GOLD PRO WEEKLY, April 25-29, 2016

[Sive Morten]

Fundamentals

(Reuters) Gold fell more than 1 percent on Friday as the dollar advanced versus the yen and the euro, putting the metal on track to post its second straight weekly loss, while silver was set for its third consecutive weekly rise.

The dollar was up 2 percent against the yen on speculation the Bank of Japan was considering applying negative rates to its lending program for financial institutions, effectively starting to pay banks to borrow its cash.

Gold was down 1.3 percent at $1,232.66 an ounce at 3:21 p.m. EDT (1921 GMT), below Thursday's five-week high of $1,270.10 an ounce. The U.S. futures contract for June delivery settled down 1.6 percent at $1,230 an ounce.

"After yesterday's five-week high, gold today is succumbing to the strength of the dollar against the yen and the euro," ActivTrades chief analyst Carlo Alberto de Casa said.

"Prices should, however, remain in range and only a close below $1,225 will put on additional selling pressure."

Goldman Sachs maintained its bearish view on gold and other commodities on Friday, and reiterated its recommendation to short gold.

"We continue to expect that the strengthening of the U.S. labor market will force the Fed to hike rates three times this year, which will lead to a stronger dollar and a gradual increase in U.S. real rates, pushing gold down," Goldman analysts said in a note.

The U.S. Federal Reserve will meet for a two-day policy meeting April 26-27.

"Huge ETF accumulations in silver continue. The spec money has been plowing into silver. If gold were to break down, you could see a bloodbath in silver," said Bill O'Neill, co-founder of commodities investment firm Logic Advisors in New Jersey.

HSBC said the gold and silver rallies could be running into headwinds.

"For silver, we favor the market above $17, but expect volatility and further gains may be hard to hold," it said.

CFTC data still shows mostly bullish information. Although gold price mostly stumble last week, Open interest has dropped slightly, but net long position has increased. It means that traders have closed some part of short positions, while most part of longs are still in game:

Technicals
Monthly

Currently analysis of monthly chart needs no adjustment, since gold mostly coiling in tight range since the start of the April. Trend is bullish on monthly chart and tight range consolidation continues. As market already has moved above YPP, next target based on pivot framework is YPR1 around 1315 area.

Since New Year gold stands in upside action. Reasons could be different - geopolitics, investors' assets distribution in the beginning of the year. Upside action currently has not changed situation drastically yet on but we will monitor how situation will change.

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 different geopolitical tensions.

Not just Middle East stands in our focus. We see that fumes of this conflict spread over planet. Recall Paris terrorist attack, Brussels, refugees tensions in EU, Brexit voting, a lot of contradiction inside EU as political as economical - North Stream-2, mutual sanctions, Ukraine membership voting in Netherlands, Montenegro NATO membership, right now Armenia and Azerbaijan conflict and a lot of others. China's financial sphere is isolated theme for discussion. All these stuff is happening on a background of reducing population wealth and solvency and currency wars between major economies. Recent Fed shift just proves this conclusion. So, we see that entropy is growing. Currently we could just gamble what game stands under curtain of political meetings among major leaders.

As market gradually starts to come to the same conclusion as gradually situation on gold market starts to change in positive area. International banks purchase gold in big volumes, mostly PBoC and Russian Central Bank. Besides, as now we see clear signs of currency war - gold will get support here either. Germany stands on a way of own gold repatriation from US and UK, as we've mentioned above. Soon probably will follow other countries, say, Netherlands, France and others.

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 1380 area.

At the same time gold needs to move above 1308 to break current bearish trend by forming upside reversal swing.

So, on long-term charts it could happen, that we will not get yet clear tendency and gold could turn to some wide range action. Because right now it is too many sources that could initiate impact on gold market. They will push market in one and other sides. Geopolitical situation in the World has reached very high degree of uncertainty and we believe that sooner rather than later it will become a dominating factor for gold market and already it's becoming.

Anyway, gold's shift from downward action to flat one, even it will be wide - already will be significant moment.
Monthly chart trend has turned bullish.

As you can see upside action has started right after Volatility breakout target (that has taken the shape of butterfly "Buy") has been completed. Currently market has reached 5/8 resistance of butterfly 's swing. Gold has exceeded Yearly Pivot and this tells on existing bullish trend on monthly chart. As gold is not at overbought here - next logical destination is 1314 area of Yearly PR1.

