GOLD PRO WEEKLY, November 30-04, 2015

[Sive Morten]

Fundamentals

Gold dropped almost two percent to a near six-year low on Friday, set for a sixth straight weekly decline under pressure from a firm U.S. dollar and prospects of a U.S. interest rate rise next month.

Spot prices were down about 2 percent for the week. U.S. gold futures hit a six-year low of $1,051.10 an ounce before closing down 1.3 percent at $1,056.20 and skidding to a sixth straight weekly decline.

Gold was hit by the dollar's advance. The greenback was trading near March's multi-year highs against a basket of major currencies

The chatter is all about exchange rates ... Gold is down on the dollar," said Phillip Streible, senior commodities broker for RJO Futures in Chicago.

Greenback-denominated commodities like gold become more expensive for foreign investors when the U.S. currency rises.

The Federal Reserve is widely expected to raise U.S. rates for the first time in nearly a decade when it meets next on Dec. 15-16. Higher rates would rise the opportunity cost of holding non-yielding gold and could dent demand and boost the dollar.

"The omens are not positive for gold in the lead-up to the December rate meeting," Societe Generale analyst Robin Bhar said.

Buying in China has been good but has been unable to support prices, traders said.

Premiums on the Shanghai Gold Exchange, a proxy for demand in China, were trading at $5-$6 an ounce, versus $3-$4 at the beginning of the month.

However, other physical demand indicators were not upbeat.

India's gold buying in the key December quarter is likely to fall to the lowest level in eight years, hurt by poor investment demand and back-to-back droughts that have slashed earnings for the country's millions of farmers.

China's net gold imports from main conduit Hong Kong fell in October from a 10-month high, data showed on Thursday.

Precious metals funds posted their biggest net outflow last week in around four months, said Bank of America Merrill Lynch.

In other precious metals, silver , platinum and palladium were all heading for weekly declines. Silver was down 1.2 percent at $14.08 an ounce, platinum was down 1.9 percent at $834.25, not far off a seven-year low hit earlier in the week. Palladium dropped 1.5 percent to $547.25.

CFTC data shows further contraction of net long position, but open interest is also decreased. SPDR Fund shows outflow again - storages dropped to 655 tonnes.

Speaking honestly guys, somehow I feel that gold is near to drastic reversal. May be this will happen not today or tomorrow, may be within half a year, but... imbalances of political turmoil in the World and gold price looks stunning. Gold probably could reach 1000 or even lower levels, but reversal will be fast and furious, absolutely unexpected and stunning...

Technicals
Monthly
So, Goldman expect bearish continuation to 1000$ area and we have to return back to medium-term bearish view as drop was really miserable within last 2 weeks. Today we will expand view down a bit, since mostly all our patterns have been completed.

We still think that currently gold should be mostly driven by geopolitics, rather than economics. This driving factor creates absolutely new scale of uncertainty and leads to very fast changes on Globe political situation. That's why we suspect that gold market hardly will fall dramatically, since we're just in the beginning of Middle East tensions. Currently we see clear signs that situation will become worse in nearest 2 months or so. If you would like to see relatively true picture - watch for "zero hedge fund" website materials as on policy as on economy. These guys know what they talk about.

As market gradually will start to come to the same conclusion as gradually situation on gold market will start to change in positive area. Still, 1000$ area is relatively close and these two events do not contradict to each other, just because they are of a bit different time scales.

Speaking on breakeven points between bullish and bearish sentiment - market should show significant upside action and form bullish reversal swing to destroy current bearish domination. It means that gold has to exceed 1310 area.

So, 1050 level mostly has been hit (just 2$ left). Minimum target of VOB pattern has been completed and we come to this moment 1-2 years. Also market has hit some other targets. Bearish dynamic pressure also has done well since market has created new low.

Still guys, we have to say that as VOB as pressure patterns are not necessary should stop at minor targets. Gold could continue move down to next ones. Market just has completed what was necessary. And if we will take a look over the horizon a bit, then we will see nice area around 850-890 level - Agreement around major Fib support, and monthly oversold.
If we recall dollar index chart and that it should continue move up, then it will be not a surprise to see gold drop lower.
Actually I see some artificial action in this gold weakness. I can't prove it, but something curious with this move down... it makes me feel uncomfortable.
Anyway, we'll see. Since all major targets have been hit - now it is a question of whether gold will hold below 1050 or not.

Weekly
So here gold also has completed our trading plan for the week, since last time we've discussed possible downward continuation and that we should be ready for this.
Now it seems that gold still has some potential of decreasing in short term to 1025-1037 targets. This is AB-CD, butterfly 1.618 extension. But this move for another 25$ should be treated as sub-product of major action to 1050$.
After that, as strategical target mostly has been reached - we probably will need to take some pause before we will get clarity with long-term, i.e. strategical perspectives of gold market. Tactically we will continue to monitor gold on intraday charts and probably will get some short-term trading setups.
But from strategical point of view our major question - will gold move up, back above 1100 area or will hold below 1050. Depending on what we will get - our long-term targets will be different.
On coming week, we first will watch for reaching of 1025-1038 area. Right now it seems possible.

Daily
Here, as our argue between morning star and grabber has been completed - bears won and our bet was correct... here we could just wait for other patterns. Most probable seems some DiNapoli one, based on recent thrust down. Thrust itself looks very nice. What's about DRPO? Well, may be.. we already have 1 close above 3x3 DMA... May be some other pattern will be formed...
Anyway, right now we just need for new patterns and signals. They will clarify the side which one we should follow:

4 hour
This chart just shows completion of our Friday setup and increases number of completed patterns. On Monday we probably could count on minor bounce to 1063 area - former low and WPP, but what will happen next will depend on market reaction on 1050 completion.

Conclusion:
We think that market participants gradually will start to understand that situation in World is changing, Globe uncertainty is growing and this will lead to re-assessment of gold value. But this is long-term process. That's why gold still could drift slightly lower and reach 1000-1050 area, or even lower. But if reversal will happen - it probably will be fast and furious, absolutely unexpected. In our long-term trading plan picture will depend on how market will response to 1050 level. Definitely speaking, whether gold will hold below it, or return back above 1100$.
In short-term perspective we could count on retracement to 1063 area of WPP on Monday.


The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.

 

[Sive Morten]

Good morning,

Recent Reuters comments - Gold jumped nearly 1 percent on Tuesday, extending gains above a near-six-year low on short covering and as the dollar dipped from multi-month highs.

The dollar dipped against a basket of currencies after hitting an eight-month high in the previous session.

Speculators are holding record short positions in COMEX gold futures due to a looming U.S. interest rate hike, but this could help gold prices in the near term, said analysts.

"Gold has the potential for further short covering to take prices higher, especially if emerging market physical demand stays strong," HSBC analyst James Steel said.

But the key influences on gold this week would be the European Central Bank meeting on Thursday and the U.S. nonfarm payrolls report on Friday, he said.

If prices can hold above the $1,070 resistance level, more gains can be seen, said MKS Group trader James Gardiner.

Gold's gains over the last two days have taken it away from $1,052.46, the metal's lowest since Feb. 2010 hit last week. Bullion posted its biggest monthly drop in 2-1/2 years in November with a 7-percent decline.
Investors have been positioning for a U.S. rate hike, expected this month at the Federal Reserve's Dec. 15-16 policy meet, by selling non-interest-paying gold.

Hedge funds and money managers raised their net short position in COMEX gold to the biggest on record in the week to Nov. 24, data showed on Monday

Assets in SPDR Gold Trust, the world's top gold-backed exchange-traded fund, are at their lowest since September 2008.

Friday's U.S. payrolls report will be closely watched for clues about the strength of the economy and its impact on the Fed's monetary policy. A strong number, after a surge in job growth in October, could cement expectations that the central bank will deliver its first hike in almost a decade.

The ECB meeting will be eyed for any impact on the currency markets.

In the physical markets, there were signs of robust demand.
The U.S. Mint's sales of American Eagle coins surged in November, with gold nearly tripling month-over-month and silver already reaching a new annual record as bullion prices fell to multi-year lows.

Premiums on the Shanghai Gold Exchange, an indicator of buying strength at top consumer China, were at a healthy $5-$6 an ounce.

