Sive Morten
Special Consultant to the FPA
- Messages
- 18,743
Fundamentals
This was pretty nice trading week for the gold as it accurately follows to our expectations. Next week we continue with our long-term trading plan.
As we've mentioned yesterday in our FX research - next week there will be a lot of important statistics. For gold market US retail sales should become major driving factor.
Major event of this week was Friday's collapse. As Reuters reports - Gold slipped on Friday and was headed for its worst month since August 2018 on a stronger dollar and equities, while palladium rose after three straight sessions of sharp declines, but was on course for its biggest weekly fall in more than three years.
The metal is set for its first weekly fall in four and has lost about 1.9 percent this month. But on a quarterly basis, gold is en route to a second straight rise, due to a dovish U.S. Federal Reserve and concerns about a global economic slowdown.
The dollar was poised for its strongest monthly gain in five, while Asian shares rose on hopes that Washington and Beijing are making progress in trade talks.
The world’s two largest economies started the new round of talks on Thursday to end the year-long tit-for-tat tariffs war.
“If we have a positive outcome from the trade talks, gold will be under pressure as investors will rotate out into more risk seeking assets,” said Jeffrey Halley, a senior market analyst with OANDA.
“But, if we have disappointing outcome then stocks will go down and people will move into safe-haven assets like gold. The market is very much in a wait and see mode.”
White House economic adviser Larry Kudlow said on Thursday the United States could lift some tariffs on China, while leaving others in place as part of an enforcement mechanism on a trade deal.
"The dollar is pulling back a little bit," said Josh Graves, senior commodities strategist at RJO Futures in Chicago. "Personal spending has declined, so investors are looking to place money in more safe-haven assets, like gold."
U.S. consumer spending rebounded less than expected in January and incomes rose modestly in February, adding to concerns that slowing global growth was affecting the world's largest economy as well.
The dollar edged lower against a basket of other currencies after the U.S. data, but pared losses as sterling
fell after British Prime Minister Theresa May's Brexit deal was again voted down in parliament.
Also propping up bullion were cautious signals from the U.S. Federal Reserve and the European Central Bank. Gold, however, was still bound for a second consecutive monthly drop, losing about 1.4 percent - its biggest decline since August - weighed down by the dollar's recent strength. The yellow metal had declined about 1.5 percent on Thursday.
COT Report
Despite big drop on Friday, CFTC data shows that net speculative position has increased more than for 30K contracts - from 88 to 119K contracts. This fact confirms idea of just a retracement on gold market. It looks like of a big scale but this is due it long-term nature. In fact the major time frame for retracement is weekly.
So, as our long-term view as short-term one are stand in place. Long-term sentiment on the market stands bullish. On longer-term basis we watch for starting of long-term bull trend. But on daily and lower time frames - continue to work with downside retracement.
Technical
Monthly
As gold market hit major target on weekly chart, it fluctuates inside major swings and mostly is driven by shorter-term factors. It makes minor impact on monthly picture and our long-term view. Recent fundamental and sentiment analysis shows that no big changes have happened and gold still stands positive. Despite technical retracement, we do not have reasons yet to cancel our long-term positive view on gold.
As we've said earlier, we're watching for our so called "symmetrical" model. It could be clear symmetry in market action, and we have suggested that future action could be a reflection of previous downside action shape.Now market has moved more above the trend line, which was a crucial level for long-term technical picture.
Gold shows good performance in December- February, which could put the foundation of new long-term upside trend. We still keep our harmonic technical model on monthly chart as primary tool of analysis. Current retracement down looks strong on daily chart, but it is just 30% of major swing up which is minimal level.
Fundamental reasons for gold rising mostly relate to changing of global political and economical situation. Strong global shifts never could happen without big political events. This should provide big support to gold market. Now it is widely suggested that these processes should accelerate closer to 2020 year, or even in second half of 2019. For example, here is report by Fathom Consulting and their expectations to see world crisis around 2020.
Here is explanation of our "symmetrical" model and scenario. Recent action on gold market reminds reverse H&S shape but very choppy and extended in time. Important COP target has been hit and upside action has started. In fact we have mirror action to the right and to the left from COP point. Market forms approximately equal lows on both sides. The speed is also similar. Is it possible that reversal is forming? Why not.
