RJO FuturesCast

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Metals

February Gold, Chinese Data to Spoil Everything?

Posted 12/14/2018 9:06AM CT | Joshua Graves

February gold is trading back down toward the 1225 mid-range level where we’ve spent the better portion of 4 months, driven mainly on the Chinese data this morning. China posted a clearly disappointing retail sales number for November of 8.1% compared to the guess of 8.8%. This is what is driving almost all commodities lower this morning. Among the data was also the Chinese industrial output number of 5.4% vs 5.9% that was expected.

Other key reasons gold is down this morning are the most obvious and historically important for driving gold one way or the other. The first, is a very strong US dollar that is making new highs. The second, is a tone that suggests a more hawkish US Fed at the upcoming meeting on December 19th. Gold is trading down roughly $10 this morning at 1239. After breaking out above 1256 just briefly on Monday. I think that gold is still going to be supported in this range, but a new catalyst is needed to get the gold bulls excited again. If the fed were to take a step back on a rate hike, it would likely be seen as a surprise and move gold well above recent highs. The trade is discounting a rate hike at a coin flip essentially, as compared to as high as 90% just a few months ago. Stock market volatility, and mixed economic data has the fed concerned that rate hikes too aggressively could derail the soaring US economy.

Gold Feb ’19 Daily Chart

Gold Feb '19 Daily Chart

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Joshua Graves

Senior Market Strategist
Josh began his career in May of 2013 after graduating from Purdue University, West Lafayette. He received a degree in Agricultural Economics, with a Certificate in Entrepreneurship. He started at Paragon Investments in Kansas, the heart of wheat country. While working there he developed long term relationships with corn, soybean, and wheat producers, speaking with them on a weekly basis. His goal was to market their physical production more effectively through tracking basis, as well as hedge their exposure in the grain and cattle markets through a variety of futures and option strategies. He then moved to Florida to work for PFL Petroleum, a physical biofuels brokerage, and gained significant exposure to OTC and physical energy markets. Trading has been a passion from day one of his career. In his free time he stays active in downtown Chicago, attends sporting events, and holds an FAA Private Pilot’s License and flies Cirrus and Cessna aircraft regularly.
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