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

18 July 2019

Gold – In Brief


After breaking out of the rectangle pattern, gold quickly hit the expected target, overshooting by about 4-5 US$.

Subsequent to that move, gold is consolidating, but looks like resolving higher with targets shown in the report. Although the Non-Farm Payrolls were high at 224,000 on July 5th, average hourly earnings remained weak and the unemployment rate crept slightly higher (from the lows…) so there was no change to the expected rate cut in July.

However, it is worth asking whether ‘international concerns’ are sufficient to warrant an aggressive cutting stance when on the face of it, most things seem ‘alright’ domestically, if not downright good.

Robert S. Kaplan, President of the Dallas Fed points out that “Trade Uncertainties have helped to contribute to global growth deceleration…we are not immune to spill overs from decelerating global growth.”.

Charles Evans, President of the Chicago Fed, “on the basis of inflation alone, I could feel confident in arguing for a couple of rate cuts before the end of the year.”

Gold remains bullish.
 

Quick Overview of Managed Money Positioning in Gold

Longs have grown by 3.87 million since June the 11th, and shorts have reduced by 1.48 million, taking the total longs to 20.830 million by the 9th of July, with shorts down to 2.569 million. Net length, while not super-high, was last this high on the 6th of February 2018, almost 18 months ago. Shorts have more or less no where to go except to grow, given that on the 2nd July they reached the smallest position recorded since January 2018.

(See ‘ Gold Positioning and Volume-Weighted Average Pricing’ for weighted average prices and shifts in weekly holdings.)  
Gold Positioning and Volume-Weighted Average Pricing’  
Gold Positioning and Volume-Weighted Average Pricing

The recent VWAP and position changes are as follows: new length is fairly evenly balanced, with shorts being chased out heavily in the last two reporting periods.

Total open interest has increased by almost 2.90 million Tozs since the 11th of June at a VWAP of US$1,341.92, and considering the price action over that period, that looks like a substantial increase in longs, particularly on Friday. This suggests that unless the rally continues, there is potential for a large raft of stranded longs…                                                                             
Gold Positioning and Volume-Weighted Average PricingWeekly Ichimoku Cloud Chart

“…a break out of the ‘squarish-looking rectangle’ formation would create a measured target to US$1,432-35.” Gold reached US$1,439.20 before falling back sharply, and that level remains resistive. Support at US$1,372, then US$1,354.

Weekly Ichimoku Cloud Chart 
  
Daily Ichimoku Cloud Chart

The Daily Cloud chart is still bullish. Support around US$1,382, US$1,376, and then US$1,357. Is this turning into a ‘flag’? If it is, and the price breaks above the US$1,440 level, look for a move to US$1,600.
 
Daily Ichimoku Cloud Chart 
Price Targets via Point and Figure – Short Term

Bearish, (but not very…) suggesting a move back to US$1,395. That would still be consistent with the possible ‘flag’ pattern that seems to be taking shape now.
 
Price Targets via Point and Figure – Short Term
The Inflation-Linked Bond Yield

The yield on the inflation-linked bond has weakened to 0.32%, after dipping to 0.33% on the 28th of June just after the previous report - which is positive for gold.
 
The Inflation-Linked Bond Yield 

Gold-Silver Ratio

Something of a topic du jour… now that the 93 target has been reached and found resistive, where next? The relatively short-term chart below suggests 87. Really substantial barrier lies at the 82.75/83.00 level.
 Gold-Silver Ratio
Equities - the SPX

The index remains bullish, with support at 2,873 and 2,815. Interestingly, the period ending 9th July saw a sharp reduction in non-commercial shorts, and the period since has seen a rebound in open interest, with fresh shorts the most likely reason. 
 
Equities - the SPX 
SPX Hourly Chart with Targets

The short-to-medium outlook seems to show that the recent decline may have run its course for now.
 
SPX Hourly Chart with Targets 
The Dollar – DXY

The DXY weakened down to Weekly cloud top support, which worked extremely well, forming a slight ‘hammer’ and rebounding sharply. Although the dollar has strengthened, gold has been relatively less affected.
 
The Dollar – DXY  
The AUD

The Hourly chart is not providing much guidance at the moment – in the sense of providing granular targets. Price action suggests strengthening will continue in the short run, however the price is running into resistance at the Daily Cloud top, which lies at 0.7057.

After so much negative news, investors seem friendlier to the AUD, and since 25th June, a $1.23 billion reduction in the net managed money position, of which $1.10 billion was short-covering.
 
The AUD 
AUD Weekly Cloud

Bearish, with Weekly Standard line resistance at 0.7063. Cloud base resistance at 0.708. The price action suggests that the recent rally is respecting the long-term trend line.

AUD Weekly Cloud
Gold Hourly Point and Figure – Medium Term

The US$1,440 target was made. The subsequent decline created a bearish triangle which has been reversed out of.  The next targets are US$1,465 and US$1,475. Crucial support lies along the base of the recent triangle, below US$1,402.
 
Gold Hourly Point and Figure – Medium Term
Where to from Here?

Gold looks capable of testing the recent high. If that level is broken through, then the price is likely to converge on US$1,480.
 
Resistance  US$1439    June 2019 high
Supports     US$1390   Daily Turning Line
  US$1372   38.20 % Fibonacci retracement (August – June 2019 rally.)
  US$1354   Weekly Standard & Turning Line & 50 % retracement (Aug-June rally)
  US$1332   61.80 % Fibonacci retracement
Targets       US$1635 Long term (Daily) Point and Figure  (1 in 10 probability in 3 months at spot US$1422)
  US$1590  Long term (Daily) Point and Figure (Market pricing in 0.13 probability in 3 months at spot US$1422)
  US$1465   Medium term (Hourly) Point and Figure
  US$1455   Long term (Daily) Point and Figure
Targets    US$1362  Medium term Point and Figure (Market pricing in 1 in 5 probability in 3 months at spot US$1422)
(Downside)      

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.