Weekly Technical and Precious Metals Positioning Report - Gold - 13th March 2018

After hitting the US$1361 target, gold tested the US$1301 support at the Weekly Standard line on the Ichimoku/the base of the Daily cloud, and recovers.

Targets: medium term look for US$1372. Short term the market is vulnerable to weaken off to US$1300 again.

Support comes in at US$1301 from the weekly Ichimoku Standard Line. Resistance lies at US$1332-34 and US$1366.

CME positioning reveals another decline in gross Managed Money length of almost 0.50 million Ftozs. Shorts reduced by 0.57 million. Trading in the week of the 27th February to the 6th of March took place at a VWAP of US$1321.64, and since the 6th, open interest in the April and June contracts has contracted by about 1.85 million FTozs, suggesting more long liquidation took place.

Non Farm Payroll data last Friday, at 313,000 jobs, gives more evidence of a strong US economy and the Fed Beige book indicates evidence of some wage growth across most districts surveyed. (However labour participation rates crept up, which will help offset inflationary pressures in the US labour market.) Growth in hourly earnings in the US manufacturing sector was 3.34 pct compared with last February, and that is the fastest pick-up in about 15 years, to cherry-pick one data point.

The outcome of next week's FOMC is not in doubt, however dovish voices in the Fed do suggest that the four rises expected by many this year will spell out a significant tightening alongside the reduction in the Fed’s balance sheet, and certainly it looks as if a rapid succession of rises this year will only bring forward future easing. The Dollar outlook in the short(-er) term may see a return to 94, basis targets which point to the weekly cloud base, however the tariff arguments and the weakening demand for US debt securities suggests that the macro outlook for the Dollar remains bearish, despite the interest rate cycle favouring the USD – and this should be supportive for gold.

Silver has ranged since the last report . The Weekly Turning Line (US$16.94) remains resistive. Narrowing Bollinger bands on the daily chart suggest a break-out is on the horizon. Targets suggest a more bearish outcome, such as US$15.55-15.60, although that ought to spur buying interest.

The ratio has weakened, with silver moving to 81 briefly. Look for the ratio to touch 83?

CME positioning in the week up to the 6th March saw Managed money longs add 22 million Tozs, after a period of deleveraging that lasted from the 9th of January to the 20th of February. Managed Money shorts, which had grown to 265.41 million, the highest level since the 26th of December, reduced very slightly. All this took place at a VWAP of US$16.49. Importantly, net positioning remains short, and this may point to a rally in the near future as net short positioning in silver tends to be short-lived. Eyeballing the chart of silver prices relative to net positioning does suggest this is a strongly lagging effect so caveat emptor and all that…

Nicholas Frappell
General Manager

Disclaimer
The information contained herein is based on data obtained from sources believed by ABC Bullion to be reliable. However, such information has not been verified by, ABC Bullion, and ABC Bullion does not make any representations or take any responsibility as to its accuracy. Any statements of a non-factual nature constitute only current opinions, which are subject to change without notice. ABC Bullion (and/or its affiliates) may have positions in commodities referred to herein, and may hereafter liquidate such positions. Neither the information in this report, nor any opinion expressed, shall be construed to be, or constitute, a recommendation or an offer to buy or sell, or a solicitation of an offer to buy or sell, any commodities or other financial products mentioned herein.