on Iran risks higher crude prices, but for how long? If higher prices persist, a slight drag will be imposed on the global economy.

Chinese data certainly looks good with a strong rebound on Caixin Manufacturing PMI, from 48.30 in January to an expansionary 50.80 in March, rising home prices and decent Non-Farms on the 5th of April. However as my former colleague John Kemp points out, US manufacturing activity lost momentum “on every real-time metric” in the final quarter of 2018 and early 2019, using examples of container traffic via Long Beach, down -7% compared with Jan-March 2018, and a 2% decline in rail freight in the first quarter.

Real yields dipped to a low of 0.55% basis the 2028 US Treasury inflation-adjusted before rising to 0.67% by the 10th of April.

Quick Overview of Managed Money Positioning in Gold

Longs have exited by 3.918 million since the 26th of March. Managed Money shorts have ramped up by 3.42 million FTozs, with almost all of that selling taking place between the 9th and the 16th. Since the 16th, open interest has declined by another 449,000 FTozs or so.

See section ‘Gold Positioning and Outlook’ for weighted average prices.
Gold - In Brief
Weekly Ichimoku Cloud Chart

The weekly chart remains bullish despite the recent aggressive falls, with the price above the weekly cloud top, above the weekly Standard line and the trend line extending back to August 2018. So far, the Weekly Standard line (US$1271.57) has been supportive. The cloud top at US$1264 is important support.
Weekly Ichimoku Cloud ChartSource: ABC Bullion, Updata, Bloomberg

Daily Ichimoku Cloud Chart

The Daily Cloud Chart IS bearish although the proximity of the blue lagging span to the base of the Cloud suggests the possibility of some support. Resistance lies at US$1290 and US$1298 from the daily turning and standard lines respectively, before Cloud base resistance hits at US$1305.
Daily Ichimoku Cloud ChartSource: ABC Bullion, Updata, Bloomberg 
Price Targets Via Point and Figure – Short Term
 Price Targets Via Point and Figure – Short TermSource: ABC Bullion, Updata, Bloomberg
The Inflation-linked Bond Yield

The yield on the inflation-linked bond declined to a recent low of 0.55% at the very end of March before turning higher during April.

The level is still positive for gold.
The Inflation-linked Bond Yield
Gold Positioning and Outlook

Managed money longs declined from the recent high of 13.537 million FTozs as of the 26th March, shedding 3.918 million FTozs by the 16th of April.

Managed money shorts increased from 7.739 million FTozs on the 26th March to 11.158 million FTozs on the 16th April.

The sudden increase in shorts in the week 9-16th April at a VWAP of US$1,296.74 is notable.

Recent VWAP and position changes are as follows:
Equities – the SPX

All the talk is of a ‘melt-up’, with the former highs naturally a key level. 
Equities – the SPXSource: ABC Bullion, Updata, Bloomberg 
SPX Hourly Chart with targets

The price has rallied up to a major target (2,921) on the hourly chart, which usually suggests a swing lower before picking up direction again, however there are targets to 3,060 and 3,077.
SPXSource: ABC Bullion, Updata, Bloomberg

The Dollar – DXY

The Dollar Index continues to range. The 61.80% Fibonacci level (of the Jan 2017- Feb 2018 down move) continues to present a barrier. The market is bullish and the likely increase in political tensions arising from the ending of the Iran sanctions-waiver may favour the dollar overall, as the ending of the waivers places both the EU and Japan on the wrong side of a US dispute with Iran.
DXYSource: ABC Bullion, Updata, Bloomberg

The AUD recovered to 0.721. Resistance at 0.726 from the Weekly Cloud base. Short-term support at 0.7117. The AUD already weakening on US-Iran sanctions waiver news? Price action suggests a test of the Weekly Cloud resistance within a bearish environment.
The short to medium term allows for a mild recovery against longer term weakness. 
The AUDSource: ABC Bullion, Updata, Bloomberg  

AUD Weekly Cloud

Resistance lies at 0.726 from the Weekly Cloud base.
AUD Weekly CloudSource: ABC Bullion, Updata, Bloomberg
Gold Hourly Point and Figure – Medium Term

Turned bearish, these suggest a strong test of the Weekly Cloud top at US$1264. Deeper downside targets beckon, however the implied probability of sub-1200 prices being achieved is rather low at the moment, with sub-7% probabilities implied in the three month period.
Gold Hourly Point and Figure – Medium TermSource: ABC Bullion, Updata, Bloomberg 

Where To From Here?

The gold price has gone through a more significant decline – and more rapidly – than anticipated.

However, the price is trading bullishly on the weekly chart, and the outlook is not dramatically different in terms of expected monetary policy outlook.

Economic data points are still mixed, and market psychology seems to be fairly volatile around changing data. The recent US-Iran sanction waiver news is on balance gold positive.
Resistance    US$1365  April 2018 high
Supports  US$1263  Weekly Standard Line & Weekly Cloud top
Targets   US$1294   Medium-term Point and Figure
Targets   US$1260-1264  Medium term Point and Figure  
(Downside)     US$1252 Short term Point and Figure
  US$1243  Medium-term Point and Figure     
 Nick Frappell Signature 
The information contained herein is based on data obtained from sources believed by ABC Bullion to be reliable. However, such information has not been verified by, ABC Bullion, and ABC Bullion does not make any representations or take any responsibility as to its accuracy. Any statements of a non-factual nature constitute only current opinions, which are subject to change without notice. ABC Bullion (and/or its affiliates) may have positions in commodities referred to herein, and may hereafter liquidate such positions. Neither the information in this report, nor any opinion expressed, shall be construed to be, or constitute, a recommendation or an offer to buy or sell, or a solicitation of an offer to buy or sell, any commodities or other financial products mentioned herein.