GOLD PRO WEEKLY, February 08 - 12, 2016

Sive Morten

Special Consultant to the FPA
Messages
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Fundamentals

(Reuters) - Gold rose to a three-month high in volatile trade on Friday, as a mixed U.S. jobs report prompted investors to reassess the outlook for U.S. interest rates this year, putting bullion on track for its strongest weekly performance in more than a year.

U.S. employment gains slowed more than expected in January as the boost to hiring from unseasonably mild weather faded, but rising wages and an unemployment rate at an eight-year low suggested the labor market recovery remains firm.

"The futures curve is showing that the probability of a March (rate) hike has fallen to around 10 percent, around the lowest levels last seen in October, but there is a greater than 50 percent probability there will be an additional hike this year," said Suki Cooper, precious metals analyst for Standard Chartered Bank in New York.

"This has buoyed the risk-off sentiment that has boosted gold prices."

The spot market was on track to close the week up 4.2 percent having risen for six straight days.

U.S. gold futures for April settled up 20 cents at $1,157.70 an ounce.

"The data shows a March (interest rate) increase is not totally out of the question, it's probably 50-50," said Robin Bhar, an analyst at Societe Generale. "That's why gold sold off after the report, as the dollar rose."

As a non-interest bearing asset, dollar-denominated gold becomes less attractive if U.S. interest rates rise.

A shaky global economy has lifted buying interest in gold, making it among the best performing assets since the start of 2016 with a gain of nearly 10 percent.

Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, rose to 22.3 million ounces on Thursday, the highest since late October.

So CFTC Data shows increasing of net long position, but open interest moves down. It means that upward action mostly stands due short covering. This tendency should change soon or upside rally could meet headwind of insufficient money flow to gold purchasing that supports any rally.
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Technicals
Monthly

So since New Year has gold stands with upside action. Reasons could be different - geopolitics, investors' assets distribution in the beginning of the year. Upside action currently is too small to change situation on monthly chart but we will monitor how situation will change.

Changes come slow to monthly chart yet and it is mostly the same by far.

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 time. The fact that gold drops on a background of Middle East turmoil looks a bit artificial and this situation could not stand forever. May be this could be explained as insufficient weight of geopolitics against current weight of Fed policy and statistics. But geopolitical tensions, despite its low weight still makes drop slower. Now we see that this situation is starting to change. Thus, recently gold has risen even on strong NFP data, compares to other assets. Demand on safe haven assets starts to increase - just take a look at JPY and gold.

Not just Middle East stands in our focus. We see that fumes of this conflict spread over planet. Recall Paris terrorist attack, 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 and a lot of others. China's financial turmoils is isolated theme for discussion. All these stuff is happening on a background of reducing population wealth and solvency. So, we see that entropy is growing.

As market gradually will start to come to the same conclusion as gradually situation on gold market will start to change in positive area. International banks purchase gold in big volumes, mostly PBoC and Russian Central Bank. 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.

Our 1050 level has been hit. 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.

So, on long-term charts it could happen, that we will not see 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.

Anyway, gold's shift from downward action to flat one, even it will be wide - already will be significant moment.
Finally - monthly chart trend has turned bullish. This is not a big deal yet, but still, this is one of the bricks in the wall, right?

And we're coming to first testing point. Within coming 2 weeks we will understand whether gold will turn down and 1000$ will become reality again, or we will get new long-term bull trend.

As you can see upside action has started right after butterfly "Buy" has been completed. Currently market has reached 3/8 resistance of butterfly 's swing. At the same time this is Yearly Pivot Point. If recent upside action was just reaction on butterfly completion - we will see downward reversal. Since it will happen around YPP - this will confirm bearish sentiment and could lead to solid drop and further downward continuation.

If, instead, market will break this area - this will be the sign of bullish trend and upside party will continue. That's why this is very important area. At the same time, this level is final point of our short-term bullish context that we were trading within recent 2 months. Here we either will get bullish context of bigger scale or opposite one.
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Weekly

On coming week we do not expect significant upward action. In addition to existing of Yearly Pivot we have here weekly overbought and major 3/8 Fib resistance. We think that market will hit this area just to complete important targets but hardly will move through it.

Even more. We think that solid downward retracement could happen by two reasons - market stands in upward action with long period already without any solid retracement. On weekly chart it looks like just single swing up. Second - market meets strong resistance.

As we've said above this level will play major role in gold's destiny in nearest term. Gold also stands in a sequence of lower tops and lower lows. Here market has chance to break this tendency if it will form reversal swing. In this case this will be additional indicator of changing sentiment on the market.

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Daily

So, we've estimated that market has reached strong resistance and hardly will break it on coming week. Even opposite is more probable. As Gold has reached all major targets of our first stage upside action - it could turn to retracement down.

Since this is first leg up after long period of dropping, market is overbought at weekly and monthly chart - retracement down will be significant probably. We think that gold could drop as far as to 1100 area. So, I'll show you the picture:
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This deep retracement will not mean collapse of all bullish hopes, as we've discussed on monthly chart. The identification will come second, after market will finish with normal technical retracement. If market is really bullish it should form some upside reversal pattern, return back and challenge neckline, i.e. YPP again. May be retracement will be slightly smaller - it's OK, but some upside reversal pattern should be formed.

That's being said, currently I wouldn't initiate any new long positions. Shorts are possible only for scalpers. For us is most important level where retracement will end.

Intraday
Here guys, we do not see yet any clues, since rally is under way and market has not reached yet final point and has not started yet to form any patterns.
WPR1 stands at 1198 that agrees with our resistance. That's being said we will have - WPR1, YPP, weekly OB, daily OB and major 3/8 Fib resistance around 1180-1194 area. Here we expect to get final point of our first upside leg that we've traded within recent 2 months.
gold_4h_08_02_16.png


Also guys, you should understand that our analysis is based on "normal" market that stands on its own where technical analysis works.
But gold now is not quite a market of this quality. If any gepolitical factors will impact the world - market could take irrational action as we saw many times in the past.

Conclusion:
We think that fundamentally gold stands somewhere near bottom and situation is starting to change. But this bottom could be "extended", because the scale of this analysis is long-term. It means that market could drop lower, say to 1000$ , but pace of drop will be significantly slower, or will turn to some wide range fluctuations.

In short-term perspective market has completed first stage of upward action, let's call it initial swing. Some moderate retracement probably should come. Major clarity will come after this retracement. Probably it will take no less than 2-3 weeks



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.
 
Good morning,

(Reuters) - Gold edged up to near its highest since June on Tuesday, as uncertainty over global growth that has hammered stocks puts the precious metal on course for its longest rally since 2011.

Tuesday would mark gold's eighth straight day of gains as investors sought safe havens in the face of instability in other financial markets, although liquidity was slow in Asia with China shut for a week-long Lunar New Year holiday.

If gold sustains its gains later on Tuesday, it would be its longest rally since an 11-day run in July 2011.

"While it's quite clear that one of the drivers here is a weaker U.S. dollar, it does appear that risk appetites are diminishing and that of course means more demand for gold," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

"It's not impossible we could see another touch of $1,200, some consolidation and then potentially a move higher if current conditions prevail."

The dollar tumbled to its lowest against the yen since November 2014 as a selloff in European and U.S. stocks continued into the Asian session, spurring demand for the Japanese currency, another safe haven. Tokyo stocks plunged more than 5 percent.

Bullion gained 5 percent last week, its biggest such increase since July 2013, boosting gold bulls' expectations that the price can go higher as global headwinds could make it tough for the U.S. Federal Reserve to raise interest rates this year.

U.S. gold for April delivery was off 0.4 percent at $1,193.30 an ounce.

Underlining gold's rising draw, holdings in eight major gold exchange-traded funds (ETFs) rose to 43.3 million ounces on Friday, the highest since July 2015.

More significant was the rapid pace of inflows since the start of the year, having risen more than 8 percent and the biggest five-week surge since March 2011.

"We remain quite upbeat on gold's prospects over the short-term given the continued unease surrounding the global equity markets, the weaker dollar and gold's much stronger technical profile," INTL FCStone analyst Edward Meir said in a note.

The next stop for gold could be $1,205/$1,215 and further to $1,235, said Meir.


So, guys, it seems that our theory slowly are coming to life - as on gold as on Yen and other safe-haven assets. Gold has reached our predefined level - 1280-1294 and hit rock hard resistance - YPP, daily and weekly OB, major weekly Fib resistance and trend line. Also gold hasA formed upside reversal swing.

