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Monthly Technical and Precious Metals Positioning Report - Gold - January 2019

24 January 2019

Gold – In Brief

 
One consequence of the US government shut-down is that the CFTC reports that I so love to bore on about have been suspended, so you can avoid that at least for this month.

Gold has experienced a sharp rally that has become mired in technical resistance at the Weekly Cloud and the 61.80% retracement of the April-August down move.

Although recent data and commentary around slow global growth are friendly to gold, the US is still the ‘global high yielder’ of choice so that tends to favour the US Dollar and thwart gold’s progress, after the initial take-off that focussed largely on a slowing Fed.

Right now, there is a ‘wait and see’ feel to gold which helps keep gold trading in a range, and range-trading appears to be assisted by gamma trading on options around the US$1,300 strike.
Gold commentary and charts begin on page 7 after a quick graphical overview of DXY, SPX and AUD. 
 
 
Equities – The SPX

December 18th report: “Rallies capped at 2,820, with downside targets to 2,555-2,570, and on to 2,300?”

After making a low of 2,334-35 the SPX is back up to the weekly cloud and looks like trading to 2,696-2,730 before hitting resistance at the 61.80% retracement of the October-December downswing, the top of the weekly cloud and turning lower again.
 
Equities – The SPX
 
 
The Dollar – DXY

The Dollar Index has looks like moving down towards the Weekly Cloud support that rises from 93.20 towards 94.16 between now and the 7th of February (this is after the rally stopped just below the 61.80% retracement of the big January 2017- February 2018 move) within a 94-97 range.

In the short-term upside resistance lies around the 96.37-96.54 band. The overall trend remains positive.
 
The Dollar – DXY
 
The AUD

The AUD looks like trading towards 0.739… but will start to intersect with the Weekly Cloud base and face resistance from that. The upside target from the reasonably reliable hourly chart points to 0.8009 but that seems unlikely anytime soon.
 
 
AUD Weekly Cloud
 
AUD Weekly Cloud 

The Inflation-linked Bond Yield

The yield on the inflation-linked bond has declined further since mid-December, which is positive for gold.
 
The Inflation-linked Bond Yield
 

Gold Positioning and Outlook

 
See my opening comment above. However, some comments can be made. Total open interest has increased by 9.76 million FTozs since the 18th of December, rising to 510,097 lots a month later by Thursday the 17th of January, which implies a very substantial inflow of fresh longs into the futures market when looking at the US$60 or that gold rallied up to in the beginning of January, considering that the same time, Managed Money shorts as of the 18th of December where still running at 8.96 million FTozs, easily twice their long run average, and despite a lack of data, one can imagine that some of those shorts were reduced, which has the effect of decreasing open interest.

Some of that increase in open interest has come since the price highs, suggesting that shorts are growing in size as well in the last week or two.

Recent VWAP is as follows:

VWAP for weeks ending:
January 22nd  US$1,287.58
January 15th   US$1,290.14
January 8th      US$1,288.70
January 1st     US$1,278.22
December 25th  US$1,258.63
December 18th US$1,247.82
           

Gold ETFs


Total gold ETFs are 72,360,616 FTozs as at December 14th, an increase of 2.78 million Troy Ounces since the figure reported in the December note.
 

Managed Money Gold Long and Short Positioning on the CME


Will be re-populated in due course.
 

Ratio of Managed Money Gold Shorts to Long Term Average

Will be re-populated in due course.
 

Weekly Ichimoku Cloud Chart


The Weekly Chart shows gold’s tremendous run into the new year. The price has become entangled in the Weekly Cloud and the 61.80 % Fibonaccci retracement of the April-August downswing at US$1,287.00. Although the price closed above that level for the week ending the 11th of January, the price has faded since and it still appears resistive.

Ichimoku Cloud Chart
 
 

Daily Ichimoku Cloud Chart


The daily chart remains bullish, with the price, the standard and the turning lines all above the daily cloud. The price has rolled back away from the 61.80% Fibonacci retracement of the June-August down-move but remains in an upwards-trending channel. Support lies at the Daily Standard Line which currently lies at US$1,270.70.
 
Daily Ichimoku Cloud Chart
 

Price Targets via Point and Figure – Short Term


After reaching a succession of higher targets, the market is now trading narrowly, and the recent rather marginal declines have started to generate some deeper downside targets. Although the recent surge in prices makes it harder to envisage a dip towards lower prices, if the spot price doesn’t get above US$1302-03, then the price may slip towards US$1239.

Overall, the sentiment is positive however.

Price Targets via Point and Figure
 

Gold Hourly Point and Figure – Medium Term

Still bullish but the upside targets are muted.
  
Where To From Here?
 
Resistance   US$1365 April 2018 high
  US$1285 Weekly Cloud Top
Supports    US$1270    Daily Standard Line / Trend line support
  US$1254   Weekly Turning Line
  US$1229   Weekly Standard Line
  US$1183   Recent lows
Targets    US$1334 Short term Point and Figure
  US$1306   
  US$1268   
  US$1240  


Summary – the Likely Outcome for gold


Gold has done so much – and has so much to do.

Bullish markets ‘climb a wall of worry’ as someone once told me, and this feels no different. A solid close above the Weekly Cloud top will or would feel so different. Meanwhile, a move lower may be perceived as the dip to buy, without questioning the recent resurgence in gold’s favour. It would take a sustained move below US$1239 to question the recent rally. Above that level, the trend is still positive within the Daily Ichimoku cloud.


Nicholas Frappell
Global General Manager
Nick

Disclaimer
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. to date is retreating.