Article / 25 August 2016 at 8:26 GMT

From the Floor: Gold out of oxygen ahead of Jackson Hole

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  • Gold looking at support of $1,310/oz ahead of Jackson Hole — Hansen
  • Gold miners ETF slide awaiting fresh direction from summit —  Garnry
  • Fed chair Yellen could offer something 'profound' at keynote speech — Hardy
  • Could be a push for more fiscal-side help — Hardy
  • Markets 'desperate for some direction' — Van-Petersen
  • EURUSD support at 1.1250 as one-month vols hold up at 8% — Norup
  • USDJPY could go to 95 if BoJ doesn't at least hint at helicopter money — Hardy
By Martin O'Rourke

Over your shoulder

Gold is looking over its shoulder Thursday morning at the $1,310/oz and $1,300/oz support areas ahead of the Jackson Hole summit as the early-August rally towards $1,400/oz fades into distant memory.

"Gold looks heavy as the dollar once again reverses earlier losses", says Saxo Bank's head of commodities strategy Ole Hansen. "It needs to break below the $1,310/00 area for a confirmation but that won't happen before Jackson Hole".

Gold was at $1,325/oz at 0655 GMT.

If you didn't know (and if you didn't know, where have you been?), US Federal Reserve chair Janet Yellen speaks Friday and investors who got in on a plunge in the gold miner's ETF (GDX:arcx) will watch her every word with due care and attention before deciding their next move.

"We were very lucky to get in on this move which shows a 10% slide in the gold miners ETF since August 17", says Saxo Bank's head of equities strategy Peter Garnry. "If we get a hawkish Yellen, then that means probably a stronger dollar, weaker gold and an extension of the slide".

"It's much about anticipated positioning ahead of Jackson Hole for a stronger dollar", says Garnry. "If it doesn't happen, then we will probably see a reversal. I think this move is a little too aggressive".

Gold is in a wait-and-see game and if we fail to see some hawkishness, it will be right back up there again", says Hansen, speaking from the Copenhagen floor. "It's the dollar that is the primary driver. Even into this gold weakness, we've seen some ETF buying pick up and some of the tactical traders out again".

The gold miners ETF since August 17
 Source: Saxo Bank

Yellen's moment

Yellen of course is not particularly noted for her speaking skills, but tomorrow's keynote address to her fellow central bankers could be a "milestone" in the words of Saxo Bank forex head John J Hardy.

"I actually think she may say something that is profound for the long term even if the near-term implications are minimal aside from some volatility", he says. "The Fed might make it clear that with the natural interest rate very low, it might want the fiscal-side policy to come on board. This is an important milestone".

Saxo's Asia macro strategist Kay Van-Petersen expects that whatever does emerge from tomorrow might prove a disappointment in terms of an immediate catalyst.

"The market is desperate for some direction", he says, speaking from Saxo's Singapore hub. "Not much is happening but perhaps everyone is expecting just a little bit too much out of Jackson Hole tomorrow".

Van-Petersen has a word of warning though for those who like to take a punt in the emerging-markets space, pointing to ripples out of Mexico, Turkey and South Africa.

"The emerging-markets ETF is up about 33% since the January lows", he says. "Given the cheap volatility, is it time for Puts"?

Emerging-markets ETF up 33% since January but now could be time for Puts
 Source: Bloomberg

USDJPY to 95

While there is a feeling for Yellen to potentially go big Friday, what if she waxes dovish as she has so often before?

"If we don't see something, then we could see chat regarding helicopter money in Japan increasing ahead of the next Bank of Japan meeting on September 21," says Hardy. "It's been growing already and that could see at least some real hints of action from the BoJ on helicopter money if they are to avoid a plunge in USDJPY to 95".

"That would be a good area nevertheless to be structurally long on USDJPY", he adds.

EURUSD is another pivotal pair looking to Yellen for further direction. "The key for bears is 1.1250 for a test to 1.10 and below after Jackson Hole which is my preference", says Hardy. "If it's dovish, then we're going to be back testing towards 1.15 again".

One-month EURUSD vols meanwhile continue to hold up at around the 8% mark, "despite realised vols running at sub-6% levels", reports Jeppe Norup from the forex options desk.

"The coming European Central Bank and Federal Open Market Committee meetings are holding up the vol but there has been less demand for euro Calls since we came away from the 1.1350 level of two days ago and we are back to the more normal-market situation of favouring Puts in EURUSD over Calls".

EURUSD also awaiting a firm hand on the tiller:
Source: SaxoTraderGO

And finally...

Oil's retreat from $50/barrel continued after an unexpected rise in stocks Wednesday pushed WTI towards $46.50/b from where a test of $45.60/b is on the cards.

"We're building a little bit of support here around the mid $40s", says Hansen. "We'll only see a return to the upside if it can break $48.60/b".

WTI was at $46.87/b at 0655 GMT.

 Gold miners will be braced for moves after Yellen's speech Friday. Photo: iStock

Martin O’Rourke is managing editor at

Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.


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