Senior Trader Daily Update 11 September 2017

Good morning everyone and I trust you had a good weekend.

XAU/USD registered its highest level since mid-August last year as geopolitics, receding yields on US Treasuries, huge ETF demand and record trading volumes on COMEX, disastrous weather events and poor US macroeconomic data weighing upon the Greenback, all underpinned precious metals investor appetite.

There was also speculation / anticipation that the Democratic People’s Republic of Korea would test another thermonuclear device (and test the resolve of the US Administration and its allies) on September 9th - the anniversary of the founding of the DPRK in 1948. With said detonation failing to materialise, gold was swatted USD 13.00 lower at this morning’s Far Eastern open on “buy the rumour, sell the (non) fact” liquidation.

Friday’s release of the latest CFTC Commitments of Traders Report (as at September 5th) showed that the voracious demand for precious metals (due to the aforementioned drivers), continued unabated. However, short sellers began to unload into the market as gold approached its recent highs. Silver and palladium speculative non-commercial positioning both saw the ledger tilted in favour of short covering which accounted for much of their ascent over the course of the period between 29/08/17 to 05/09/17.

Technically, some mean-reversion back towards the 21 Day moving average at XAU/AUD 1646.00 on speculative rebalancing remains favoured ahead of an (eventual?) clearing of resistance at AUD 1686.50 (the 76.4% Fibonacci retracement of the 1728 to 1552.50 move), which would then allow a move to the June 6th high at AUD 1728.00, which would complete a technical “rounding bottom” pattern.

The ‘wood’ between USD 1344.00 and the psychological USD 1350 level (and option strike) was surmounted, allowing gold to move ahead to USD 1358 on Friday, a level last seen on August 16th last year. As noted, the sheer weight of speculative positioning to the long side is likely to leave gold susceptible to bouts of long liquidation (also providing dip buying opportunities) with targets at USD 1368 (August 2nd high) and USD 1375.50 (double top from July 6th & July 11th ) within range.

Good luck this week.

Kind regards,
Andre