In general, guys, coming area of 1315-1330 will become a real test of bullish strength. Monthly overbought, YPR1 and Fib level... hardly market will pass it easily and without solid reactions. May we will even get here extended H&S reversal pattern...

Weekly

Recently gold forms mixed context and patterns. Although our suggestion on moving above 1260 was confirmed, at the same time gold does not hurry to continue move up. Weekly chart shows that gold still stands in pennant consolidation and keeps chances on downward retracement still.
Thus, recent attempt of breakout has failed and we haven't got bullish stop grabber here. It could clarify everything. Instead of that weekly trend has turned bearish.

In general appearing of bullish continuation pattern as pennant right below weekly Fib level looks like bullish sign and reminds consolidation before breakout. For long-term trend it is absolutely no matter - whether market will continue move up right now, or it will show 1190 retracement first. Both scenarios will keep long-term bullish trend valid. Minor retracement here to 1190 is absolutely logical and initially we really have expected that it will happen. Only appearing of some "worrying signs" on daily and intraday charts have forced us to keep closer on it and brought some doubts.

Currently situation barely was clarified, it still stands blur. But right now some advantage stands on side of the bears, while last week it was on bullish side due daily grabber pattern. As grabber has hit its target but bulls were not able to use it and push gold above 1260 showing inability to do this - makes us think that some downward action on coming week looks probable. Although we do not have clear patterns that could give us precise destination point

Daily

Here, guys we still keep the shape of our H&S pattern. Recent action above the top of right shoulder was classical W&R by stop grabber - action that 100% matches to its name. It means that this was not a breakout or failure in classical understanding, just grabbing stops above its top.
Trend here has turned bearish and we probably should agree with most part of analysts that 1225 level will be very important here. Even right now we could say that this price action also is not typical for butterfly "sell" that we've discussed. So, currently we think that it's not time to take long position here. We need either completion of H&S or again move above 1260.

4-hour
Here we have some more bearish signs. First of all, from pivot point frame work we see that market was not able to hold above MPP and dropped below it. Despite of inability to hold above 1260, pay attention to reverse H&S shape that we have on this chart. As right shoulder has been successfully completed, with nice upward action, gold has failed to break neckline. It means that whole this construction should failed totally. Hence gold should drop below shoulder first and head - second.
That's why we've said that bears have some advantage here. In this really will happen - gold will drop below 1225 level and this will increase chances on neckline breakout on daily chart and reaching 1190 area finally.

Conclusion:
We think that fundamentally gold stands somewhere near bottom and situation is starting to change. But this bottom could be "extended" in time. Long term view has not been impacted by recent price action, since gold mostly is coiling in tight range.

In short-term perspective as gold has failed to break above 1260 area and hold there, bears have got some advantage and we have to talk about 1190 retracement again.

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.

 

[Zilvinas]

Hi Sive,

could we assume the same conclusion for Gold retracement as on your analysis on JPY, I mean CFTC report? Cause if we look closely on Gold CFTC report we could see that the last time "long" positions were so high is in 2012. At the same time on monthly chart we can see that in 2012 gold price action collapsed. So maybe based on CFTC report now we should really get retracement to the downside?

 

[Sive Morten]

Hi Sive,

could we assume the same conclusion for Gold retracement as on your analysis on JPY, I mean CFTC report? Cause if we look closely on Gold CFTC report we could see that the last time "long" positions were so high is in 2012. At the same time on monthly chart we can see that in 2012 gold price action collapsed. So maybe based on CFTC report now we should really get retracement to the downside?

Hm, I'm not sure. Still there is a big difference between JPY and Gold CFTC data. JPY is on all time high, while gold has rather solid potential to grow more. It doesn't mean that gold can't turn to retracement, but from CFTC point of view - they still look different.

 

[Sive Morten]

Good morning,

(Reuters) Gold reversed early gains on Tuesday, dropping despite a decline in dollar and equities, as investors remained cautious ahead of policy meetings this week at the Bank of Japan and the U.S. Federal Reserve.

The U.S. dollar fell versus the yen as traders took profits from the greenback's recent rally against the Japanese currency. Expectations of a dovish Fed also hurt the dollar. Asian stocks retreated as investors were wary of riskier assets ahead of the central bank meetings.