Although we have long-term bullish view on gold - nobody cancels technical rules yet and they suggest deep retracement, usually it takes the shape of AB=CD. Beyond strong resistance we have two other reasons for it - H&S pattern and reversal swing:
gold_d_09_02_16.png


Here guys we call you to take profit on your long positions. Although scalp traders could think about going short - this is not forbidden, but for us, daily traders, most important is a final point of potential retracement. Since it will give us new entry point with upside trade but of bigger scale that was previously:
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Good morning,

Reuters) - Gold rose for an eighth session out of nine on Wednesday, climbing towards a 7-1/2-month high as investors sought the safe-haven asset amid tumbling stock markets and concerns about the global economy.

Global equity markets have been hit by worries over the health of the euro zone banking sector, with a very loose monetary policy seen crimping bank profits and consequently their ability to repay debt.

That has triggered a rally in bullion, along with other safe-haven assets such as government bonds and the Japanese yen.

Gold will push higher on continued jitters in the global equity markets, dollar weakness, bullish technicals and a pick up in bullion investment buying, said INTL FCStone analyst Edward Meir.

Federal Reserve Chair Janet Yellen's address to the U.S. Congress later on Wednesday was also expected to support prices.

"We suspect her remarks will come across as unusually dovish, allowing the dollar to resume its descent and giving commodity markets a bit of a lift late in the day on Wednesday," Meir said.

Yellen will defend the U.S. central bank's first rate hike in a decade and likely insist that further rises this year remain on track, albeit at a slower pace.

A slower pace on interest rate hikes could help bullion, which is a non-interest paying asset.

For the time being, traders will take cues from equities and other safe havens.

Asian stocks dipped on Wednesday amid growing concerns about the health of the global banking sector, particularly in Europe.

The Japanese government bond 10-year yield turned negative for the first time on Tuesday and the U.S. Treasury benchmark yield declined to a one-year trough.

The dollar was near 15-month lows against the yen.

The gold price rally, however, has hurt demand from physical buyers of the metal.

Gold prices in India slipped to a record discount as traders struggled to draw buyers. Dealers were offering a record discount of up to $25 an ounce to the London benchmark price.

Top consumer China is closed this week for the Lunar New Year holiday.


So, market stands rather tight in last 2 sessions. May be today's Yellen speech will push it somewhere. Technically, as Gold has met our major targets and levels - we do not expect any upside action till the end of the week. Mostly because market is overbought on daily and weekly charts. And on weekly we also have bearish Stretch pattern.
Currently we could specify first target of retracement, which is 1140 K-support. But there is a solid odds still that gold could drop to 1100-1105, since gold's habit is deep retracements and don't forget about overbought - it will push market lower:
gold_d_10_02_16.png

So conclusion is simple here. Daily traders - sit on the hands and do nothing. Scalpers may be could try to take shorts as soon as you will get acceptable context. Right now we do not see anything yet, except may be this bearish engulfing pattern.
 
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Good morning,

(Reuters) - Gold surged to its highest in 8-1/2 months on Thursday as investors bet that the Federal Reserve could find it hard to hike U.S. interest rates this year, while safe-haven demand amid a tumble in equities and the dollar also boosted the metal.

The Fed is unlikely to reverse its plan to raise interest rates further this year, but tighter credit markets, volatile financial markets, and uncertainty over Chinese economic growth have raised risks to the U.S. economy, Federal Reserve Chair Janet Yellen said on Wednesday.

Yellen said she expected continued U.S. economic growth would allow the Fed to pursue its plan of "gradual" rate hikes, but her comments kept the central bank's options open.

A slowing of rate hikes could help bullion, keeping down the opportunity cost to hold it.

U.S. gold rose to an intra-day high of $1,215.30 an ounce, a near-nine-month peak.

"Stop loss orders are being triggered on the break of $1,200," said MKS Group trader Jason Cerisola.


"Yellen made it clear that while the Fed still expects to continue on its gradual tightening path, policy was not on a pre-set course and would respond appropriately to developments," ANZ analysts said in a note, adding that gold prices will likely get some support from the dovish Fed outlook.

Bullion was also supported by inflows into safe-haven assets as investors fretted over the Fed's rate hike path.

Asian shares sputtered on Thursday, while the dollar fell to a 15-month low verses the Japanese yen.

