Technical Analysis

Hello everyone.
 
Precious metals remained under the cosh on Wednesday as the Dow Jones Industrial Average recouped 1,500 of the (approximately) 2,200 points it had shed since last Friday and as the US Dollar continued to find its feet against the “majors” (Euro, JPY and AUD).

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“Ladders and snakes. Ladders give, snakes take.”
 
The ongoing carnage in US equity markets (and associated volatility indexes like the VIX and the XIV) on Tuesday, roiled precious metals markets. Gold and silver surged higher during Far Eastern and early European trade on the back of the algorithmically driven abyss into which equities had precipitously plunged since Friday, only to “turn turtle” and surrender gains made since the commencement of trading this week in their entirety, as stocks surged back when US investors arrived.

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Violent moves were seen across the gamut of financial markets spanning stocks, interest rates, currencies and commodities, as the week commenced.
 
Yesterday’s Far Eastern session was one of the choppiest I can recall in recent memory.

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Gold and silver ripped higher on Thursday as the US Dollar was given the baby seal treatment by investors after US Treasury Secretary Steven Mnuchin commented at the World Economic Forum in Davos that; "Obviously a weaker dollar is good for us as it relates to trade and opportunities,” - thereby departing from the widely followed public script by US officials that a strong Greenback is always desirable.
 
The brakes were also slammed on the Dow Jones Index’s untrammelled ascent to record highs, after US Commerce Secretary Wilbur Ross commented at the WEF that China's 2025 Technology Plan was a "direct threat" to the US, sparking fears of an escalation in the (perceived) trade war being waged by the US presently, as well as fears of increased protectionism from the world’s largest economy. Fears exacerbated by the freshly announced US tariffs on solar panels and washing machines less than 24 hours prior.

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The three day US government “shutdown” concluded prior to the commencement of Far Eastern trading yesterday, after the US Senate voted (81-18) to pass funding measures through until February 8th in exchange for a promise from Republican leaders to address the DACA (Deferred Action for Childhood Arrivals) issue.

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Precious metals closed out last week on a firm footing, most likely resulting from end-of-week booksquaring / profit-taking / shortcovering.
 
Over the weekend, headlines were dominated by news that the Democrats failure to extract concessions from President Trump’s Administration in relation to the granting of amnesty to illegal immigrants, had torpedoed the 60 Senate votes required to continue funding the “spending gap” of the US government, thereby leading to the closure of components of the US Government as of midnight Saturday.

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The precious metals, having spent their time since mid-December shrugging off regular record highs in US equity markets and instead taking their cues from a backpedalling Greenback to advance strongly, were taken to with a 4x2 overnight in late trade in what was an extremely choppy day. HFT Algo’s piled in and hoovered up US dollars when news hit the wires of Apple’s intention to repatriate its offshore profits and consequently make an estimated USD 38 billion one-off tax payment (likely the largest of its kind).  Additionally, the technology behemoth sketched out its plans to invest more than USD 30 billion to expand its US operations as a result of the recent tax cuts (including construction of a new US campus, data centres and the creation of more than 20,000 jobs, leading to a $350bn “direct contribution” to the American economy over the next five years).

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The progress of US President Trump’s (and the Republican party’s) tax reforms held sway over the markets and related uncertainty fed into a weak US Dollar Index throughout much of yesterday’s trade, allowing gold and silver to advance by the close of business in spite of buoyant US equities markets.
 
That was basically the long and short of it, as the saying goes.

Hello everyone.
 
Gold and silver (in both USD and AUD terms) experienced what is commonly known as a “buy the rumour / sell the fact” rebound (or in this specific instance a “sell the rumour / buy the fact” bounce), as profit taking / shortcovering emerged when the US Federal Reserve confirmed a widely anticipated (and priced in) Fed Funds rate increase by announcing a 25 basis points hike at the conclusion of its FOMC monetary policy meeting. Additionally, guidance for next year suggested the likelihood of at least three more interest rate increases. The US central bank also signalled its intention to keep to its commitment to increase its monthly balance sheet runoff to $20b in Jan.

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The bad news for precious metals (and specifically gold investors) is that some major support levels have ceded over the past few sessions with “risk on” being the trade du jour, spurred on by robust economic progress from the world’s largest economy, the USA. If a picture says a thousand words, then the attached charts for the US Dollar Index (DXY), the Dow Jones Index and the phenomenon that is Bitcoin, speak volumes. So too does the latest Commitments of Traders data as at December 5th (see table below) which portrays significant levels of long liquidation across the complex but especially in gold and silver.

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Mixed trade was seen in gold on Wednesday, while silver and platinum were pressured lower.
 
Gold slipped modestly after the release of the latest private U.S. ADP National Employment Report (Nov) which came in +190K and even though the all-important 200 Day moving average was penetrated, any sustained unravelling was prevented due to the US government funding and debt ceiling issue remaining unresolved.

Good morning everyone.

Gold traded to its lowest level since August 9th in USD terms as the markets remained confident that the US Tax Reform legislation presently making its way through both Houses of government, will be passed before year end. ‘Risk on’ investor sentiment was thereby stoked as the US Dollar was driven higher against its major pairs.

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Precious metals markets were ambling into the weekend on Friday until financial markets were thrown into late turmoil when a bottom-feeding ‘journalist’ from ABC News (US) ran a fraudulent story that former National Security Adviser in the Trump Administration, Lieutenant General Michael Flynn, would be testifying that then candidate Trump had ordered him to engage with Russian officials (thereby validating the “Russian Collusion” narrative), when in fact, Lieutenant General Flynn had been instructed to engage with Russian officials by President-elect Trump during the transition period as part of the normal (and legal) business of government.
 
The Dow Jones Industrial Average shed 390 points on the basis of the irresponsible falsehood as ABC News sat on a retraction for hours. XAU/USD rallied from 1271.50 to just short of 1290.00 before rolling over (and then gapping lower on this morning’s Far Eastern open). The US dollar was also crushed against all the major currencies on the back of the initial report.
 
This most recent example of (intentional) erroneous reporting underscores the agenda-driven approach and blind hatred of the US mainstream media towards President Trump and validates his placing the “Fake News media” directly in his crosshairs, as well as totally debasing any of their contributions.

Good morning everyone.
 
Gold and silver continued their southern drift on Thursday, pressured lower by the Dow Jones Industrial Average registering a record high above 24,000 and a spike in US Treasury Yields due to the shortening of odds in favour of the Republican Tax Reform Bill succeeding. Also weighing, were hawkish monetary policy comments from outgoing US Federal Reserve Chairman, Janet Yellen on the back of the seemingly robust US economy.

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XAU/USD was driven back down into the middle of its well-established 1265 to 1295/1300 range on Wednesday, finding support between its 21 & 100 Day moving averages at 1282 - 1285. The trigger for the retreat was a revision to 3rd Quarter US GDP data which at 3.3%, came in marginally above market expectations and delivered the strongest GDP result in 3 years.
 
The late in the session news yesterday of a North Korean missile launch was effectively shrugged off by the markets with President Trump casually remarking “We’ll take care of it.”

Good morning everyone.

Precious metals markets saw sideways, choppy, rangebound price action on Tuesday in spite of:
 
US equities continuing to scale record highs, fuelled by progress in the US Senate to advance the Republican tax bill.
Late reports of North Korea launching a missile 4.5 kms into the air which eventually fell into the Sea of Japan and which was claimed by the Pentagon to have been an ICBM.

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Having posted strong gains on the back of Greenback weakness (particularly against the JPY) on Friday, news on Monday that a breakdown in negotiations between the various parties in Germany that were attempting to form a coalition government resulting from September’s election, saw the precious metals rally deflate quicker than the Hindenburg, as the EUR was kicked to the curb and investors were herded back to the safety of the US dollar.

The fragility in the Australian consumer sector was underscored this week by yet another weak set of wages data, with the wage price index coming in well below what the market was expecting, sending the Australian dollar tumbling.

Good morning everyone.
 
Thursday saw a few more items ticked off the week’s ‘bucket list’ but gold and silver held station within recent ranges.
 
First cab off the rank was the Bank of England monetary policy announcement. The central bank raised rates (for the first time in ten years) from 0.25% to 0.5% and indicated its intention to move aggressively by hiking 0.25% twice more over the course of the next two years (<sarc off>).

Good morning everyone.
 
Choppy trading within the recent range for precious metals was seen in reaction to the release of a raft of economic data and ahead of the US Federal Reserve’s FOMC monetary policy statement, which ultimately saw the FOMC vote unanimously to leave interest rates unchanged, in line with market expectations.
 
On the economic data front;

• U.S. ADP (Oct) came in +235K (vs +200K expected & negative revised +110K for Sep which was previously +135K)

• U.S. Construction Spending (Sept) was +0.3% (vs Unchanged expected & negative revised +0.1% for Aug which was previously +0.5%)

• U.S. ISM (Oct) came in at 58.7 (vs 59.4 expected and 60.8 in Sep)

Good morning everyone.
 
Mixed trade on Monday saw gold and silver in USD and AUD terms firm modestly as investors understandably took a “wait and see” approach and strapped themselves in ahead of a hectic week that includes;
                                      
MonPol announcements from the Bank of Japan on Tuesday, the US Federal Reserve on Wednesday and the Bank of England on Thursday.
 
An expected announcement by US President Trump (prior to his departure for an 11-day trip through Asia on Friday), nominating the next Chairman of the US Federal Reserve. Market consensus strongly favours Jerome Powell (a current member of the Federal Reserve Board of Governors) succeeding in receiving the nomination to the prestigious and all-important post over Stanford University Economics Professor John Taylor.