Senior Trader Update 20/04/2017

Good morning everyone,
 
Gold continued its consolidative price-action in AUD terms yesterday, hitting resistance in the ‘sticky’ AUD 1710-1715 noted in yesterday’s commentary but holding above AUD 1690. Speculative re-balancing on profit taking and the tipping out of some of weaker ‘late to the party’ longs creating intraday price weakness, while shortcovering and bargain hunting provided the support.
 
In USD terms, more skulduggery was seen around the time of the London PM Auction (Fix). Following on from last week’s ‘aberration’ where gold fixed USD 15.00 below the prevailing spot at the time and Tuesday’s Fix where the benchmark rate was set below the low for the day (with 14.5K contracts / approx. 1.5 mio ozs being dumped on the COMEX 15 minutes before the process began), yesterday’s gala saw 25K contracts (2.5 mio ozs) puked out on the COMEX as the Auction commenced, driving June futures down from USD 1283.7 to 1275.4 (chart attached).
 
Geopolitical tensions and developments remain front and centre, US - North Korea diplomatic ‘pleasantries’ dominating proceedings. Throw into the mix now the UK General Election on June 8th (UK PM Theresa May’s motion in the Commons on Wednesday passed by an overwhelming majority of 522 for to 13 against, easily exceeding the 2/3rd’s majority required to circumvent the Fixed Term Parliaments Act, as expected), the first round of the French Presidential elections on Sunday (with the tarot cards polls tightening significantly in recent days and the second round to follow on May 7) - both events which have significant implications for the stability and future of the ‘European Project’ i.e. the European Union.
 
Returning to the topic of North Korea, Zerohedge noted a report by Korea JoongAng Daily stating that China appears to be preparing measures in case North Korea tests a nuclear device or acts provocatively, which include the possibility of suspending oil to the regime (North Korea depends on China for some 90 percent of its crude oil supply). "Analysts" suggest that the 85th anniversary of the founding of the North Korean People’s Army on Tuesday April 25th and the days leading up to the South Korean presidential election on May 9 would present opportunities for North Korea to conduct any nuclear test.
 
Co-operation between China and the US vis a vis North Korea has increased with the Trump Administration applauding Beijing’s proactive stance in recent weeks. The Chinese navy tested its new guided-missile destroyer, conducting its first live-fire exercise in the Yellow Sea, right near the Korean Peninsula and which was broadcast on CCTV (the state-run broadcaster), a gesture which was viewed as an attempt to send the strongest possible message to Pyongyang to put a leash on any actions or rhetoric that might escalate tensions on the Peninsula further.
 
Technically, from a Gold/AUD perspective, the metal consolidates within a AUD 1690 – 1710/15 band for the present moment and perhaps it is worth bearing in mind the following market observation from Richard Donchian (the father of Trend Following style trading) that: “A move followed by a sideways range often precedes another move of almost equal extent in the same direction as the original move.  Generally, when the second move from the sideways range has run its course, a counter move approaching the sideways range may be expected”.
 
In Gold/USD terms, gold has moved back below the MAJOR trendline resistance dating back to September 2011 and the consensus view of many market pundits and technical analysts suggest that the psychological ‘big figure’ level of USD 1300.00 needs to be cleared to confirm a breakout above this major technical impediment.
 
Good luck.
 
Kind regards,
Andre