"The metal continues to be influenced to a large extent by dollar movements," said HSBC analyst James Steel, adding that he expects gold to reach $1,300 this year. "As well as a weaker dollar, we see global risks and a modest recovery in oil prices as gold-bullish. The more tame Fed tightening cycle, compared to expectations last year, should also support gold," Steel said.

MKS Group trader Sam Laughlin said support around $1,230 should keep gold buoyant, though gains will be limited by the Fed announcement on Wednesday. Speculation of further easing sent the yen reeling against
the dollar late last week, but uncertainty over whether the BOJ will actually deliver fresh stimulus at its April 27-28 meeting saw the Japanese currency recovering some ground.

The Fed also holds a policy meeting this week, with the two-day gathering kicking off on Tuesday. The U.S. central bank is not expected to raise interest rates at the meeting, but markets will be looking for its take on the global economy and its monetary policy outlook. Economists expect the Fed to deliver a rate hike in June, and follow up with another by year-end.

But interest rate futures show less conviction, underscoring an ongoing wide gap between markets and policymakers on the trajectory of rates. Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar.

Assets in SPDR Gold Trust, the largest gold-backed exchange-traded fund, fell 0.3 percent to 802.65 tonnes on Monday, though remained not too far off a two-year high reached earlier this year.

So, as we've said in our weekly research - we see that short term advantage stands on bears' side. On Monday market has not shown any action that could destroy this assumption. Even more - minor berish grabber has been formed. So, chances still exist on drop to 1190-1195 area. At the same time we can't miss a bit irrational action. Take a look that market surfs above neckline - absolutely curious behavior for any market at final point of H&S right before breakout. So, gold generates mixed signals and stands mostly indecision. That's why our idea is to not gamble on direction right now but wait for clarity. Finally, we just need entry point and we do not have an intention to trade current retracement:

On 4-hour chart we see just minor reaction on reaching trend line and Fib level. Let's hope that Fed will become a catalysts and push gold in one or other direction, i.e. bring the clarity

 

[Sive Morten]

Good morning,

(Reuters) Gold ticked higher for a third straight session on Wednesday on a softer dollar and weak
U.S. economic data, but the metal traded in a tight range as investors waited for the Federal Reserve's policy decision later in the session.

The dollar extended losses against a basket of major currencies as investors believed the weakness in the U.S. economy would prompt the Fed to be cautious about raising rates. The Fed is likely to keep rates steady later on Wednesday, and the focus rests squarely on the tone of its statement and
any timing for an eventual rate hike. The U.S. central bank raised rates in December for the first time in nearly a decade.

"Gold ground higher, continuing to trade in a tight range. The weaker dollar has supported demand, but investors remain wary heading into the central bank meetings," ANZ analysts said. "An unchanged economic outlook and a more balanced assessment of the risks should enhance the Fed's confidence to
proceed with further normalisation," they said.

OCBC Bank said the Fed "could strike a careful balance between calling for gradual policy normalisation and making sense of the recent spate of mixed economic data amid slightly stronger crude oil prices."

Data on Tuesday showed orders for long-lasting U.S. manufactured goods rebounded far less than expected in March, implying that business spending and economic growth were weak in the first quarter. Another report showed an ebb in consumer confidence in April.

Gold prices that hit a 13-month high last month are likely to fall back in the short term because of a slump in demand from key Asian consumers, GFMS analysts at Thomson Reuters said in a report on Tuesday.
Global gold demand tumbled by 24 percent year on year to 781 tonnes in the first three months of the year, its weakest quarter in seven years, GFMS said.

On gold market right now we have very similar situation to EUR and FX market in general - no clear patterns, but sentiment mostly bullish which, in turn, points on dovish expectations on Fed meeting.
On daily chart market mostly stands indecision, but this flying above neckline absolutely irrational behavior for H&S pattern. Besides, overall construction, including our H&S could be drawn as big triangle pattern. Triangle itself is a continuation figure. Thus, it seems that market really could make an attempt to continue move up right on current week and Fed could become a driving factor:

On 4-hour chart we see the part of this triangle and as price moves above WPP:

Still, we call to not try to anticipate breakout and do not dive in turmoil during Fed press conference. We have no necessity with taking position right now. It will be safer to do after we will get clear direction.

