Exams are taking a slight break from quite the cluster-f*ckedup-ness that it was last week, with maths, geography and econ all back to back. I have not been as plugged to the markets, given the more pressing goal of achieving dem grades to hopefully meet my uni offer.. Nevertheless, I have taken punts to bank in on dollar strength continuation, of which has not come very smoothly for my portfolio's equity curve; quite jagged in fact. In such a case, it's about time to reduce trade frequency even further, and be increasingly selective on opportunities. Looking over at Gold, some rangebound trading over the past month, might prompt to be an interesting prospect for a short-term long.
Technicals: The rapid move down on the 26th, which was off of the back of a broad USD move up across the board was not met with any significant follow-through, and Gold is instead, basing up in the range's lower extreme, with a pin and an upday on Friday, which may signal an upward bounce for the next couple of weeks. As long as $1180 is held, (which means its crucial to see the first few days of PA next week), a possible rally to $1215 should be on the cards.
Sentiment Negatives: In the near-term, the main risk present of which may keep Gold bid is the risk of a Greek debt default with the nearing deadline is one of them, of which is also carried with rising European yields. Although labor markets have somewhat tightened, the underlying low-inflation and low-growth backdrop in the US (negative GDP), might prompt US rate hikes to be priced further away in time. Since 08, the US has had 'blips' in quarterly GDP readings, where a rebound in seen in Q2 and beyond. I'd have to argue that it may possibly be different this time around, where a rebound will not be as strong as previously seen. Although the dollar's strength was thought previously to not harm the US economy, with its currently elevated levels, it's beginning to show some cracks for e.g. in exports, where a contraction of 7.6% is experienced. One similar occurence was in 2014's first quarter, where export activity was also negative. With the dollar significantly higher than it was in Q1, I would expect for exports to remain subdued, although if "weather" was the culprit, this may prove otherwise.
Falling Gold Volatility: Expansions in gold's volatility have been synonymous with price falls, clearing out buyers, notably in mid-2013, and late 2014. Although Gold's volatility has reached levels of which it based around previously before expanding, there's reason to believe that volatility might not expand as aggresively as it has before. The main risk to upside in vol, is drastic changes to the Fed's outlook to the rate hike timing, but since this is a trade to keep for a max. of 2 trading weeks, aside from keeping a close eye on the NFP next week and other econ. data, such risks should be subdued. Low volatility environment should also be one that is supportive of rangebound trading conditions.
Positioning Not Concerning: I've marked the extreme points with red circles and a red line on the COT lines. Level of positioning in Gold as well as per the COT, is not at alarming levels for a reversal to occur or the like, and has still some room to fatten up if longs do start to creep in to the market.Positioning wise, there's room for gold to be bid.
Okay, let's see how such an idea goes for the short-term... Econ on the 4th of June, and Lit on the 9th and 10th, and then it's freedom (at least until A level results come back).
Mostly a place where I write down my macro/RV ideas. Feedback more than welcome.