GOLD PRO WEEKLY, 07-11 September, 2015

[Sive Morten]

Fundamentals

Gold prices fell towards a second weekly loss on Friday after U.S. payrolls data failed to allay uncertainty over the prospect of a near-term interest rate hike from the Federal Reserve.

Data from the Labor Department on Friday showed that non-farm payrolls rose 173,000 last month, a slowdown from July's upwardly revised gain of 245,000.

However, a drop in the unemployment rate to a near 7-1/2-year low and an acceleration in wages kept alive prospects of a Federal Reserve interest rate increase later this month.

"Overall I think the payrolls were erring on the better side, even though the headline number was weaker, because of the lower unemployment rate, the higher hourly earnings, and the upward revisions," ABN Amro analyst Georgette Boele said.

A top Federal Reserve policymaker said the data on the U.S. jobs market was "good" and did not change the outlook for monetary policy.

Global equity markets tumbled and the dollar was mixed after the data.

Gold has come under pressure this year from expectations the Fed will hike rates for the first time in nearly a decade.

The Fed has already indicated that the timing of a hike is largely data-dependent.

The absence of Chinese buyers also weighed on gold, with markets in the major bullion consumer closed for public holidays. Monday will be a U.S. holiday.

Gold prices in India swung to a discount to the global benchmark this week for the first time since mid-July.

"Although August bullion imports were high, demand in India appears to have stalled," HSBC said in a note.

Capital Economics noted that weddings and festivals are viewed as auspicious times to buy gold in India.

"According to the Hindu calendar, the number of days ... considered propitious to get married is 30 percent lower in 2015 than in 2014," it said.

"Gold demand should recover in Q3 ahead of the big wedding and festival season in Q4."

In Australia, gold coin and minted bar sales at the Perth Mint dipped in August.

CFTC data shows solid drop in open interest (for 60K contracts), while net long positions remains the same. It tells that investors across the board have contracted their positions -as speculators as hedgers, as longs as shorts. They decreased participation rate in gold market. We could try to guess reasons for that, but hardly will know this definitely. May be coming Fed meeting, may be something else... But the fact is - investors partially have abandoned gold

This could become a reason (from sentiment point of view) why market was not able to continue upward action.

Technicals
Monthly
As we've said last week - it is difficult to make any far going conclusions yet and mostly right now started upside action looks like tactical bounce from strong support area. To get another status market should show significant upside action and form bullish reversal swing.

Also changes barely have touched monthly time frame, we've got very important detail here - the close of August candle. As a result, we've got bearish grabber on monthly chart that suggests moving below 1080 area. This is the answer on our questions - how far upside action could climb. In general market has reached not bad upside targets on lower time frames, completed daily DRPO "Buy" and in general this is enough to treat retracement as completed and sufficient.

When market has started explosive upside action two weeks ago, I was a bit confused, since we have very important targets around 1050 and I couldn't believe that gold just turn up, it would be too unnatural and untypical for gold, or even for any market. And appearing of the grabber explains everything.

We have just one long-term pattern in progress that has not achieved it’s target yet. This is VOB pattern. It suggests at least 0.618 AB-CD down. And this target is 1050$. Besides, in the same area we have 1.618 target of most recent butterfly pattern.

Last week we've discussed potential bullish engulfing, but we've got grabber instead. This drastically changes perspectives and replace deeper upside action with downward reversal probably.

If somehow gold will drop below 1050. Next destination will be 890-900$ area - major 5/8 Fib support and Agreement !!! with AB=CD pattern down, the same one that points VOB target.

Weekly

Our context on weekly chart drastically has changed. If last week we were guessing how far market could move up, and discussed 1220 K-area resistance, today we will be watching for downward signs, at least until monthly grabber is valid.
First of all - upside action was stopped by natural support/resistance area @ 1180. Right now trend has turned bullish, but second week in a row market is falling down. This could be a sign of bearish dynamic pressure.
As market has shown already sufficient bounce to respect 1.27 butterfly point - it could proceed down to 1.618 around 1022. Although it stands slightly below 1050 target on monthly chart - 30$ is not big difference for large scales.
Probably we will be able to talk on upside action again only if market will move above 1180 again and erase grabber. Until that will happen - our context will remain bearish.

Daily
On daily chart we've discussed grabber on Friday and that it has been completed as recent lows were taken out. It means that upside AB-CD pattern is not valid any more. Trend stands bearish here. We mostly will be interested in downward swing for taking short position.

4-hour
Here we will wait for couple of issues. First one is reaching of target/support area around 1112. This is minor AB-CD 0.618 extension that stands very close to major Fib support and WPS1.
As soon as target will be hit we will be watching for upside bounce to one of mentioned levels - area around WPP and MPP (they coincides on coming week) and Fib level, or K-resistance around 1135.

