GOLD PRO WEEKLY, August 31-04, 2015

[Sive Morten]

Fundamentals
Reuters reports
Gold rose on Friday as technical indicators and suggestions the U.S. central bank may delay a rate rise provided support, but the metal was still on track to post its biggest weekly drop in five weeks amid dollar strength and strong U.S. economic data.

The gains came as U.S. Federal Reserve officials suggested the central bank may delay tightening monetary policy beyond next month due to turmoil in financial markets.

A rate rise would dim the appeal of non-interest bearing assets like gold.

"With that in mind, there's a little bit of breathing room," said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago, noting that this "breathing room" allowed technical factors to take over. "This is a classic retracement from low to high."

Gold prices crossed a key technical retracement level between July's 5-1/2-year lows and last week's 6-1/2-week highs, providing a chart-based boost, Tesfaye said.

Nonetheless, bullion still plunged 2.3 percent on the week, as a slew of U.S. economic data suggested stronger growth.

U.S. consumer spending picked up in July, data showed on Friday. This followed Thursday's upward revision in U.S. economic growth in the second quarter to 3.7 percent from the initial estimate of 2.3 percent.

The big question for next week is whether the anxiety that crept into the market on Aug. 10 when China devalued its currency is going to continue," Saxo Bank senior manager Ole Hansen said.

Weak gold prices have failed to spur physical demand in Asia, with premiums in India slipping and investors in China still hooked on volatile equities.

Hedge funds and money managers hiked a bullish bet in COMEX gold and upped their net long position in silver futures and options in the week ended Aug. 25, U.S. Commodity Futures Trading Commission data showed on Friday.

Speculators hiked their net long stance in bullion by 31,508 lots to 44,271 lots, the data showed. That brought their net long to the highest since June, as the dealers further retreated from the rare bearish stance they switched to in July.
The big jump came in a week that prices touched a two-week high before tumbling in a broad commodities sell-off.
CFTC data shows big shifts in sentiment in favor of upside action. Thus, open interest has increased significantly. At the same time we see very strong increasing of speculative longs and hedgers' shorts position.
Here is detailed breakdown of speculative positions:

Open interest:

Shorts:

Longs:

Summary:

Technicals
Mostly situation stands the same here. Upside action that has actively started 2 weeks ago slightly paused, mostly due reaching of overbought on lower time frames. In general 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.

So, now 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$.

We also have got completed pivot points framework target. Again it has confirmed its reliability. Once we’ve said that in the beginning of the year market showed solid upside action. Gold was able to exceed yearly pivot, passed half way to Yearly Pivot resistance 1 but right now has reversed down and closed below YPP. From technical point of view this is bearish sign and market has hit next destination point of this analysis –yearly pivot support 1 around 1083$.

Potentially we could get on monthly chart bullish engulfing pattern that could trigger higher retracement up. But this barely will change the overall situation. As you can see market stubbornly holds bearish tendency of lower highs and lower lows. The real speech about reversal on gold market will be possible only if gold will break this tendency, i.e. will move above 1308 high. Till this will happen - overall context will remain bearish despite the depth of upside retracement.
Applying of harmonic swing here (see below, on weekly chart) also shows that market has rather solid room for upside action without making solid impact of force balance. Yes, we have bullish divergence here but it could trigger just minor bounce and then turn to bearish dynamic pressure as it was last time. Conclusion on monthly chart stands as follows - market could move higher but this will not become a menace for bears yet.
We could say even more - this bounce is logical and expected. Market stands at strong support, it has broken major lows and finally, it has completed important targets - butterflies and inner AB-CD patterns.

At the same time last week action gives chances to opposite scenario as well. For example, if here we will get bearish grabber... But chances are small for that, since COT data mostly supports further upside action.

Weekly

This picture is very informative. Market has completed minor butterfly target - 3/8 retracement up. This is enough to respect butterfly and treat is as worked correctly. Still, we see supportive changes in CFTC data. Last time market has slowed a bit on a way up, but there were technical reasons for that. Upside momentum is still valid.
It means that market has all chances to proceed. First real barrier will stand at 1215-1220 area. This will be weekly K-resistance level accompanied by weekly overbought. Here gold could show first serious pause on a way up.
At the same time, applying harmonic swings here we see that next swing every time a bit smaller than previous one, but this diminishing is not drastic and market has chances to reach, say, trend line resistance around 1240 area.
Finally, we also will look for 1175 lows area. If market will move above them, this will be additional confirmation of bullish ambitions. Last week market was not able to pass through them yet.