 

[Sive Morten]

Good morning,

(Reuters) Gold reversed losses to climb to its highest level in a week on Thursday, as the U.S.
dollar slumped more than 2 percent against the yen after the Bank of Japan surprised markets by keeping monetary policy steady.

At a two-day rate review ending on Thursday, the BOJ decided to maintain its pledge to increase base money at an annual pace of 80 trillion yen ($732 billion). It also left unchanged a 0.1 percent negative interest rate it applies to some of the excess reserves that financial institutions park at the BOJ.

The yen soared against the dollar and euro after the announcement, as investors unwound bets that the central bank would loosen monetary policy again.

Spot gold rose to a one-week high of $1,256.60 an ounce, after dropping 0.7 percent earlier in the session.
Traders said the metal was tracking the dollar/yen move after a Federal Reserve statement on Wednesday that provided few clues on the U.S. central bank's monetary policy outlook.

The Fed kept the door open for an interest rate hike in June, although it indicated it was in no hurry to take such a step. The U.S. central bank said the labour market was improving but acknowledged that economic growth seemed to have slowed.

"The longer the Fed holds off on raising rates, the better for gold," said HSBC analyst James Steel. "The bullion market will now focus on the prospects of a Fed hike at the next meeting in June, and the possibility that the Fed will tighten later this year may help cap bullion prices."

Investors see a 23-percent probability that the Fed's overnight lending rate will rise in June, according to CME's FedWatch group. U.S. short-term interest rate futures reflect the expectation the Fed will wait until September before raising rates.

Gold has rallied 17 percent this year on expectations that the Fed will not raise rates aggressively this year due to global economic risks. The U.S. central bank raised rates in December for the first time in nearly a decade. Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

U.S. GDP data due later in the session will be eyed for trading cues. Economic growth likely stalled in the first quarter as domestic demand cooled and a strong dollar continued to undercut exports, but a pick-up in activity is anticipated given a buoyant labour market.

"The short-term outlook for gold will now be heavily influenced by domestic data releases in the U.S.," ANZ said.

So, on gold market we see new step in confirmation of bullish sentiment and our thoughts on irrationality of recent behavior from H&S point of view. Today we get more confirmation on this doubts, as trend has turned bullish and we have a chance to get bullish grabber today. Actually we need move above 1260 and price will hold there. May be GBP will trigger this action... Anyway, right now it seems that market stands closer to confirmation of bullish scenario rather than bearish action start:

On 4-hour chart we also do not have big shifts yet, but price has moved above WPP and coiling around upper border of triangle. If potential grabber will be completed - price will move above WPR1 and this will be confirmation of upward trend continuation:

 

[Sive Morten]

Good morning,

(Reuters) Gold jumped to a seven-week high and silver soared to a 15-month peak on Friday, as the
dollar remained downbeat after the Bank of Japan surprised markets by standing pat on policy.

"The main reason for the rally is that the markets expected the BOJ to announce more easing measures and the dollar is continuing to weaken," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

"There are quite a lot of people on the long side. So I think the momentum will continue for both metals," said Leung. According to the latest data, speculators' bullish position on COMEX silver contracts was at a
record-high in the week to April 19, while the bullish position on gold was at a 3-1/2-year peak.

Reuters technicals analyst Wang Tao said prices could rise to $1,289.

The Federal Reserve's decision on Wednesday to leave interest rates unchanged also supported bullion.
The Fed kept the door open to a hike in June while showing little sign it was in a hurry to tighten monetary policy amid an apparent slowdown in the U.S. economy.

Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion whileboosting the dollar, in which it is priced. After three straight years of losses, analysts are finally
prepared to say gold prices have found a bottom, with rising prices seen this year and next as concerns over the pace of U.S. monetary policy tightening fade.

U.S. data on Thursday supported views the Fed will take a cautious stance in hiking rates this year. U.S. economic growth braked sharply in the first quarter to its slowest pace in two years.

Assets in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.19 percent to 804.14 tonnes on Thursday.

So, on gold market we've got results of our suspisions on H&S perspective. By far we've got temporal success. Yes, 1260 top has been taken out, but now we need to see that gold will hold above it. To be honest guys, somehow I feel that we will get it.
Our short-term target is 1.27 butterfly @1300-1305 area:

Currently market has stopped since it has hit intraday target of AB=CD pattern. Some minor retracement and profit taking is possible, but price should stand above triangle body and K-support area: