Senior Trader Daily Update 01 August 2017

Month-end and XAU/AUD closed on a firm footing as the Greenback hit its lowest level against the EUR in 2&1/2 years.

Who needs Game of Thrones or Reality TV when head-spinning developments seemingly come thick and fast from the Trump Administration? In the latest instance, the swearing in of President Trump’s new Chief of Staff General John Kelly on Monday led to the instant removal of the President’s freshly appointed Communications Director, Anthony Scaramucci - 11 days into his new role to be precise.

White House intrigues aside, much bigger concerns reside on the geopolitical stage. North Korea reportedly launched a missile on Friday capable of reaching the US mainland, resulting in terse, very direct comments from the White House as regards the likely consequences of such actions. The Russian Federation then decreed the expulsion of 755 US diplomatic staff from its soil in retaliation to the recent round of US sanctions against it (that it views as illegal and without basis). In addition, the European Union vehemently opposed the latest round of Russian sanctions and is contemplating its own course of action as it finds itself squeezed between energy dependence on Russia and complying with the extra-judicial dictates of its NATO ally the US.

It would seem safe to say that the rebound in gold prices from the early to mid-July slide reflect investors and markets eschewing uncertainty and perceived chaos. Additionally, the thing that led to the slide in gold in the first place, i.e. investor consensus regarding the scope for US Federal Reserve interest rate hikes, appears to have been placed on the back-burner for now.

Since we last covered the CFTC Commitments of Traders Report (as at July 11th), the latest data (as at July 25th) has shown:

• Heavy short-covering from non-commercial speculative gold accounts as well as bargain hunting at the lower levels. Spec accounts piled back in on the long side, leading to an approximately 3.75 mio ozs increase in net long length from the period July 11th - July 25th (Futures & Options Combined).

• In a similar manner to gold, silver non-commercial speculative accounts covered short exposures but were less effusive about joining in from the long side. Thus, the bulk of silver’s strength has been based on short-covering. Between July 11th & July 25th approximately 32.25 mio ozs have been added back to net long length.

• The Platinum Group Metals have seen platinum non-commercial net long length double from 5.2K contracts as at July 11th to 10.3K contracts on July 25th (approximately 250,000 ozs), while palladium speculative net long commitments increased a modest 69K ozs over the corresponding period.

Technically, the key to the bounce from the lows in XAU/AUD (in spite of a soaring AUD/USD) looks to have been the ‘Bullish Engulfing Candlestick’ (circled) that occurred on July 21st. With some of the short-term moving averages looking set to cross imminently (5 Day & 21 Day at 1583 & 1585 respectively), momentum could drive XAU/AUD towards Fibonacci retracement (of the AUD 1728 to 1552.50 down move between June 6th and July 20th) targets at AUD 1594 (23.6%), 1619.50 (38.2%), 1640.25 (50.0%).

Good luck.

Kind regards,

Andre