Session close: Settled at 1248.6 but traded more than $10 higher after Fed announcement
Fundamentals: Gold ha performed very well since the Fed hiked interest rates yesterday. Yes, you read that statement correctly; Gold has performed very well since the Fed hiked interest rates yesterday. This is because the rate was priced in and Gold longs have already been tormented enough over the last two weeks, they were ready to reposition. Ultimately though, as we have been hammering home, we believe the Federal Reserve, during this hiking cycle, will never be as hawkish as they were one year ago. To add to the bull case for Gold, there were two dissenters yesterday for the first time this year (voting ‘No’ on the hike; Kashkari and Evans). The Fed Dot Plot still prices in three hikes next year but there is without doubt more doubt over those three hikes then there has been and that means the Dollar is ‘dovening’ up. Tax-reform should be materially priced in by now, but still remains a hurdle for Gold as it could give the Dollar its last stand before yearend. But we remain firm that we like buying Gold ahead of the New Year with the expectations of a positive performance in January. The ECB is still yet to come and their policy announcement and statement is due at 6:45 am CT. ECB President Mario Draghi holds a press conference at 7:30 and currencies will be key for the Gold trade. Retail Sales is due at 7:30 am CT, a key number ahead of the holiday season. Manufacturing and Services PMI’s are due at 8:45.
Technicals: Yesterday’s recovery surely neutralized the tape at minimum. We don’t necessarily advise chasing this price action in a FOMO manner. However, we see support at 1247-1250 and this area, if retested should prove to be a solid buy opportunity over the next 45 days. Call our trade desk at 312-278-0500 and we would be happy to discuss strategies on both options and futures to take advantage of our expectations.
Resistance – 1262.8-1263.2, 1273.9-1276.8, 1289, 1303.4-1304.7
Support – 1247-1250, 1237-1241.7, 1214.5-1225
Natural Gas (January)
Yesterday’s close: Settled at 2.715
Fundamentals: Though prices stabilized through part of yesterday’s session, the bears are taking it lower again this morning. Stock data is due at 9:30 am CT and the draw expectations have dissipated slightly from -67 bcf yesterday and we are looking at a range of 60-65 now. However, a draw of more than the initial expectations of 67 bcf should spark some short covering as there is becoming little question on the colder weather over the next two weeks.
Technicals: The bears remain in control and there is no question here. We will continue to watch the 2.74-2.7565 level and we need to see a close back above here to even think about beginning the neutralization process. A close below the previous low at 2.656 will encourage further selling though we have to imagine the downside is limited.
Resistance – 2.781, 2.85-2.88, 2.946, 2.9825-3.01
Pivot - 2.74-2.7565
Support – 2.656, 2.486-2.522
Yesterday’s close: Settled at 124’195, the highest settlement in more than two weeks
Fundamentals: Prices have bled lower into this morning as things have settled in since yesterday’s Fed meeting. We have discussed this earlier in the report but yesterday was the first time all year that we had two dissenters (voting ‘No’, Kashkari and Evans) and this will begin to start the conversation about a potential third at some point next year as the Fed Dot Plot does have some laggards on three hikes next year (Click here to view the Fed Dot Plot). We have been adamant about buying the 10-year in the latter half of December and looking for stronger price action into and through January. Though we are in a hiking cycle, the Fed will never be as hawkish as they were a year ago and for that reason we believe middle to longer term yields will not go higher. You don’t have to look much past QE1, 2 and 3 to see that the bottom in yields came upon their launch to get the idea of perception. Feel free to call our trade desk at 312-278-0500 if you’d like to discuss this in more detail. We are also gearing up for more information from the ECB policy statement at 6:45 am CT and Mario Draghi’s press conference at 7:30. Retail Sales is also due at 7:30 am CT, a key number ahead of the holiday season, and Manufacturing and Services PMI’s are due at 8:45 am CT.
Technicals: Price action traded to a high of 124’21 and stalled between our two layers of resistance that come in front of a potential breakout point at 125. We have now altered this resistance level. Support comes in at our 124’09 level and has held the session low; watch this level today in order to signal that this market will consolidate for another week as it awaits more news on tax-reform. Today should be more data drive so stay nimble.
Resistance – 124’21, 124’295-125’00
Pivot – 124’15
Support – 124’09, 124’015, 123’27, 123’10, 122’29