Conclusion
Situation on gold market has changed drastically. Now patterns and recent action point on further drop on gold, even to 1050 area. Until market will stands below 1180 level this setup will be valid.
Thus, probably we should prepare for taking short position on gold market

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 steadied on Tuesday after a four-day losing streak as the dollar eased, but the metal was not too far from a 2-1/2-week low as it struggled to find direction amid uncertainty over a looming U.S interest rate hike.

Investors had been waiting on Friday's U.S. jobs report to gauge the strength of the economic recovery and whether it would prompt the Federal Reserve to hike rates at its policy meet later this month. But the data failed to provide adequate clarity regarding a Fed move amid volatility in financial markets.

"We are unlikely to see a big move until the Fed meeting," said a bullion trader in Hong Kong. "Gold is not even reacting much to what we are seeing in the equities market."

Gold prices have been dented this year by expectations the Fed will hike rates for the first time in nearly a decade. The Fed meets next on Sept. 16-17.

Investors believe higher rates could diminish demand for non-interest-paying gold, while boosting the dollar.

"Gold continues to test support around $1,115-$1,117, with dips still well bought. Short term we see $1,115-$1,130 as the likely range," said MKS Group trader Sam Laughlin.

Gold has failed to find a strong safe-haven bid despite the recent weakness in stocks due to worries over the Chinese economy, showing that gold is struggling to find direction outside of U.S. monetary policy.

Bullion investors will be watching China's August data over coming weeks to see if the economy is at risk of a hard landing.

A stock market crash and the unexpected devaluation of the yuan currency in August have heightened concerns about stability in the world's second-largest economy, with some also believing the weakness could prompt the Fed to delay its rate hike.

Data on Tuesday showed China's August exports fell less than expected but a steeper slide in imports pointed to continuing economic weakness.

So, on Gold market as well, no big shifts yet. Daily chart even stands the same as last week. As you know we've come to conclusion that in medium term perspective gold could continue move down, since it was not able to keep upside momentum and failed continue move up. Daily trend has shifted bearish.

At the same time, in short-term perspective gold is apprhoaching to support and could show minor upside bounce. Thus, we have 0.618 AB-CD target around major Fib support and WPS1. As a result gold could bounce either to WPP or to K-resistance area:

 

[Sive Morten]

Good morning,

Reuters reports today Gold held above a three-week low on Wednesday as the dollar nursed losses, but prices remained range-bound as traders waited for direction from the Federal Reserve on the timing of a U.S. interest rate hike.

"Gold looks likely to trade a relatively tight range prior to the FOMC meeting next week," said James Gardiner, a precious metals trader at MKS Group, referring to the Federal Open Market Committee.

The prospect of higher rates, which would lift the opportunity cost of holding non-yielding bullion while boosting the dollar, has weighed on gold prices this year.

A decision to not raise rates at the September meeting may support prices, said HSBC analyst James Steel.

The Fed should hold off on raising interest rates until the global economy is more stable, the World Bank's chief economist said in an interview with the Financial Times published on Tuesday.

"The world economy is looking so troubled that if the U.S. goes in for a very quick move in the middle of this I feel it is going to affect countries quite badly," Kaushik Basu was quoted as saying.

Gold has failed to attract strong investor interest as a safe haven despite the recent weakness in stocks due to worries over the Chinese economy, showing that the metal is struggling to find direction outside U.S. monetary policy, analysts say.

The physical gold market has been mixed, providing little support to global prices.

Gold prices in India are at a discount to the global benchmark for the first time since mid July as a weak monsoon dampened demand in the world's second-biggest consumer.

In top consumer China, premiums edged up on the Shanghai Gold Exchange to about $5 an ounce on Wednesday morning, up from last week's $4.

Today guys, we do not see anything special on gold market. On daily chart picture looks almost the same as yesterday. Small candles, lazy action. As market shows no bounce up from recent lows, it probably means that it should go lower.

On 4-hour chart our small retracement has happened, but market barely has reached even first Fib resistance and WPP. Gold really looks heavy recently. In general this is agrees with our expectation of further decreasing of gold price.

 

[Sive Morten]

Good morning,

Recent comments from Reuters - Gold languished near a four-week low on Thursday, retaining sharp overnight losses, as strong U.S. economic data and outflows from bullion-backed exchange traded funds sapped investor interest.

Prices could head back towards July lows as bullion broke through some key technical levels in Wednesday trade, said analysts at ScotiaMocatta. The July low of $1,077 for spot gold was the weakest since February 2010.

"The $1,100 level should prop up gold during Asian trade today as physical names look to snap up the metal at these levels," said MKS Group trader Sam Laughlin.

The $1,115-$1,120 range should cap any moves higher, though the metal may again see further downward pressure in London and New York once Chinese demand is removed, he said.

Many traders were awaiting the U.S. central bank's next policy statement on Sept. 17 for clues on the timing of a U.S. interest rate rise, before taking any big positions in gold.

