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USAGOLD/Peter Grant/06-26-17
Gold remains defensive after getting slammed in early European trading by a huge $2 billion notional sell order in the futures market. Some are speculating that this was a “fat-finger” trade, but why are there never any “fat-finger” buyers in the gold market? The yellow metal is already more than $10 off the intraday low.
While the trendline off the mid-December low was temporarily violated, the 200-day moving average has successfully contained the downside thus far. Zerohedge quotes Citi analysts as saying, “we have confirmed triple weekly momentum divergence on Gold and as a reminder, this is one of our favorite indicators to suggest that a trend (downtrend in this case) is running out of steam.” In short, they seem to be suggesting that this pullback is a buying opportunity.
I’m inclined to agree based on this morning’s soft U.S. economic data and the resulting downgrades to Q2 GDP expectations. Weak yields and a weak dollar suggest that the market remains skeptical about the September rate hike, despite persistent hawkish FedSpeak.
Fed funds futures put the odds of a September hike at a meager 12.8%. Therefore, I expect the hawkish tone to persist as the Fed works to put the September hike back on the table. Janet Yellen will have her opportunity to try and set that table when she speaks on global economic issues tomorrow in London.
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