Precious Metals News Update - 10 May 2018

PRECIOUS METALS RANGES - Trade Date: May 9th

COMMENTS / HIGHLIGHTS:

• The fallout continued yesterday from Tuesday’s decision by US President Trump to abandon the Joint Comprehensive Plan of Action (JCPOA) aka ‘The Iran Nuclear Deal’ and to reimpose even tougher sanctions than had existed previously, ostensibly to punish Iran for alleged transgressions and to force the country into renegotiating the deal.

• Whilst XAU/USD’s reaction to the decision was tepid at best, the crude oil markets bore the brunt of the reaction for obvious reasons. With the US Department of the Treasury outlining that oil sanctions against the Islamic Republic of Iran are to be reinstated in 180 days and demanding that importers of crude oil from Iran wind down their purchases by then, the commensurate reduction in supply to the market by Iran (estimated to be in the region of 200K to 500K barrels per day) drove crude prices to 3½-year highs yesterday.

• The Greenback has been on a tear since April 19th (see attached chart) having broken above a couple of significant downtrend resistance lines, propelled higher by solid US economic growth indicators and rising US Treasury yields. The combination of these two factors along with steady / firm US equities markets whose retreat from record highs earlier in the year have avoided turning into a bloodbath, have held XAU/USD in check. The US dollar’s strength against its majors however, has allowed gold to post strong gains vs those pairs.

• Geopolitical risk and tension has been turned up a notch as the US Administrations decision on Tuesday has elicited pushback from other signatories to the original agreement, including the EU and UK who intend to honour the agreement without the US. The risk of Iran deciding to relaunch its nuclear weapons programme has also increased with the US’ withdrawal, bringing with it a threat by Israel to launch a defensive military strike against Iran.

TECHNICAL COMMENTS:

• XAU/USD: The third day in succession where XAU/USD has posted a ‘long-legged Doji’ candlestick on the Daily chart (a long upper and lower body with virtually the same opening and closing price, reflecting market indecision). That said, the conjunction of the technically all-important 200 Day moving average and the lower boundary of XAU/USD’s sideways trading band at the USD 1300 / 1305 region remains solid as the Rock of Gibraltar.

• XAU/AUD: XAU/AUD broke free of its narrow sideways range between its 21 Day moving average (AUD 1740.00) and topside resistance in the AUD 1752.00 / 1757.00 zone on Tuesday and upside technical targets now present at AUD 1779.00 (15/09/2016 high), AUD 1800 / 1801 (psychological big figure resistance / 3rd August 2016 high) and the AUD 1840 - 1845 region (June/July 2016 highs), providing that a technical base can form at the recently cleared previous resistance (AUD 1752.00 / 1757.00).

Good luck.
 
Regards,
Andre