Bullion has benefited in recent years from ultra-low rates, which cut the opportunity cost of holding bullion while holding the dollar in check. But expectations that rates will rise soon have pushed the metal down more than 6 percent this year.

Economic data on Wednesday showed U.S. job openings surged to a record high in July and employers appeared to have trouble filling openings, the latest signal of an increasingly tight labour market that could push the Federal Reserve closer to raising interest rates.

Investor interest in gold has been tepid. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.61 percent to 678.18 tonnes on Wednesday - the biggest drop since Aug. 12.

A drop in Asian equities on Thursday failed to prop up gold, often seen as a safe haven.

Asian stocks fell on Thursday after lacklustre Chinese and Japanese economic data added to heightened worries about slackening global growth, denting investors' appetite for riskier assets.


So gold step by step comes to completion of our expectations moves from one our target to another. Thus, yesterday we've suggested that gold is ready for downward continuation and this has happened - another drop. Below we will explain why gold has stopped here, but on daily chart it has no real barriers till 1080 lows. As you can see market has broken already major Fib support, it is not at oversold. So in fact, it has free space till 1080 major lows.

On 4-hour chart we see that market stands in progress with AB=CD pattern. As soon as minor 0.618 target has been hit and respected - price has dropped further and now is coiling around WPS1. As drop down was really fast, it tells that move south should continue soon. Market also takes the shape of bearish flag here:

Since gold is not at oversold and is not at some strong support - upside bounce should be minimal, say, 1113-1115 as max. May be we could rely here on DRPO "Buy", I'm not sure, but anyway, gold could re-test broken consolidation and daily Fib level @ 1113. This will be either 50% or 5/8 upside retracement. Normal bearish market mechanics suggests that after that gold should continue move down:

 

[Sive Morten]

Good morning,

Recent news from Reuters - Gold clung to small overnight gains near $1,110 an ounce on Friday, but the metal was headed for a third consecutive weekly fall as investors continued to fret over the timing of a looming U.S. interest rate hike.

"It is hard to get too enthusiastic about gold currently," said HSBC analyst James Steel. "We are likely to see sideways trading until the FOMC," he said referring to the U.S. Federal Open Market Committee meeting.

Traders are awaiting the Federal Reserve's next policy statement on Sept. 17 for clues on the timing of a U.S. interest rate rise, before taking any big positions in gold.

Concerns over slowing growth in China, mixed economic data and volatility in financial markets have increased uncertainty about the timing of any U.S. interest rate increase, which had been expected as early as this month.

Data on Thursday showed the U.S. labour market appeared to gain momentum in early September as fewer Americans filed for unemployment benefits, but weak inflation pressures may complicate the Fed's decision.

Bullion has benefited in recent years from ultra-low rates, which cut the opportunity cost of holding bullion while holding the dollar in check. But expectations that rates will rise soon have pushed the metal down 6 percent this year.

BNP Paribas SA revised its gold price forecast for 2015 on Thursday, citing strength in the U.S. dollar and concerns over the Chinese economy. The bank cut its price forecast by $15 to $1,145 per ounce for the year.

Among other precious metals, silver was headed for a weekly gain, while platinum was set for a third weekly dip. Palladium has been the best performer in the group this week, snapping three weeks of losses to rise 3 percent.

So, our setup for gold has been completed recently. Market has turned to minor retracement. Still, as we've said yesterday, since market already has broken all major levels, next destination is 1080. Currently market should not show too deep retracement, since it will be not quite natural for normal bearish market.

But right now we're mostly intereted in intraday charts. Thus, on 4-hour time frame gold still is forming bearish flag pattern and even has formed some stop grabber inside of it. Keep in mind next AB=CD target - ~1095$

On hourly chart market has completed our 1115 pullback (looks like DRPO has worked) and now is turning down. If market will form butterfly pattern - it will have the same destination point as 4-hour/daily AB-CD:

 

[ochills]

Fantastic analysis Commander in pips.
I read your Gold analysis to learn more on how you dissect market and is of great help.
thanks a millions.

 

[Sugit]

Absolutely great analysis, and so incredibly steady, day after day. Thank you! I am working hard and feel very inspired. And much obliged.

One question to the Forum operators: it would be very handy to see the date of the UPDATE at the TOP of the posts, so we can see when the post was made. Now for reading them back, we first need to check "Last edited" at the bottom. Or maybe Sieve could mention date and time in the header for the updates. Thanks.

 

[Sive Morten]

One question to the Forum operators: it would be very handy to see the date of the UPDATE at the TOP of the posts, so we can see when the post was made. Now for reading them back, we first need to check "Last edited" at the bottom. Or maybe Sieve could mention date and time in the header for the updates. Thanks.

Hi Sugit, well actually this is old song. Previously I just made update without reserving posts but forumers complained that my updates were losting in the big number of other posts. After that I have started to reserve posts.
But to be honest currently discussion is not very active and number of posts is relatively small. So, may be I will just put updates without reserving on next week...