Senior Trader Daily Update 7 September 2017

Good morning everyone.
 
Gold, having reached its highest level in USD terms since late September last year on Tuesday, (spurred on by geopolitical tensions, receding yields on US Treasuries, a soft Greenback and monster inflows into ETF products. Tuesday saw a record inflow of 9.5 tons bringing to 26 tons the total amount that has been piled onto gold ETF’s since the start of September - which follows an increase of 31.4 tons globally in August), pared gains on Wednesday as President Trump dialled-down recent rhetoric towards North Korea and perhaps more importantly, in a predictably unpredictable move the US President reportedly reached an agreement with Democrat congressional leaders (thereby circumventing GOP leaders who were all opposed to the deal) to pass aid for Hurricane Harvey relief AND to extend government funding until December 15, as well as a 3-month debt limit increase. Thus, any investor uncertainty or speculation surrounding government funding and the debt ceiling was killed stone dead until December 15th.
 
Whilst investor sentiment towards precious metals in general and gold in particular remains favourable, the significant build-up in net speculative long positioning and the surge in ETF buying of late, continues to leave open the spectre of reasonable corrective price action.
 
Technically, XAU/AUD could see some mean-reversion back towards the 21 Day moving average at 1642.50 but if investors gird their loins on pullbacks and gold goes on to clear resistance at AUD 1686.50 (the 76.4% Fibonacci retracement of the 1728 to 1552.50 move), then a move to the June 6th high at AUD 1728.00 which would complete a technical “rounding bottom” pattern (see chart), is highly probable.
    
As noted previously, XAU/USD found significant ‘wood to be chopped’ in the region between the 22/09/16 high at USD 1344.00 as well as the psychological USD 1350 level (and option strike) which slowed down the recent advance and it is quite possible that the yellow metal will now settle into some consolidative price action between previous resistance at USD 1300 (which should serve to act as a solid support on any pullback) and the aforementioned USD 1344 - 1350 level.
 
Good luck.
 
Regards,
Andre