That's being said, weekly chart does not clarify current condition of upside action. It does not show clear bearish or bullish patterns yet. At the same time it tells that market relatively free till 1220 area. Having CFTC on our back and strong action last week, we would gravitate to conclusion that upside action probably could continue.

Daily
Daily chart shows why gold was not able to pass through 1175 area. Beyond natural resistance of the lows, this was strong resistance per se that includes daily K-resistance and overbought. So this was not gold weakness by itself, that was mostly technical reasons. Way down was a bit faster that we would like to see, but this does not look outstanding, taking into consideration fact that this was first bounce after long bearish run.
Two days ago market has formed bullish grabber that is still valid. May be it sounds unbelievable now, but this grabber theoretically should lead price back to 1175 top. In this case we could reach our first weekly destination around 1220 K-area by some AB=CD pattern. Right now we have bullish pattern and CFTC report that mostly supports further upside continuation on gold. If market will drop below 1118 area and erase grabber - this will destroy short-term bullish setup and could lead market right back to the lows. It will not mean that upside scenarios will be totally destroyed, but current AB-CD scenario. Later market could form, say, double bottom.
But let's go through it step by step. Right now we have sentiment and pattern, so let's work with them first.

4-hour
Appearing of grabber was accompanied by forming DRPO "Buy" on 4-hour chart. Now market is moving higher. So, if you already have long position - just control your risk, tight stop etc. If you do not have one - you could wait for some minor retracement down. Probably we can't rely on DRPO any more, since it is almost has completed its minor target, but grabber is still valid. So any long entry you should correspond to grabber pattern.

Hourly
For example, here are some levels that could be watched if you have intention to trade grabber and take long position:

Conclusion:
Last week gold market was have to take technical pause in upside action, since it has reached really strong resistance level around 1175 in a condition of overbought. Upside breakout was mostly impossible. Right now gold has "free space" above and has formed some bullish patterns that make possible upside continuation.
CFTC numbers also were really strong and supportive for further growth.
Short-term bullish setup will fail if market will drop below grabber's low. In this case return back to 1080 lows will become probable

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 news - Gold rose on Tuesday as equities faltered on fresh signs of weakness in China's economy although mounting expectations that the U.S. Federal Reserve will likely go ahead with an interest rate increase this month kept gains in check.

Activity in China's factory sector shrank at its fastest rate in at least three years in August as domestic and export orders tumbled, increasing investors' fears that the world's second-largest economy may be lurching toward a hard landing.

That sent Asian stocks reeling on Tuesday, stretching overnight losses that followed weekend comments from a key Federal Reserve official suggesting a rate increase in September is likely. The dollar similarly weakened as risk aversion favored the euro and yen.

"We are seeing some general risk-off moves in the Asian timezone and some buying of gold would be consistent with that," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

Bullion ended August 3.5 percent higher as worries over China's slowing economy sparked safe-haven bids, although the metal has since come off a seven-week top.

Growing indications that the Fed could lift rates at its next policy meeting on Sept. 16-17 could limit gold's upside potential.

Spooner said only another "fear-based" deep rout in global equities like that seen on Aug. 24 following a slump in Chinese stocks would "dissuade the Fed from easing."

"And I think if we did see a very strong number in the nonfarm payrolls this week, it would certainly give them an opportunity ... to make their move in September," he said.

But Spooner said there is a chance that the U.S. rate hike - which would be the first since 2006 - could induce profit-taking in the dollar and potentially buoy gold.

MKS Group trader James Gardiner said he sees resistance for bullion at $1,145 and then at $1,150 with immediate support around $1,125.

