Head Trader Update 11/04/2017

Good morning everyone.
 
Notwithstanding that geopolitical developments remained front and centre in investor minds vis-a-vis the Trump Administration’s surprisingly muscular foreign policy statements and actions recently, early firmness during an otherwise somnolent Far Eastern session gave way to profit taking & speculative rebalancing driving GOLD/AUD values lower during European trading before US investors arrived to “swoop and scoop” the dip. GOLD/AUD bottoming out at 1665 on the day.
 
Friday’s weekly release of CFTC data showed another significant increase in net long length (approaching the highs from early March). Net non-commercial speculative long length rose by 17,616 lots (11,222 from new longs and a 6,394 lot reduction from the shorts with 1 lot = 100 ozs on the COMEX). Bear in mind that this data would NOT have included any additional increase in long length brought about on the back of the buying resulting from the US’ Tomahawk missile strike, thus with the market likely long to the gunwales as trading commenced on Monday, profit-taking and speculative rebalancing seemed well in order.
 
In spite of recent gold-friendly developments, chasing the market does not seem prudent with a combination of a lack of follow through to the topside and net non-commercial long speculative length, still a cause for concern. In GOLD/USD terms, 1260 has been penetrated 5 times and on each occasion, has been met with selling market sources report, suggesting that there is significant ‘wood’ to be chopped at that level (which dovetails with the AUD 1690 level where AUD/GOLD tried and failed 3 times on Friday).
 
All that being considered, on balance gold remains in an uptrend with support on dips and the unpredictability of geopolitical developments able to turn the markets on a dime. Investors favouring playing the short side would be well advised to be “short for an hour but long for a day” in the present environment.
 
Back on the topic of geopolitics, US Secretary of State Rex Tillerson will be in Moscow this week for 2 days of scheduled meetings with his opposite number, Sergey Lavrov (but not with Russian President Putin) and the markets will be hypervigilant regarding any signs of escalation with Syria or North Korea (or Russia for that matter).
 
For the present the markets appear to be taking in their stride weekend news that the U.S. has sent a Navy task force to waters off North Korea to conduct exercises with the South Korean navy.
 
Finally, the People’s Bank of China bought no gold in March per its website, being the fifth successive month with gold reserves remaining unchanged at 59.24 million ounces (1,842 tons). Any further abstinence by the PBoC (or the Russian Federation for that matter - the two biggest official buyers of gold) would kneecap a major element of gold price support.
 
Technically, another Doji candlestick was posted on the Daily chart yesterday reflecting market indecision / stasis in the battle between bullish and bearish interests around current levels. Patience and buying into any price weakness remains favoured.
 
Kind regards,
Andre