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

20 November 2019

To view this report in PDF format, please click here.
 

Gold – In Brief

Gold dropped to a low of US$1,445.70 on the 12th of November, touching the 38.20 pct. Fibonacci retracement before recovering slightly.

The 7.00 pct. move down from the US$1,557.10 high looks corrective after the powerful swing higher in May through to early September, with gold developing significant speculative length, but gradually running out of fresh bullish impetus and becoming vulnerable to a change in the news. That arrived with suggestions on October the 11th that the US-China trade conflict was on the threshold of being resolved quickly. Always an unlikely proposition, given the scale of the disagreements, the propensity for the Trump administration to pivot on a dime, and the desire of the People’s Republic to see tangible concessions made in the form of reduced tariffs the initial optimism has given way to caution. Sure enough, government sources in Beijing have reported ‘pessimism’ about resolving the dispute and seem reluctant to be dragged into offering further concessions.

A trade dispute that started over accusations of intellectual property theft (Section 301 of the Trade Act of 1974) and a carefully targeted list of tradable items that the Chinese ought to be prepared to negotiate over has decayed into a parley over how many soy beans and other agricultural products the Chinese need to buy to set the clock back to pre-2017 trade levels.
Concurrently – and not coincidentally – US Factory output has started to decline, weakening in both September and October.

Chinese GDP growth in Q3 was the slowest since Q1 1992. New bank loans extended in October, the latest data, shows a contraction to 661 billion CNY, below expectations of 800 billion CNY. Although retail sales are robust, there are grounds for concern.

Germany’s Wholesale Price Index printed at -0.10 pct., after expectations of +0.20 pct., following on from Septembers -0.40 pct. The country just avoided slipping into recession with Q3 growth of 0.10 pct.

ABC-NF Chart November 2019 - 01

Gold Positioning and Volume-Weighted Average Pricing
The recent VWAP and position changes are as follows:
ABC-NF Chart November 2019 - 02

Weekly Ichimoku Cloud Chart
The 38.20 pct support has held and the price has moved slightly higher. Resistance lies at the centre-point of the marubozu candle formed last week, at US$1,487, and the Weekly Turning line which currently lies at US$1,483. Support at US$1,445.70 again and US$1,413, the 50 pct retracement and the Weekly Standard Line. This chart remains bullish, or at least 90 pct bullish, with the price below only one line.

(A marubozu candle is one where the candle is all ‘body’ and the open and close lie at or very close to the high and lows.)

ABC-NF Chart November 2019 - 03
Daily Ichimoku Cloud Chart

The price has dropped below the Daily cloud – a bearish configuration – however as shown in the red oval, the lowest candlestick has made a ‘doji’ pattern, almost a ‘hanging man’ which is a reversal signal after the succession of down days, and subsequent candles have been bullish. Expect resistance at US$1478-1482. The way the Lagging Span is interacting with the base of the daily cloud (see the boxed area) is not helping gold’s recovery in the short term either… but let’s see. The bigger picture as shown by the Weekly cloud chart is bullish. 

ABC-NF Chart November 2019 - 04
Gold Hourly Point and Figure – Medium Term
Many bearish price targets, some that extend to the key 50 pct and 61.80 retracements of the May-September rally, as shown in the red boxes.

ABC-NF Chart November 2019 - 05

Price targets via Point and Figure – Short Term
The recovery suggests a move back to test the recent (early November) highs around US$1,514. Expect resistance around US$1,482-84 initially.

ABC-NF Chart November 2019 - 06
The Inflation-Linked Bond Yield
The yield is slightly lower than the October report (0.30%) and is still supportive of gold.

On non-inflation linked 10-year yields, the yield looks like targeting 1.77 pct. before moving higher back to 1.84 pct.?

ABC-NF Chart November 2019 - 07
Gold-Silver Ratio
Back to 86-87 before silver momentarily outperformed. Above 87, be cautious of a move where the silver-gold ratio weakens to 89, however below 87 another relative strengthening towards 84 and 83 seems probable.

ABC-NF Chart November 2019 - 08
Equities - the SPX
Onwards and upwards. Not many targets left on the Hourly point and figure though, 3,157, 3,189 and 3,254 at the moment. That signifies little at the moment except a possible weakening of upward momentum? The Daily point and figure has a target to 3,310 so perhaps that is the number to really watch closely.

Support at 2,988 and 2,924.

ABC-NF Chart November 2019 - 09
SPX Hourly Chart with Targets
The short-to-medium outlook remains bullish with targets to the above levels, ultimately to 3,254.

Support at 2,970, then 2,870.

ABC-NF Chart November 2019 - 10
The Dollar – DXY 
The DXY remained capped by the Weekly Turning line. Recent weakness is reportedly related to meetings between the President and Jerome Powell, along with weak manufacturing output, which declined by 0.10 pct. if the impact of a strike at GM is excluded. Total industrial production shrank by 0.80 pct. This was the largest fall since May 2018.

Support at 97.05 now. Resistance at 98.39. The trend remains positive.

ABC-NF Chart November 2019 - 11
AUD Weekly Cloud
Bearish basis the weekly cloud chart. The price interacted with the Weekly standard line in green, closing above it once before turning lower. The price is now supported by the trendline and the weekly turning line, however the recent break above the trendline doesn’t look sufficient to change the trend.  Chances of the RBA engaging in unconventional monetary policy in 2020 seem to have increased although ‘when’ is still a matter of debate. The net effect is expected to drive the AUD lower via lower yields on assets.

ABC-NF Chart October 2019
The AUD Hourly Point and Figure
The AUD rallied towards the 0.6971 target, possibly helped by some large option positioning, and then rolled back. If the price closes below 0.6720 the target to 0.7170 will disappear. The longer-term targets point back to 0.64 and 0.61.

ABC-NF Chart November 2019 - 13
Where to from Here?
Gold remains bullish, and as said last month the macro picture has not changed markedly, and so far, the decline in prices remains very much within a strong rising trend.
 
Resistance US$1,586 61.80% Fibonacci retracement of the 2011-2015 down move.
  US$1,557 September 2019 high
Supports US$1,446 38.20% retracement of the May-September rally
  US$1,412 Weekly Standard Line & 50% retracement (May-September 2019 rally)
  US$1,378 61.80% retracement (May-September rally)
  US$1,359 50% retracement (August 2018 low – September 2019 high)
 
      Basis spot US$1,470 3 months
Targets US$1,635 Long term (Daily) Point and Figure (just under 1 in 8)
  US$1,590 Long term (Daily) Point and Figure (1 in 6)
Targets US$1,435 Medium term Point and Figure (1 in 4)
  US$1,415 Medium term Point and Figure (1 in 5)
(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.