I am becoming bullish gold as it stabilizes
highlights
Thoughts on jobs and gold
Current Views
11MAY 0.7870 USDCHF call
cost ~22bps off 33 spot
Buy GCQ6 at 4610 (limit order)
Stop loss 4294 Take profit 5320
If a jobs report falls in the forest
As discussed in Monday’s am/FX, I think the risk is a stronger NFP as Initial Claims and other factors suggest a greater chance of a 4.2% UR not 4.4%. The question is whether or not people will care because the Fed long ago abandoned the 2% inflation target and oil, semis, and other factors are dominating, not economic data. With the hike side of the distribution still truncated in the U.S., one can reasonably wonder whether strong data matters.
This colorful spaghetti chart shows the push and pull happening with EURUSD right now as U.S. tech outperforms (red line going lower) while rate differentials (green) and oil prices (inverted, blue) support the EUR.
This is the push and pull facing many FX pairs as U.S. equity exceptionalism draws money but foreign fixed income offers better and improving carry.
On the question of: Does the jobs data matter? You can see it has been mattering less and less. This chart shows the 6-hour change in EURUSD post-NFP.
A frozen Fed means that transmission from economic data to monetary policy to FX is lower and that is the world we live in right now. Taking the same data from that chart, here is the rolling 6-month average of how much EURUSD moved in the six hours post-NFP. This is another reason my USDCHF idea from Monday was not smart. I went too early, but the event itself is probably less important than I was thinking it was when I wrote my piece that day.
The market cares little about the U.S. economy because we’re trading AI Capex, oil, and short vol/long carry—not U.S. growth. I suppose if you want to look at things through a macro lens, strong nominal growth and a Fed that refuses to hike is bullish gold and bearish the back end, but again… It depends a lot on oil and Iran’s response to the most recent overtures from the U.S.
Gold
Gold is becoming more interesting to me as the market has forgotten about it somewhat, and the “nothing stops this train” of higher deficits, good nominal growth, and flat or lower policy rates in the United States remains valid. Retail remains involved in gold to a degree that still makes me uncomfortable, but the two blowoff bottoms probably suggest that some of the paper hands have been purged.
Below you can see that GLD options volume is still high, and the r/wallstreetbets crew are still bullish GLD, but I don’t think it’s super worrisome given the price shows no sign of exuberance whatsoever.
The chart is forming a huge triangle, and the 200-day has held since 2023, so a move below 4300 means my bullish idea is wrong and something major has changed. Whatever your time horizon, a stop loss of 4250 looks correct, while you could either buy here as a big picture person who doesn’t care about entries, or you could try to buy at 4580. The big picture person can target 6000 while the more nimble look for a retest of 5400. I will put the more nimble version in the sidebar. All the levels I am describing here are in spot, but the trade in the sidebar is futures (GCQ6 trades about $40 above spot right now).
A recapture of the 100-day would start a bullish process that should resolve the triangle break and take us back toward the 5350/5580 failure zone.
Final Thought
New multi-year lows for USDCNH (sub 6.80). Massive support and take profit zone is 6.61/6.71.
Be prudent when selecting wishes.