So, gold right now confirms our expectations and recent action suggests that this is not just retracement, but something more important stands on the back. CFTC data shows significant increase of long positions and this can't happen just occasionally. Besides, S&P index is falling, even in condition of strong oversold. This is not normal. Usually markets show such kind of behavior when they stand under impact of non-technical factors.
It seems nobody will care about September rate hike. This is not interesting already. Investors' minds now are busy with the question what's going on and as longer they will not find answer as greater demand for gold will be...
On daily chart market is forming bullish dynamic pressure and keeps valid our bullish grabber. This confirms our suggestion on bullish setup and further upside continuation. Short-term target, clarified by grabber is 1170's top. In medium-term perspective we could get upside AB-CD:

On 4-hour chart move up does not look impressive yet. Still, it may be slow but stable. Gold creeps above WPP and our DRPO target finally has been reached. Trend is bullish here:

At the same time we do not want to get too deep retracement again. Yesterday market has shown minor drop to 1125, as we've suggested. But as upside action is continuing and market is not at some resistance or overbought, it would be better if we will get minor retracement to 1137 or at least to 1132 K-area:

 

[Sive Morten]

Good morning,

Reuters tells today - Gold steadied on Wednesday with appetite for the metal soured by a firmer dollar despite weaker Asian equities, and failure to breach a key resistance and a looming U.S. rate hike suggest more downside risk.

Asian stocks sagged after sharp overnight losses on Wall Street, fed by worries over weak Chinese manufacturing data. Chinese stocks fell again in a seesaw session despite pledges by a number of brokerages to increase their stock investment to support the market.

Gold has failed to convincingly breach the $1,145 resistance even in the face of a 3 percent slide in U.S. stocks on Tuesday, said Howie Lee, analyst at Phillip Futures in Singapore.

"This suggests that in the short term, stock market meltdown or no meltdown, gold prices are unwilling to move above $1,145

(and) it will take a way stronger catalyst, say a very weak nonfarm payrolls number this Friday, to substantially bring prices (higher)," Lee wrote in a note to clients.

A U.S. private employment report later in the day could give a rough guide on the wider nonfarm payrolls data on Friday.

Some economists say strong employment growth in August could help cement expectations that the Federal Reserve will raise interest rates for the first time in nearly a decade at its next meeting on Sept. 16-17.

Boston Fed President Eric Rosengren said the U.S. central bank will probably only gradually raise interest rates, irrespective of whether it decides to take the first step a few months earlier or later.

Non-interest bearing gold has been hit by a looming hike in U.S. interest rates, shifting funds to the dollar. But some analysts say the dollar could also be prone to profit-taking when the Fed does raise rates, which should support gold.

Tuesday marked spot gold's fourth day of gains, but technical analysts at ScotiaMocatta said "it is hard to get too bullish considering the falls are more significant than the bounces."

"We believe this is a consolidation situation with only a breach of $1,168 bringing in fresh buying," they said.

So, on gold indeed we have nothing special yet. Daily chart looks mostly the same, but we like it, since it keeps all our patterns in place - stands above MPP, grabber is valid, bullish dynamic pressure looks brighter:

On 4-hour chart market now is flirting around WPP and turns to some kind of upside chanel. Trend has turned bullish:

Hardly something will happen till ADP report later in this session. If you have taken long position yesterday at predefined level according to our analysis, now you could move stop to breakeven and watch. If gold will drop further, say, to K-support area - then we can try to enter again:

 

[Sive Morten]

Good morning,

Reuters reports today Gold added to overnight losses on Thursday, hurt by a stronger dollar and as investors awaited a key U.S. jobs report to gauge the timing of a Federal Reserve rate hike.

U.S. private payrolls data on Wednesday suggested that labour market momentum likely remained strong enough for the Fed to consider an interest rate hike this year. The nonfarm payrolls report on Friday will be eyed for more clues.

"Gold is awaiting the payroll data for indications of Fed intentions at the September FOMC meeting. So the market may move sideways until the numbers are released," said HSBC analyst James Steel, referring to the Fed's Federal Open Market Committee.

The U.S. central bank has pegged the likelihood of a rate increase to the strength of economic data. A strong jobs report could prompt the Fed to increase rates sooner than later.

Bullion traders remain wary of taking up fresh positions until they receive more clarity on whether the Fed will raise rates at its next meeting on Sept. 16-17.