So, as you can see overall market assessement of situation stands very close to ours one. As we've said in weekly research - market has hit major long-term targets. Some bounce probably is inavoidable, but absolute clarity we will get when we will see the strength and height of this bounce. Moving above 1100 will be strong challenge on breaking long-term picture on gold market. Theoretically we're ready for this, because our position - investors will re- assess overall geopolitcal situation and gold should have strong support...The one thing that we do not know is time - how long will it take for this re-assessement and whether gold will hit some lower targets first, say, 1000, or 890$...
Anyway, in short term perspective we do not like that Gold has not reached AB-CD 1038 target. So, if you're watching for long entry - be extra careful. Since gold likes this trick - initiate the visuality of reversal and later drop and hit major target. We would call probably not to take long position until gold will not complete AB=CD...

On 4-hour chart market has completed butterfly and if we wouldn't have 1038$ target I would say that gold could form, for instance, H&S pattern and butterfly could become left shoulder. This is very common situation. But we have 1038... So I dare to suggest that we could get, something else, some leg down, may be butterfly. 1.618 extension of current retracement stands precisely around 1038 area...
Now market stands at resistance of trend line and WPR1:

 

[Sive Morten]

Good morning,

Reuters reports today Gold clung to gains from a two-day rally on Wednesday, supported by short-covering following a dip in the dollar after soft U.S. manufacturing data.

The outlook for the metal, however, remains bearish due to a looming U.S. rate hike, with all eyes now on the U.S. non-farm payrolls data due later in the week. A strong jobs report would further bolster the likelihood of a hike later this month, reducing the appeal of dollar-denominated gold.

"The fate of gold is still very much determined by U.S. monetary policy," said Mark To, head of research at Hong Kong's Wing Fung Financial Group. "Prices will consolidate around current levels until the policy meet in mid-December."

The expected U.S. interest rate increase will drag gold prices to the $1,000 level, he added.

Bullion fell to a near-six-year low last month and posted its biggest monthly drop in 2-1/2 years in November as investors believed higher rates could weaken demand for non-interest-paying bullion.

The Federal Reserve is widely expected to raise U.S. rates for the first time in nearly a decade at its next meeting on Dec. 15-16.

ABN Amro on Tuesday maintained its negative outlook for gold prices in 2016, mainly on expectations the Fed would slowly raise rates into next year, and said prices could fall below $1,000 per ounce in the coming months.

Traders will be eyeing U.S. payrolls data on Friday to gauge the strength of the economy and its impact on the Fed's rate decision.

Data on Tuesday showed U.S. manufacturing contracted in November for the first time in three years, though other data showed an increase in construction spending in October. Analysts said the manufacturing weakness will not deter the Fed from raising rates this month.

The dollar weakness likely required some bullion investors to unwind and cover their short positions in the precious metal, prompting the gains during the last two days. Hedge funds and money managers are holding a record net short position in COMEX gold contracts, data on Monday showed.

So, our yesterday analysis has not changed significantly. Investors poll suggests NFP around 200 K. Gold could show some upward action, but as yesterday as today we warn you about 1038 target that has not been hit it. Usually market never starts reversal until it will hit major targets. Here could be the same story. Gold even could form reversal pattern, but be careful trading it.

On 4-hour chart market stands in downward channel and has hit our predefined level - WPR1 around channel border:

But, as you can see market is coiling just below it and this could be early sign of breakout attempt. If we will take a look at hourly chart - market could form H&S pattern and right now - small butterfly "Sell" that will lead gold to neckline. This is possible. But moment of truth will happen later - when time will come to test H&S - whether it will work or not. And here gold could show weakness, may be particularly due 1038 target. Other words speaking, existing of uncompleted 1038 target increases chances of H&S failure:

 

[Sive Morten]

Good morning,

Reuters reports Gold slumped to a near-six-year low on Thursday after comments from Federal Reserve chair Janet Yellen virtually cemented the case for a U.S. rate hike this month, while the strength in the dollar also pressured the metal.

Fed Chair Yellen said on Wednesday she was "looking forward" to a U.S. interest rate rise that will be seen as a testament to the economy's recovery from recession.

