Gold Trades Lower, the Dollar Moves Higher, and the Trade War Deepens

May 28, 2019 - 5:42pm

 by Gary Wagner

Gold traders returning from an extended three-day holiday weekend were met with strong selling pressure and lower pricing in gold, silver and platinum. As of 2:00 PM EDT gold futures, basis the most June 2019 contract is currently trading down by $5.90, and fixed at $1277.70.

On a technical basis major resistance is at $1286 per ounce, the .38% Fibonacci retracement. Major support is $20 below that price point at $1267, the .50% Fibonacci retracement. Now for the last three consecutive trading days, gold has tested the highs around $1286, with no success of breaching above that price.

With concern about the trade war muted, at least for now, President Trump said the “US wasn’t ready to make a trade deal with China.” Speaking at a joint news conference Monday in Tokyo with Japanese Prime Minister Shinzo Abe. The lack of apprehension as the trade war divide deepens and a resolution diminishes is perplexing.

According to ABC News, China state media was playing down the escalating trade war, however that changed in mid-May after “Beijing’s top trade negotiator, Vice Premier Lui He, returned from Washington without a deal,”

According to Bloomberg News “The U.S.-China trade war has entered a dangerous new phase. Tariffs are up and there’s the threat of more to come. A quick fix is still possible, with Presidents Donald Trump and Xi Jinping set to meet at the G-20 summit next month. But at this point, it looks more likely that the trade war will be long, messy—and expensive.”

Bloomberg economists Dan Hansen and Tom Orlik said, “If tariffs expand to cover all U.S.-China trade, and markets slump in response, global GDP will take a $600 billion hit in 2021, the year of peak impact.”

Hanson and Orlik’s nightmare scenario adds a 10% equity market drop to the across-the-board 25% tariffs. In that case, China, U.S. and world GDP would be 0.9%, 0.7% and 0.6% lower in mid-2021. In this situation, the equity market drop acts as a further headwind to consumption and investment, compounding the impact.

Today was a day of mixed signals, consumer confidence at a six-month high, the 10-year Treasury note at a 19 month low, and an equities market that opened higher on the day and then reconsidered the potential economic repercussions that the trade war could lead to. In other words, hold on, the financial markets are going to get a lot more volatile before we see smooth sailing.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action

We are currently flat with no active trades. That being said the current fundamentals behind the trade war seem to be getting farther away from a resolution than closer. As such is not a matter of if, but when this dispute escalates into the economic fabric of both the United States and China. On today's video report we will detail the parameters we are looking for to enter the market for him the long side. We also will touch upon what would negate that call and Turner market sentiment bearish.

Gold Market Forecast

Today was a day of truly mixed messages as the US equities traded higher on the open, and gold traded modestly lower. As market participants began to acknowledge the potential for recent actions by the administration as well as China's rhetoric has created a deeper chasm and a wider bridge to cross if the two superpowers are to in any way resolve their issues and and this trade war. Today's video will touch upon that topic and how it could change the economic conditions both in United States and China.

Sentiment Indicator:
Gold -> Bullish
Silver -> Bearish
S&P 500 -> Bearish
Bitcoin -> Neutral
Bitcoin fundamentals by Joseph M. Wagner II:

What Bitcoin Futures Most Recent Gap is Telling us

As we talked about Friday, we were expecting a gap in Bitcoin Futures (BTC #F) over the weekend. But we were not expecting was for this gap to be an “exhaustion gap”. According to Investopedia, “An exhaustion gap is a gap that occurs after a rapid rise in a stock's price begins to tail off. An exhaustion gap reflects slowing momentum usually from falling demand for a stock.”

There are three main reasons why this most recent gap appears to be the beginning of a correction. The first reason is the today’s candlestick which is shown as a doji with a small body and long upper wick. This type of candlestick is often associated with a key reversal and change in market sentiment. The second reason is the size and price difference of this gap, it shows slowing momentum simply because it is a smaller gap then the previous one which occurred on May 13th on a daily chart as well as May 19th on a thirty Minute chart of BTC futures on the CME .The third and most vital reason that this current gap appears to be an exhaustive one is trading volume. The May 13th gap exhibited a huge spike in trading volume immediately following the gap up. However, that spike in trading volume was not witnessed today (In the CME) although volume is still above 10,000 contracts on the day, which is still elevated on a historical basis.

Although Todays gap up looks less bullish than both gaps from the last two Monday’s I believe this is not likely indicating a key reversal and more likely is pointing to a correction in the market. If such a correction should occur support levels lie at $8500 and below that at $7400, resistance still stands at approximately $9800.