One way to describe today’s Gold behavior is “violently unchanged ”. The market started the day strong giving perhaps a foreshadowing of days ahead. However, as the Yellen Speech creeps upon us, it has given back almost all its gains.
This, likely based in part on the last 2 times a Fed employee exercised its “Open Mouth Operations” prerogative andGold reacted negatively.
<click chart for live prices>
Spot Gold Hourly shows less patience among shorts, and more long selling before Yellen. We do think someone will try to stomp on it-if Yellen gives anything less than a ringing endorsement of yellow rocks.
But: unless there is some other macro long with stops underneath from buying the $1275 area (where the pile in started 2 months ago), then sell-offs will be violent but brief.
There are signs that the downside may be closing off despite today’s retreat. Open interest has come in for one. For another, trade flow seems to be less long liquidation now. If that is true, then we may now see shorts start to cover of for no other reason to close out their end of year books.
Support in the $1271 area has been pierced and bounced back up, indicating impatient shorts are covering. Michael Moor is advising clients as of yesterday:
“Be out of all macro shorts for the time being”
This is consistent with the behavior now being seen of support broken for shorter loved time frames. We've gotten no momentum signals since last week, and almost had one higher today.
If we do rebreak below $1271 and spend any time underneath, look for $1255-$1260 to be the next support. Otherwise, testing new lows and rejecting them quickly is a sure sign the risk is in being short now.
A Couple Factors to Consider From Here:
1- China’s Golden Week is Ending
2- Many long side funds are closing out postions because their EOY is November. They do this to avoid the banking EOY rush.
3- short side players running algos are shorter term types who will cover intraday on losers.
That combined with macro longs exiting leaves less stops to gun for underneath.
Good luck-
Yellen in Spotlight at 3:15 Today.
Investing.com - Here are the top five things you need to know in financial markets on Wednesday, October 4:
1. Yellen, U.S. Data in the Spotlight
Fresh comments from Federal Reserve Chair Janet Yellen will top the agenda for global financial markets today, as they look for further hints on the timing of the next rate hike.
Yellen is due to deliver a speech at a community banking conference hosted by the Federal Reserve Bank of St. Louis at 3:15PM ET (1915GMT).
Her comments will be monitored closely for any new insight on policy. Last week, Yellen said that the central bank plans to continue gradual rate hikes despite broad uncertainty about the path of inflation.
Besides Yellen, market participants will keep an eye out on a pair of U.S. economic reports to gauge how it will impact the Fed's view on monetary policy in the coming months.
Wednesday's calendar features the ADP private sector nonfarm payrolls report at 8:15AM ET (1215GMT), which is often seen as a warmup act for the big Friday government jobs report, as well as the ISM non-manufacturing survey due at 10AM ET (14:00GMT).
Interest rate futures are pricing in more than a 75% chance of a December Fed rate hike according to Investing.com's Fed Rate Monitor Tool.
The dollar lost some momentum after striking a one-and-a-half-month high, while Treasury yields headed lower, as markets continued to speculate over who will succeed Yellen as the next Fed chair when her term ends in February.
2. ECB President Draghi Delivers Comments
European Central Bank President Mario Draghi is due to deliver opening remarks at the Inauguration of the ECB Visitor Center, in Frankfurt at 1715GMT (1:15PM ET).
Draghi indicated last month that the ECB could start tapering its massive stimulus program as early as October.
The euro has since pared its gains following Draghi’s hint at slashing stimulus, dropping below $1.18 against the dollar.
3. Catalonia Crisis Worsens
Spanish stocks slumped to a six-month lowand government bond yields rose sharply, as concerns about the crisis in Catalonia grew.
According to unconfirmed reports, Catalonia's pro-independence leader Carles Puigdemont will hold a press conference at 1900GMT (3:00PM ET), triggering speculation of a unilateral declaration of independence.
Puigdemont said late on Tuesday that the region will declare independence from Spain "in a matter of days."
Spain's King Felipe VI accused Catalan secessionist leaders of shattering democratic principles in a rare televised speech which Tuesday evening, which in itself is a sign of the seriousness of the crisis, analysts said.
Spain's IBEX index of the country's 35 biggest stocks fell by as much as 2.5% in the opening hour of trading in Madrid, extending a third session of declines and taking the benchmark to the lowest level since March 15.
The tensions also had a clear impact in the bond market, with Spanish premiums climbing over comparable German debt to the widest level in at least five months.
4. Oil Slides Further Ahead of Weekly U.S. Supply Data
Crude oil prices slid further, reaching their lowest level in around two weeks amid speculation weekly supply data due later in the session will show a large build in U.S. fuel supplies.
The U.S. Energy Information Administration will release its official weekly oil supplies report at 10:30AM ET (1430GMT).
After markets closed Tuesday, the American Petroleum Institute said that U.S. oil inventories declined by 4.0 million barrels in the week ended September 29 as refiners raised output. However, the API report also showed a gain of 4.9 million barrels in gasoline stocks, while distillate stocks fell by 584,000 barrels.
U.S. West Texas Intermediate (WTI) crude futures dipped 30 cents, or around 0.6%, to $50.12 a barrel. It reached its lowest since Sept. 19 at $49.91 earlier in the session.
Meanwhile, Brent crude futures, the benchmark for oil prices outside the U.S., shed 38 cents, or 0.7%, to $55.62 a barrel.
5. Global Stock Markets Mixed
World shares hit their latest in a run of record highs, supported by optimism about global growth, but sentiment in Europe was soured by a political crisis gathering steam in Spain.
Asian-Pacific equities closed mostly higher, with stocks in Japan and Hong Kong leading gains, though several major markets in the region were shut for holidays.
Japan's Nikkei climbed to a more than two-year peak while Hong Kong's Hang Seng Index rose to a level not seen since May 2015.
Meanwhile, European shares were mostly lower in mid-morning trade, with Spanish and banking stocks suffering from the ongoing Catalonia crisis, while Germany's DAX was catching up after a bank holiday, boosted by strong auto stocks.
On Wall Street, U.S. stocks pointed to a muted open, with the major benchmarks pausing for breath after posting fresh records in the last session.
Read more by Soren K.Group