Yellen expressed confidence in the U.S. economy, saying job growth through October suggested the labour market was healing even if not yet at full strength.

"The market took these comments as a good indication that the Fed would raise rates at the next FOMC meeting later this month," said HSBC analyst James Steel, said referring to the Fed's Federal Open Market Committee.

A rate hike in December, widely expected in the market, would be the first in nearly a decade. Gold, as a non-interest-paying asset, would not benefit from higher rates.

"Gold is likely to remain fragile and vulnerable to the downside as investor sentiment is clearly negative," Steel said.

Yellen's comments come after expectations for a Fed rate hike at its Dec. 15-16 policy meeting were slightly shaken on the back of poor manufacturing data released earlier in the week. However, private employment data on Wednesday was stronger than expected, adding to gold's troubles.

U.S. nonfarm payrolls data on Friday will be keenly watched for more clues.

The dollar jumped to its highest in 12-1/2 years against a basket of major currencies on Wednesday after Yellen's hawkish comments. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

Investors are rapidly pulling out of bullion funds, adding to the pressure on the metal.

Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell 2.41 percent to 639.02 tonnes on Wednesday, the lowest since September 2008.

The outflow is the biggest single-day percentage drop in four years.

Gold prices could see another trigger later on Thursday as the European Central Bank announces its policy decision.

"Any further accommodative measures by the ECB later tonight would likely spell further downside risk for gold prices," OCBC Bank said in a note.

So guys, as you can see our warning and suspicions were not in vain. Strike has come from ADP report and Gold dropped miserably. This just confirms our view that until 1038 target will not be hit, it is very dangerous to rely on any sign of reversal. And it seems that gold has not bad chances to complete our AB=CD within 2 sesions:

Yesterday we've said that it seems gold should form some other pattern that could lead it to 1038, "may be butterfly". And we've got it. Right now market has made pause in bearish action due reaching 1.27 extension and WPS1. But taking in consideration the speed of yesterday dropping - moving to 1038 is a question of time. NFP could be strong catalyst in this process:

 

[Sive Morten]

Good morning,

(Reuters) - Gold clung to overnight gains on Friday and looked set to snap a six-week losing streak as a slump in the dollar buoyed the metal above 2010 lows ahead of the key U.S. non-farm payrolls data later in the session.

The metal rallied nearly 1 percent overnight after the European Central Bank's monetary easing measures fell short of expectations, boosting the euro and sending the dollar to its lowest in a month.

Investors stuck to the sidelines with the focus now on the U.S. jobs report later in the day to gauge the strength of the economy and how it would impact the Federal Reserve's monetary policy.

"A robust U.S. payrolls release could push gold back on the defensive," HSBC said in a note.

Gold had fallen to a near-six-year low of $1,045.85 early on Thursday on fears of a looming U.S. rate hike.

The Fed is widely expected to hike rates at the Dec. 15-16 policy meeting for the first time in nearly a decade. Higher rates tend to weigh on non-interest-paying gold.

Investors have been positioning for such a move by pulling out of bullion funds. Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, are at their lowest since September 2008.

Fed Chair Janet Yellen, speaking before Congress' Joint Economic Committee on Thursday, said the United States may be

"close to the point at which we should be raising" rates.

Yellen also said the U.S. economy needs to add fewer than 100,000 jobs a month to cover new entrants to the workforce, perhaps setting an implicit floor for jobs growth that policymakers want to see.

In contrast, analysts expect the November payrolls report on Friday to show 200,000 jobs were added last month.

A strong report could cement the case for a rate hike in December, boosting the dollar and hurting gold.

"Further dollar short-term weakness will support the precious complex. Support levels for gold are in the mid 1,040's and immediate resistance in the high 1,060's," said MKS Group trader James Gardiner.

So, gold shows limited reaction on yesterday ECB sign of weakness... Technically situation has not changed and market continues it's preparation for NFP data release. On daily chart we're still watching for 1038 target:

On 4-hour chart picture also stands the same - First butterfly's target been hit, retracement, now we're waiting continuation to 1.618 target and completion of weekly/daily AB=CD...