Longer-term U.S. debt rallied hard as investors wagered that either the Fed would be unable to tighten at even a gradual pace, or that if it did hike it would only hasten the arrival of recession and deflation.

The spread between 10-year and two-year U.S. Treasuries shrank to the smallest since late 2007 just before the global financial crisis hit.


So, Yellen's dovish comments have pushed gold higher, or better to say have become a cathalysts of upside continuation. As stops above 1200 have been triggered - market has moved even higher.

At the same time, gold is driven by not pure technical and financial reasons. Right now it has become obvious run into quality and reviewing the role of safe haven assets by investors. We've warned about it in December, even before terrorist atack on Paris...
It means that in medium-term perspective our analysis and technical view will be adjusted by market and distorted, skewed to upside. Downward retracements could be cancelled or will become smaller. Market is tending higher...
On daily chart we still will wait for the deep to buy. We just can't jump in running train, this is not our way of trading. Sooner or later this retracement will come.
gold_d_11_02_16.png


But for those of you who would like to take small result day by day I could specify DiNapoli method of trading. Since market creeps with overbought and makes very small intraday retracement, Idea stands on following things.
Once market has reached some new top and met overbought - it turns to minor retracement. You can use this retracement for going long and out when market will return back at the top or ovrerbought. By this step trading you will be protected from holding position too long and will get result day by day, although it will be small. It is not necessary to talk that stops should be also rather tight - corresponding to targets.
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Good morning,

(Reuters) - Gold on Friday clung to sharp overnight gains that pushed the metal to a one-year high, and looked set to post its best week in over four years as stock market turmoil stoked safe-haven demand.

Bullion jumped 4 percent on Thursday, its biggest single-day percentage rally since 2013, and analysts and traders see more gains ahead if the weakness in equities persists.

Asian shares slid as mounting concerns about the health of European banks further threatened a global economic outlook. MSCI's global stock index closed more than 20 percent below its all-time high.

Safe-haven assets shone across the board. U.S. 10-year Treasury yields hit their lowest since 2012 and the Japanese yen climbed to its highest in 15 months against the dollar, while money continued to flow into gold-backed exchange traded funds.

"We are seeing a flight to quality," said a Sydney-based trader. "ETFs have been accumulating the metal for some time now. They are one of the main drivers (of the gold rally) along with the equity markets which are extremely soft."

For the week, spot gold is up almost 6 percent, the biggest such gain since October 2011.

U.S. gold futures have risen more than 7 percent for the week, the sharpest jump since 2008.

Assets in SPDR Gold Trust, the world's top gold exchange-traded fund (ETF), rose 2 percent on Thursday, the biggest inflow in two months.

Total holdings of the top eight gold ETFs have risen by 3.8 million ounces so far this year, after three straight years of decline.

The risk-off sentiment has made gold the best performing commodity in 2016, investment bank ANZ said. Others predicted further gains.

"$1,300 would be possible if stocks don't stop falling," said Yuichi Ikemizu at Standard Bank in Tokyo.

Jeffrey Gundlach, co-founder and chief executive officer of DoubleLine Capital, said gold is likely to reach $1,400 as investors lose faith in central banks.

Also helping gold were dovish comments this week from Federal Reserve Chair Janet Yellen, who stressed that the U.S. central bank was not on a "pre-set" path to return policy to "normal" amid a worsening meltdown in global stock markets.

Though Yellen said she still expects the Fed to gradually raise rates this year, federal funds rate futures have almost completely priced out the chance of a rate hike.



So, yesterday gold again was standing on rally. As you can see market behaves right now irrational (from market mechanics point of view, of course). We understand that it is logical with run-to-quality action, but as a result technical analysis effectiveness drops.
Anyway to take long position we will need some deep, retracement down. On daily chart we have nothing but just wait when it will happen. Now probably it is reasonable to speak on move above YPP... All other issues are stand the same - reversal swing, overbought on all time frames and monthly wedge breakout. We still think that it is not necessary to hurry with entry.
Here we also could start watching for DiNapoli patterns. Say, B&B "Buy":
gold_d_12_02_16.png


Since market moves very fast and rally just has stopped - currently intraday charts are not as useful as usual. More or less clear picture is visible only on daily and higher time frames now.
 
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