On monthly chart we keep watching whether gold will be able to hold above trend line. Now price stands above YPP as well, but it has not been tested yet by price. As meaningful retracement stands under way - YPP should work as nearest destination point.
Weekly
As bullish B&B "Buy" was done, here we have just one pattern that we're trading right now - "222" Sell. Its minimal target stands at 1275 level that has not been reached yet.
This week we've got another important pattern on weekly chart - reversal candle. This week was bearish reversal one as it shows new top compares to previous one and close below the lows of previous week. In fact, it engulfs almost the whole month of action.
Reversal weeks have the feature of continuation. Usually, once it was formed, market usually shows continuation down. In general, this corresponds to our 1275 target and gives the answer on question - is it time to go long already or not.
Daily
Here is our major scenario. Pattern suggests reaching of 1260 area. AB=CD itself looks perfect, the speed of AB and CD leg is similar, both legs show real signs of thrusting action.
Still it will be interesting to see what will happen around 1275 as well. This is strong K-support area.
Our Friday suggestion was correct, indeed no downside continuation has followed and market spent all time in minor pullback. Now Gold again stands at daily oversold level and 1289 Fib support. It means that next week could start with upside bounce.
For taking the short position it would be better to wait for pullback. Whether to trade gold long stands up to you. Our context on daily chart is bearish so, we use retracement only as a chance for short entry at better level.
Intraday
Here is we can see favorite gold trap. It likes to show fake pullback before major target is hit. Thus, on 4H chart on Friday we've got a pullback. Of course it doesn't come out from nothing, it was daily oversold as well. But, at the same time, it has started before major COP target has been hit.
As gold has formed bearish grabber - it suggests another drop down, below recent lows. It confirms the idea that major pullback here could start after COP target will be hit.
That's being said, we have two major scenarios. First is - we're going step by step with daily AB=CD pattern. Week should start with minor drop to COP target, then upside retracement should start.
Second scenario is long-term bullish trend. 1260 area is the one that we potentially could get upside reversal and "222" Buy pattern.
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.
This was pretty nice trading week for the gold as it accurately follows to our expectations. Next week we continue with our long-term trading plan.
As we've mentioned yesterday in our FX research - next week there will be a lot of important statistics. For gold market US retail sales should become major driving factor.
Major event of this week was Friday's collapse. As Reuters reports - Gold slipped on Friday and was headed for its worst month since August 2018 on a stronger dollar and equities, while palladium rose after three straight sessions of sharp declines, but was on course for its biggest weekly fall in more than three years.
The metal is set for its first weekly fall in four and has lost about 1.9 percent this month. But on a quarterly basis, gold is en route to a second straight rise, due to a dovish U.S. Federal Reserve and concerns about a global economic slowdown.
The dollar was poised for its strongest monthly gain in five, while Asian shares rose on hopes that Washington and Beijing are making progress in trade talks.
The world’s two largest economies started the new round of talks on Thursday to end the year-long tit-for-tat tariffs war.
“If we have a positive outcome from the trade talks, gold will be under pressure as investors will rotate out into more risk seeking assets,” said Jeffrey Halley, a senior market analyst with OANDA.
“But, if we have disappointing outcome then stocks will go down and people will move into safe-haven assets like gold. The market is very much in a wait and see mode.”
White House economic adviser Larry Kudlow said on Thursday the United States could lift some tariffs on China, while leaving others in place as part of an enforcement mechanism on a trade deal.
"The dollar is pulling back a little bit," said Josh Graves, senior commodities strategist at RJO Futures in Chicago. "Personal spending has declined, so investors are looking to place money in more safe-haven assets, like gold."
U.S. consumer spending rebounded less than expected in January and incomes rose modestly in February, adding to concerns that slowing global growth was affecting the world's largest economy as well.
The dollar edged lower against a basket of other currencies after the U.S. data, but pared losses as sterling
fell after British Prime Minister Theresa May's Brexit deal was again voted down in parliament.
Also propping up bullion were cautious signals from the U.S. Federal Reserve and the European Central Bank. Gold, however, was still bound for a second consecutive monthly drop, losing about 1.4 percent - its biggest decline since August - weighed down by the dollar's recent strength. The yellow metal had declined about 1.5 percent on Thursday.
COT Report
Despite big drop on Friday, CFTC data shows that net speculative position has increased more than for 30K contracts - from 88 to 119K contracts. This fact confirms idea of just a retracement on gold market. It looks like of a big scale but this is due it long-term nature. In fact the major time frame for retracement is weekly.
So, as our long-term view as short-term one are stand in place. Long-term sentiment on the market stands bullish. On longer-term basis we watch for starting of long-term bull trend. But on daily and lower time frames - continue to work with downside retracement.
Technical
Monthly
As gold market hit major target on weekly chart, it fluctuates inside major swings and mostly is driven by shorter-term factors. It makes minor impact on monthly picture and our long-term view. Recent fundamental and sentiment analysis shows that no big changes have happened and gold still stands positive. Despite technical retracement, we do not have reasons yet to cancel our long-term positive view on gold.
As we've said earlier, we're watching for our so called "symmetrical" model. It could be clear symmetry in market action, and we have suggested that future action could be a reflection of previous downside action shape.Now market has moved more above the trend line, which was a crucial level for long-term technical picture.
Gold shows good performance in December- February, which could put the foundation of new long-term upside trend. We still keep our harmonic technical model on monthly chart as primary tool of analysis. Current retracement down looks strong on daily chart, but it is just 30% of major swing up which is minimal level.
Fundamental reasons for gold rising mostly relate to changing of global political and economical situation. Strong global shifts never could happen without big political events. This should provide big support to gold market. Now it is widely suggested that these processes should accelerate closer to 2020 year, or even in second half of 2019. For example, here is report by Fathom Consulting and their expectations to see world crisis around 2020.
Here is explanation of our "symmetrical" model and scenario. Recent action on gold market reminds reverse H&S shape but very choppy and extended in time. Important COP target has been hit and upside action has started. In fact we have mirror action to the right and to the left from COP point. Market forms approximately equal lows on both sides. The speed is also similar. Is it possible that reversal is forming? Why not.
On monthly chart we keep watching whether gold will be able to hold above trend line. Now price stands above YPP as well, but it has not been tested yet by price. As meaningful retracement stands under way - YPP should work as nearest destination point.
Weekly
As bullish B&B "Buy" was done, here we have just one pattern that we're trading right now - "222" Sell. Its minimal target stands at 1275 level that has not been reached yet.
This week we've got another important pattern on weekly chart - reversal candle. This week was bearish reversal one as it shows new top compares to previous one and close below the lows of previous week. In fact, it engulfs almost the whole month of action.
Reversal weeks have the feature of continuation. Usually, once it was formed, market usually shows continuation down. In general, this corresponds to our 1275 target and gives the answer on question - is it time to go long already or not.
Daily
Here is our major scenario. Pattern suggests reaching of 1260 area. AB=CD itself looks perfect, the speed of AB and CD leg is similar, both legs show real signs of thrusting action.
Still it will be interesting to see what will happen around 1275 as well. This is strong K-support area.
Our Friday suggestion was correct, indeed no downside continuation has followed and market spent all time in minor pullback. Now Gold again stands at daily oversold level and 1289 Fib support. It means that next week could start with upside bounce.
For taking the short position it would be better to wait for pullback. Whether to trade gold long stands up to you. Our context on daily chart is bearish so, we use retracement only as a chance for short entry at better level.
Intraday
Here is we can see favorite gold trap. It likes to show fake pullback before major target is hit. Thus, on 4H chart on Friday we've got a pullback. Of course it doesn't come out from nothing, it was daily oversold as well. But, at the same time, it has started before major COP target has been hit.
As gold has formed bearish grabber - it suggests another drop down, below recent lows. It confirms the idea that major pullback here could start after COP target will be hit.
That's being said, we have two major scenarios. First is - we're going step by step with daily AB=CD pattern. Week should start with minor drop to COP target, then upside retracement should start.
Second scenario is long-term bullish trend. 1260 area is the one that we potentially could get upside reversal and "222" Buy pattern.
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.