Also weighing on bullion was the absence of Chinese buyers. Markets in China, a major gold consumer, are closed on Thursday and Friday for public holidays.

Tepid Chinese demand during the holidays will also keep gold prices capped, along with the uncertainty over a U.S. rate hike, HSBC's Steel said.

The dollar climbed against the euro and yen on Thursday as global investors tentatively stepped back into riskier equities, hurting bullion.

The technical picture for gold looks bearish with near-term support at $1,117, ScotiaMocatta analysts said.

"We are bearish gold so long as it trades below the recent high of $1,170," they said.

So, on gold we do not see any big shifts yet. Yesterday ADP positive report has held a bit upside action on the gold, but its impact was mild and has not led to bearish reversal yet. Thus, we do not share pessimism on gold market yet. Let's get first bullish grabber erasing and second - will start talk on bearish perspectives. Right now Upside action does not look impressive of cause, but all bullish patterns are still valid. At the same time we have to note that bearish grabber was formed yesterday and it's look like one of them will fail soon:

On 4-hour chart trend has shifted bearish again and market is returning back to 1125 support of consolidation. So, if your initial position has been closed by b/e stop - do not hurry to take new one:

Hourly chart suggests that we probably will get 2-leg retracement down in a shape of AB-CD. Although price is still held by K-support area, this probably will not last too long and gold should drop lower to 1125-1130 support - major 5/8 area. There we will think about long position again...

 

[Sive Morten]

Good morning,

Reuters reports today - Gold held declines from a two-day losing streak on Friday, ahead of a crucial U.S. jobs report as traders waited for clues about the timing of a Federal Reserve rate hike.

Traders are watching the U.S. nonfarm payrolls report due later in the day to gauge whether the Fed would begin increasing rates at its policy meet this month.

Expectations of a September rate hike have been lowered recently due to the volatility in global markets, although the uncertainty around the timing of an eventual rate hike has taken a toll on bullion.

"Gold is already pricing in diminished odds of a September rate hike," said Howie Lee, an analyst at Phillip Futures.

"A strong labour market report will increase the odds of a rate raise in two weeks time, sending the dollar up and gold prices down. A weak report will dampen what are already very low odds of a rate raise and send gold prices up," said Lee.

Economists polled by Reuters expect the U.S. economy to have produced 220,000 new nonfarm jobs last month.

According to Fed policymakers and other economists, employment and wage growth for August would likely need to be particularly strong for the Fed to act this month, while the sharp recent gyrations in stocks, bonds and currencies would need to dissipate.

Other data on the labour market this week, including weekly jobless claims on Thursday, has been encouraging.

The data along with weakness in the euro pushed the dollar index to its highest in over two weeks at 96.616 on Thursday.

Higher rates would hurt non-interest-paying bullion and boost the dollar.

Also weighing on gold was the absence of Chinese buyers with markets in the major gold consumer closed through Friday for public holidays.

Other data also showed weakness in physical demand. Sales of gold coins and minted bars at the Perth Mint dipped in August from a nine-month high in the previous month.

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

Recent action shows more weakness. We have to acknowledge that Gold can't continue upside action that was started by grabber. As soon as our long position has closed on breakeven stop - later we haven't called for another long entry. Right now market has opposite (bearish) grabber as well and we see thrust black candles on intraday charts. In such circumstances it is not very comfortable to go long.
Also we see some relative signs of possible dollar strength today, that we've specified in our Forex daily update. May be we will get good NFP numbers. That;s why right now it is better to avoid long entry on gold. We will have enough room and time to do this, if market will show rally:

On hourly chart market has broken all short-term Fib supports. Although right now it stands at 1.618 AB-CD target and has not taken yet the lows of daily bullish grabber - this is weak relief for us. We see solid thrusting candles on a way down and currently it looks so that market has more chances to drop lower.
That's being said, as on EUR, Gold was not able to resolve retracement on short-term time frames and we probably will have to switch to higher scale and larger patterns. What they will be we will see really soon. May be Double Bottom on daily chart...

 

[Sive Morten]

Here guys, excellent research on big shifts that I've talked about recently. Written very interesting...