Gold nears Multi-year High on Dovish FED & Risk Off Trade

Hi guys and good morning from London, 7:40, uh, Friday the 14th of June, last day, trading day of the, the week. We'll have a quick look over the markets, how we're trading currently, uh, just coming into the EU cash open. We'll have a look at the market moves from yesterday, the headlines from overnight. And the calendar for the remainder of the day, and we'll have a quick look ahead at next week. Quick look over the charts just to begin with, as we are seeing a bit of risk-off in the market. We saw a bit of this yesterday, most notably gold, which we'll come on to in just a moment, just pushing up to its higher point. But T-notes, as you can see here, just bring in— into the picture, it's now at the high of the day. Worth probably keeping an eye on this this trend, which we're not far from testing, would also come in, uh, in line perhaps with some of these highs. But T-notes back up to the higher levels that it's had for quite some time, uh, helped of course by tensions between Iran and US yesterday, uh, the dovish Fed as well, which has helped gold, which has helped gold push on. You can see here a really strong push this morning up to and above $1,350, $1,357 trading. Having a look at this on the, the longer term chart you can see just how high we are. The top level here that I've just drawn a horizontal line on, it goes back to the 11th— or the week of, I should say, the 11th and, uh, 20— 11th and 5th of July 2016. Not too far away from that, could easily do that in a, in a day. Before that, worth keeping an eye, uh, of course, on this trend line. So this trend line starting in 2016, we had a couple of tests in early January '18 and then April as well. We're not too far away from trading that on the week. Can we make it? Can we finally break out? I know someone who has been calling this for a very long time, Will DeLucy, uh, will be, I'm sure, very happy to see this, uh, push on. But worth noting, every time we have come back up to this level, we've seen a strong push lower. So let me know in the chat and we'll come back to this later. I just want a simple yes or no. Do you think gold can get back above the high of the 2016, uh, July and June levels by the end of the year? Currently trading, uh, just above $1,350. Can we finally now push higher and break those levels? We'll come back onto that in a bit, uh, perhaps really reasons why. Just a yes or no in the, in the chat would be Super. Over to the headlines from, from overnight. Um, it was this time yesterday, or just— no, it was this time yesterday, it was really getting moving. Oil prices had pushed higher. We had the, the Gulf of Oman tanker attacks. Two of them were under attack and oil pushed higher. A quick, uh, push to, well, the high of the day. We then eventually did push on a tiny bit more. You can just see here, if I just bring oil into picture. We had a decent move higher just after 7 o'clock yesterday on report of this. Um, if I just get around it where it was, 7 o'clock, up to those highs was over 4%. Since then we have just traded sideways. The US have accused Iran, Iran have called those accusations unfounded. So what could this mean for, for oil price? Uh, well, at the moment I guess the market is telling you it's not too sure. It's not too sure. While it's obviously nicely above where we were trading, you know, just over or just under a dollar still, it is starting to drift back lower. Those American officials released images last night showing that Iran was involved in the attack on those tankers near the entrance of the Persian Gulf this time yesterday. One pair of incidents that have raised tensions between the US and and Iran over the past day. So it's already hostile tensions between the two. Is this going to be, um, the catalyst to make things worse? And if so, what could that mean for markets? Because certainly yesterday, and it, it was relatively tricky. If you're coming in, uh, 24 hours ago and you're seeing this for oil push higher, uh, it's— yes, understandably oil price goes higher, but risk assets should appreciate, and they did. T-notes, gold, uh, and I have a quick look over at the yen. It did as well in the morning, uh, into the afternoon, sorry. Um, but equities also pushed higher. The DAX on the open higher, dragging the S&P and NASDAQ to its highs as well. Um, so definitely, I mean, from that, it perhaps didn't quite make sense. Now you had the energy sector within the S&P nearly 10%, which would have helped drag things. We know how inflated these markets are. Yes, the, the Fed are dovish, but nothing majorly new yesterday. So I was a bit surprised to see this push from 8 o'clock to be sustained. It was very choppy in the afternoon. We— there was a couple of times it looked like we were threatening to come back down, and we are a bit to an extent now, but very much contained within this range. And, uh, be worth keeping an eye at 8 o'clock to see just what the DAX does. But you can see here really that lower point on the pivot yesterday, 2882, to the high just below 2900 acting as resistance. Perhaps a bit unusual move in equities, more so going off the, the dovishness of the Fed, and helped a bit by the fact that oil price was higher rather than looking into the fact that this could be an escalation. Um, and gold and T-notes would tell you the opposite story, and that going off that risk move. One to keep an eye on anyway, certainly now in markets. Just having a quick look, the DAX under a bit of pressure, and the NASDAQ is actually now the lowest it's been since, uh, in that half hour period after 8 o'clock yesterday. So perhaps we're seeing a bit of an unwind here. Gold on those highs, T-notes on those highs, uh, and yen— if I just have a quick look to my left— is also on its high of the day, uh, and yesterday's resistance level as well to worth keeping an eye on. Things perhaps are starting to, to pick up. Just on those— that question from Gold earlier, every answer so far has been a yes. So it does look like, you know, the sentiment is very much favoring a push higher, uh, for, uh, for Gold there. So hours before— so we're going back to this story, sorry. Hours before, um, the central command provided its evidence to bolster the US accusations. Pompeo pinned the blame on Iran but declined to take any questions. The US will defend its forces, he said, interests, and stands with our partners and allies to safeguard global commerce and regional stability, Pompeo said, and obviously noting that Iran had previously threatened to curtail oil transport in the Strait of Hormuz. Roughly 30% of the world's, uh, seaborne flow of crude oil and products pass through that strait each year. So nearly a third of oil, of oil, all oil going through there. So a closure of that would, uh, lead to major, uh, disruption of, of global oil supply, supplies. And evidently, uh, we haven't seen that yet in the market, but you would have a very big push to the upside I mean, just looking at oil price here, you can see how far we have come down. If that was to be the case, and this again would be an escalation over a period of days and weeks, but you're looking back towards the highs of the year if this was to be the case. I saw an interesting tweet, um, yes, on the 12th, on the morning, and it makes you, makes you think. If you're a conspiracy theorist, you're you know, you're thinking, well, someone had a bit of inside knowledge here and wanted to just to get along in. So this was the, the tweet, um, around the evening on the 12th. It says 1:45 there, but of course that's American time. Uh, crude oil has lost more than 2.5% during the day in 6 out of the last, uh, 15 sessions, falling to a multi-month low. 6 months after the other times this happened the last 30 years, oil returned +47, -3, +47, +7, +33%, and +44%. If, uh, if you like your stats, uh, what a place to have got long on oil. If you like your conspiracy theories, well, someone might have just had a bit of inside knowledge. And looking at the area we're trading now in oil, this is now a daily continuation, uh, certainly. And I'm just going to move the recent price action in this square. If you're looking at price coming down. There was certainly a zone, if you like, looking at back at the, the November 2018 lows coming up to the February lows as well. It's just a really nice area. I know if we take our mind back to the beginning of February, I remember Piers was doing a briefing talking about the inverted head and shoulders here around this point. You can see shoulder head, shoulder, and then you've got that breakthrough. So certainly a very key level. If you look in here on the futures, sort of going from $52.31 to the low there, it's not going to get it perfectly, uh, but let's just call it— just let's call it $51, uh, as a decent area of supply. We've come back into that level now, a failed test to push low again. Just purely technically, it looks pretty good here. If we were to see an escalation, oil should push higher. Um, but just to where I think will be, will be pretty key. I think it would be out the woods, if you like, and maybe drift higher if we can get back above this key level from the 8th of March. We had a recent test of trying to do that just above $55 on the futures, uh, that didn't want to go. And that's looking around $55.16. If we can get back above there, certainly medium-term bulls will, will be be favoring a push higher. One to keep a watchful eye on anyway. So back to, uh, well, back to the, the headlines from, from overnight. Um, and there's a really good— I think I've still got it on my email here— uh, report, if you like, from, uh, John Kemp, who works at, uh, Reuters as a market analyst. I'll send this out to our guys. But anyone watching, feel free to tweet me your email or whatever, and I can send this over, or at least a link to it, where it sort of goes over the risks of an uncontrolled escalation. It's a fairly lengthy report, as you can see, but something to read over the weekend, prepare yourselves for next week. I think could certainly be you know, a bit of light reading on Sunday, Father's Day, here to, to take, uh, to take into account what could potentially happen over the coming days, uh, or so. Um, it goes on to this report anyway, just talking about the, the current state of high tension. Hawkish elements in both the US administration and the Iran, not just now but recently, but this may exploit, uh, an incident to push respective leaders to, to escalate here. And the vulnerability of the tankers of the Strait of Hormuz is precisely the sort of incident that could spark an unplanned and uncontrolled escalation. 30% of all oil going through there, or seaborne oil I should say, going through there every year. This is a large amount. This could be a massive issue. At the moment, the market's telling me, or telling us, that it's not too bothered. If you're Talking about something so big, and if we go back to oil just quickly here on the chart, and I tell you that it is up— it was set just after 7, here we go— and it's just up 1.3%. I'm sorry, but the market's telling you it's not interested right now. Worth being, of course, aware of what could happen, uh, and the escalation that comes with that. Just as we see the yen just breaking above that resistance from last night, T-notes above the high. And gold trying to push above a key level, uh, from before. But just being worth, worth being aware just how important this area is. Hormuz is, is not necessarily the most important, or because the volume of oil that flows through, but because of an ultra-tense flashpoint that could spark a much broader conflict between both sides. And they, although while insisting they do not want this and I don't necessarily think it's going to happen, uh, it would lead to oil price pushing on and on. So any comments that come out throughout the day today, worth keeping an eye on. It does almost seem that this has just been pushed to the side this morning. I would have expected, to be honest, a bit more in the way of commentary overnight. I'd expect them to come in and perhaps see oil a bit higher following comments. To be honest, it doesn't look like this is much more of a story right now. Any escalation, any further accusations, I'll be looking for oil longs. And that might just be what saves the S&P here, is your safe havens are pushing higher, admittedly helped by, uh, perhaps a weaker dollar, although the dollar index right now is pretty much flat for the day. Elsewhere, trade comments, um, well, yeah, trade comments, uh, overnight, obviously Trump yet again speaking to, to reporters. He was saying yesterday how he's still waiting for a response from Xi. Uh, it's an interesting one, one with trade. Uh, having a look over, we'll just bring the S&P up. You can see yesterday helped by oil, as we mentioned, but it's choppy. If we have a look at the, the week where we open, I'm going to draw that horizontal line there. We had a brief push below, we're now back above. Another up week, but range-bound, choppy. No real developments in trade. And I think that's the way to look at it. I think he's gonna step up the hawkish ante, especially if Xi doesn't confirm they're going to meet at the G20 at the back end of this month. And that in turn would lead to stocks just coming down a touch. While I've said repeatedly I think there will be a deal done and stocks will break the all-time highs again, the timing of that could be tricky. And, uh, just going back to what Trump had said. Sorry, I didn't have the charts up there. I'm just having a look there at the S&P and the choppiness of that. The, the gap fill happened Wednesday, Thursday, but we're now back above. So going back to those comments from, uh, from Trump yesterday, uh, and Larry Kudlow as well was speaking while warning Beijing they may face consequences if it refuses the invitation. He was saying Trump has indicated his strong desire for a meeting. We know this. But the meeting is not yet arranged formally. So I would just start from that and see how it plays out. He was saying this in Washington. Gold again just pushing higher. So if you're, if you're in this position here, gold, you know, just pushing on above 1355, 1358 trading at the moment. Asked if possible they won't meet, Kudlow replied, I don't even want to comment on it. I'm just saying my president has indicated a strong desire to sit and meet He's also indicated that the meeting doesn't come to bear, there may be consequences, but he would prefer the meeting. So the 28th and 29th, Japan, that is when the meeting is, is going to be. Uh, whether that happens or not will move markets. So over the weekend, keeping an ear out for any developments on that. Any developments for, for oil as well will be what potentially drives these markets going into next week. At the moment, well, last month, as those trade talks broke down, Trump raised tariffs on $200 billion of Chinese imports and started the process to slap another $300 billion, which will cover virtually all remaining goods coming into the US from the world's second-largest economy. So we'll keep an eye, we'll keep an eye on that. We'll have a quick look over the calendar. If I just bring this into picture here for next week, or at least the, the rough plan for now, this is currently what we're expecting. So no, uh, you'll notice on here nothing to do with, with Trump as of yet. So I'll keep an eye, uh, throughout the day today to update this. But it's a central bank heavy weekend, uh, week I should say. You've got, uh, Wednesday the, the Fed, uh, Thursday or Wednesday overnight you've got the Bank of Japan, and then you have, uh, the Bank of England, uh, as well on there. I was gonna say, yeah, there you can see Bank of England also on Thursday. So speaker-wise, in the build-up to that, is going to be limited, uh, so worth obviously just planning ahead on the days you really want to be involved. Likelihood is, I mean, just looking at Monday, just how quiet that's going to be when you've got the Fed on Wednesday. Tuesday likely to be the same. You've got a bit of European data out in the morning. But likelihood is Monday and Tuesday are going to be quiet, uh, as we build up into the Fed, uh, in the evening, 7 o'clock UK time. We'll of course go through this in a lot more detail on Monday, but it remains to, to be seen if there is any developments overnight, uh, over the weekend regarding what the Fed might do. Currently it's looking like they are gonna hold rates as they are Yesterday anyway, it was about 24% chance they were going to cut according to the FedWatch tool. So it could be a pretty good, uh, one-two trade that, that evening, uh, one, uh, the evening release 7 PM UK time and then the, the press conference from Jerome Powell half an hour later. Moving on to Brexit, um, if I just bring in the the picture here. Give me one second. So this was how we finished the first round of the, the ballot here. Boris Johnson, uh, 114 votes above the 105 threshold you would need to be in the last two. Uh, he's gonna be there barring a major surprise. We're just having some Chinese data coming out here. Retail sales better than expected. Industrial production worse than expected, so mixed data there, uh, from, uh, from China. Not going to move the markets too much unless they were both better or worse. Worth keeping an eye on, uh, stocks, how they move here, and, and the Aussie as well, which came under a bit of pressure. Just, uh, to divert here, the Aussie dollar, uh, came under pressure as we are now looking at another rate cut. The New Zealand dollar also under pressure this morning following some poor data. Back to Brexit, just having a look at those that did make the cut: Boris, Hunt, Michael Gove, Dominic Raab, Javid Hancock— although reports overnight that he is going to quit— uh, and Rory Stewart. Fair play to him for getting through. Nice to see a bit of fresh air into politics. The 3 that didn't quite make it: Lidsum, who was at one point the third favorite, even yesterday was near the favorites. Believably, uh, and Harper and McVey not making, uh, the cut. Just having a quick look at the, the plan. I did a tweet on this yesterday, uh, so we do— well, this is quite a good one from BBC Politics. Again, I can send this out. So each candidate needs, uh, 8 MP backers. We've done that first round where the 17 votes was the cutoff point. 7 of those got through. Hancock may go. We go into the second round, which is on Tuesday, uh, where they now need 33. Uh, we will then have another vote Wednesday, Thursday, and on— or on Thursday if needed to get us down to, uh, the two. In terms of the, the debates, we do have one on Sunday on Channel 4, uh, in the evening. However, this was yesterday, going off yesterday, not all candidates are confirmed. The BBC to also hold a live event 8 PM on Tuesday. This is going to be 2 hours after the second ballot, uh, vote results are released. So worth keeping an eye on that into the evening. Um, further ballots needed, as I mentioned, on Wednesday and Thursday until we are down to the 2, and then the voting begins on the 22nd, 4 weeks later. We will know who the next Prime Minister of the United Kingdom is. BBC, ITV, and Sky News are all expected to host debates as well, um, uh, so worth keeping an eye on developments for that. They haven't been confirmed as of yet, but you've got to imagine they're gonna, gonna, gonna want to, to get on, um, as well. Actually, just having a look at that industrial production number Uh, it was actually a fair bit worse. So worth keeping an eye on, on, on stocks here, just if you were to, to get a follow-through. Coming in at 5%, uh, down 0.4% of the expected figures. And again, if you like conspiracy theories, you also know that Chinese data perhaps might be meddled with a touch. So moving, uh, moving on, let's have a quick look at, uh, just the— those votes and and how things had changed. If we have a quick scroll down, Boris, you know, before, um, the vote— and I'm going to say it again and again because they're so useful to follow, this, this Guido Forks— you can see they released before how the candidates stand in the build-up, uh, obviously from public MP backing. Uh, there's about 70% of MPs that had publicly backed, and you can see all of this here is up. No Nothing is down. It's very, very, uh, accurate. Of course it's going to go up as more MPs have to vote on these days. So definitely worth keeping an eye on this website and on their Twitter in the build-up for Tuesday. The pound reaction that we saw yesterday— I'm just going to bring this in— it's probably actually exactly, unbelievably, where we were, give or take 2 ticks, uh, from where we were at 1 o'clock following the, the release of the vote. So Boris Johnson more than expected. Now you could have argued if that was to be the case a week ago, the pound would be on the, the lows of the session. However, in the build-up to, uh, this vote yesterday and Monday and Tuesday, he came out and was a lot less hawkish on the idea of a no deal. So this is obviously positive for the pound, uh, so therefore that downside was limited. Rory Stewart getting through, I think, was the reason perhaps we pushed a bit higher. Can he gather any further momentum? But in reality, to stop Boris winning this is going to be very, very tricky. I watched a bit of Question Time yesterday, which I find so hard because they just shout at each other and it's not very pleasant watching. But there, um, you know, there you had people digging out Boris. You had people sticking up for him. He's almost not having to do a single bit of work here to get this, to get this job. Whether he can actually get anything through and, and whatnot, I'm not too sure. But I stand by what I said yesterday. I think he's the only Conservative MP that could win the next general election. So perhaps it's time for people to put the party ahead of their political beliefs. We, we should, we should, uh, we shall see. Looking at the calendar for the remainder of the day, if I just bring this into picture here, we've had that, uh, Chinese data out. Overall mix, we did have some better, but the industrial production was worse, uh, just on the lower bound of the range. So not enough perhaps to spark a massive move lower. Going into this morning, we have some Italian CPI We've just had Tommaso back from, from Italy, so I'm hoping I'll be able to get a bit of inside trading knowledge on, on that one. 1:30, the US retail sales, always a choppy release, short-term volatility. If it's really bad, might just help, um, those, uh, ideas that another rate, uh, or that a rate cut is going to happen. Uh, we'll, we again shall see on, on that. Uh, 2:15, industrial production, business inventories at 3, along with Michigan sentiment, the preliminary figure there, 98 expected from the previous, uh, 100. Speaker-wise, ECB's Lautenschlager at 11 and Bank of England's Carney at 1:55. Worth keeping an eye on Carney, as of course we do have the, uh, central bank meeting, uh, yesterday— uh, yesterday, on, uh, Thursday, I should say. Here, just looking at the Let's see if I can just zoom in on this. I just put this together roughly yesterday. Um, if you just give me a second, if you can see this, I think you can. I'm just going to work out how I can remove the thing on the left. There we go. So this is roughly put together. Of course, Wednesday and Thursday going to be an interesting 24 hours regarding central banks. Um, recent talk, the Federal Reserve have obviously been the most dovish, the Bank of Japan likely to keep things the same, but a lot of talk about them having to lower interest rates. So any talk on that, or, uh, there's been rumors of the Japanese version of the TLTRO, the European version of that, the Japanese version of that, or paying banks to lend, uh, has also been rumored. Any talk or development on that would see a decent move, uh, lower for, for the yen in a currency that has been strengthening so much recently due to safe haven flows and trade war stagnation. So it could be an interesting one. The Bank of England, if anything, have been more hawkish out of, out of the three. Bank of England MPC members saying that the, the next move may well have to be a rate rise and that the market isn't pricing that in. Again, expected to hold at 0.75, but the vote split will be interesting. The bloke Vote split will be interesting there on Thursday. And you can see here just about, uh, the Fed expectations at the moment according to the FedWatch tool. 24% chance of a cut, 76% chance of no change, and of course 0% chance of a hike. For me, that's a really good opportunity, uh, should we then get a cut. And you would likelihood see a fast money move for weakness of the dollar and that could well get gold quite, um, quite high above those key levels. Having a look at gold here, you can see just the extent of that move, uh, today and really in June, really pushing on here. Uh, worth keeping a closer eye on that going into the remainder of the session. As usual, any questions, please, uh, do let me know. Um, I hope you all have a great trading day and an even better weekend. And for anyone listening, uh, in Canada, congratulations to the Toronto Raptors for, for winning, uh, the NBA championships. Um, it's, uh, gonna be a relatively quiet morning here, I would say, but certainly where we finish the week will be interesting going into a very key one next week with the central bank meetings, uh, as well. I hope you have a good trading day and a good week ahead.