Senior Trader Daily Update 28 August 2017

Hello everyone,
 
Friday’s trading saw the markets go into a holding pattern ahead of speeches at the central bank conference in Jackson Hole by arguably the two most powerful central bankers in the world, US Federal Reserve Chairman Janet Yellen and the European Central Bank President Mario Draghi.
 
With the markets on auto-pilot awaiting the Jackson Hole speeches, two pockets of clear-air turbulence were hit, leading to exceptionally volatile trade. The first being when newswires carried the following comments from a Bloomberg interview with Dallas Federal Reserve Bank Chairman Kaplan (ahead of Chairman Yellen’s speech):

• We clearly are accommodative right now

• Investors used to idea rates will be lower for longer

• Market or real-estate correction could be healthy

• Market correction wouldn't necessarily hurt the economy, and may help it

• We should be moving on b/sheet as soon as possible

• Fed can shrink b/sheet with minimal impact on markets

Predictably, the Greenback collapsed and precious metals spiked on the back of those headlines.
 
Following almost immediately, was the release of the speeches from the ECB President and Federal Reserve Chairman which proved to be a damp squib for the markets, as both effectively ignored making any significant comments pertaining to monetary policy. The result was that the earlier spike in precious metals was entirely reversed with a particularly brutal ‘sweep’ seen in the COMEX December gold futures contract as 21,256 contracts (2.125 million ozs) traded from USD 1295.50 down to USD 1281.30 inside of one minute. The entire move down was then erased over the course of the subsequent half hour. Definitely not for the faint of heart.
 
The latest CFTC Commitments of Traders Report (as at August 22nd) showed significant non-commercial speculative short-covering across the entire precious metals complex AND healthy investor appetite from bullish speculative accounts.

Technically, XAU/AUD consolidates within a well-defined sideways band between 1612.50 and 1640. A topside breakout would target the 100 Day moving average at 1646 and beyond toward the 1660/1665 region (the 61.8% Fibonacci retracement of the 1728 to 1552.50 move and a pair of late June highs).
     
XAU/USD continues to find robust support on dips and now sits within striking distance again of the major trendline resistance near the psychologically and technically important USD 1300.00 level which should still be afforded due respect. An attempt to breakout above the ceiling that has held gold in check since November last year is favoured.
 
Long weekends in the UK today and the US next Monday may hinder gold’s progress but once the northern hemisphere summer holiday period concludes after next week’s US holiday, significant moves may be in store.
 
Good luck and have a good week.