GOLD PRO WEEKLY, February 15-19, 2016

[Sive Morten]

Fundamentals

Reuters) - Gold prices eased on Friday after soaring 5 percent the previous day, pressured by profit-taking after the biggest rally in more than seven years, but the metal was still set for its best week in four years as investors rushed to safe haven assets.

U.S. gold futures for April delivery settled down 0.7 percent at $1,239.40 an ounce but were on track to rise 7.1 percent this week, the sharpest increase since December 2008.

"Today you've got a little bit of a corrective pull back. There's some profit taking going on," said Bob Haberkorn, senior market strategist at RJO Futures in Chicago.

"Traders are catching their breath and re-evaluating what to do at this stage," said Haberkorn, who also indicated he expected to see another leg up after a bit more consolidation.

Investors said gold's prospects for a sustained price rally are better than they have been for years.

"Gold could test $1,260 or even $1,300 in the next few weeks, but I wouldn't be surprised if we also see some profit-taking," said Commerzbank analyst Carsten Fritsch.

U.S. and European shares rebounded, with reassuring U.S. retail sales data boosting sentiment, while the U.S. dollar also rose, pressuring gold prices.

Bullion investors have been unnerved since the Bank of Japan, followed by Sweden this week, introduced negative interest rates to stimulate growth.

Gold has also been boosted by a scaling back of expectations for U.S. interest rate rises and even the possibility of rate cuts if economic conditions deteriorate.

On Friday, however, New York Fed President William Dudley said it is "extraordinarily premature" to even talk about using negative interest rates to stimulate the economy

SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, said its holdings rose 2 percent on Thursday, the biggest daily inflow since Dec. 18.

So, CFTC data brings no surprises - Open Interest grows simultaneously with net long position. Pure bullish dynamic that confirms sentiment:

Technicals
Monthly

So 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 is not sufficient yet to change situation on monthly chart 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 Middle East tensions. Currently we see clear signs that situation will become worse in nearest time. The fact that gold was dropping recently on a background of Middle East turmoil looks a bit artificial and this situation already is changing. 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. Currently this subject is not very interesting since gold stands on upside march. But it has not cancelled yet bearish scenario totally. Gold needs to move above 1380 to do this.

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 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 butterfly "Buy" has been completed. Currently market has reached 5/8 resistance of butterfly 's swing. Gold has exceeded Yearly Pivot and this points on existing bullish trend on monthly chart. As gold is not at overbought here - next logical destination is 1314 area of Yearly PR1.

Weekly
On weekly chart we do not have a lot of subjects to discuss. Trend is bullish here. Market strongly overbought around minor 5/8 Fib resistance. Most important here is breakout of 1200 area. This was really strong resistance, including upper border of long-term consolidation. This is very important breakout also because gold has created upside reversal swing and broken downward tendency.

It is difficult to make any forecast with such geopolitical situation as we have, guys, but base on technical picture purely, we should get some AB=CD retracement down. Logical destination of this retracement is broken 1195-1200 area. May be we will get it, since coming week will be short one, Monday is a President's Day in US and currently overall situation around Syria is taking some relative relief due agreement of fire stop from 1st of the March. May be this will let market to be driven by it's own factors and retracement will happen.

Daily

Obviously market is overbought on daily chart as well. When we do not have Fib extensions to estimate resistance level and target (all targets have been hit already), we apply Fib retracement of most recent swing down. 1.618 level stands precisely around WPR1 @ 1280. Also this will be monthly Fib resistance level.

Currently it is very difficult to say - whether market will take another minor leg up to reach 1280 major resistance or will turn down right now. As first scenario as second are possible right now, because 1255 is also weekly Fib resistance, although minor one.

But from the other side - we do not care much on it. Anyway we need the deep to buy and from which level market will start retracement - this is not as important, since we do not have any plans to trade on bearish side.

Still, if retracement will happen - we should look for 1280 area. This is major 3/8 Fib support, daily oversold, WPS1 and previously broken strong resistance area. Following the gold's habits - market probably will be focused on this area.

Hourly
Probably we could monitor situation on hourly chart since it could clarify this question for us. Right now situation stands mostly in favor of another leg up to 1280 area. Market keeps chances for upside butterfly and here we also have clear signs of bullish dynamic pressure.

But if market will drop below 1230 and erase butterfly - may be retracement will start right from here.

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. But with current pressure of geopolitical factors it is very difficult to say definitely when it will happen and how deep retracement will be.
On coming week we will watch for 1258 or 1280 area as starting retracement down, with initial target around 1180-1195.


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,

(Reuters) - Gold stretched its losses into the third session and tumbled below $1,200 an ounce on Tuesday, as easing concerns over the global economy buoyed stocks and hurt safe-haven demand for the metal.

Bullion's three-day loss of 4 percent, its biggest such drop in seven months, takes the precious metal further away from a one-year high that was recorded last week, and threatens to undo a rally that has seen prices gain 13 percent so far this year.

Goldman Sachs's recommendation to short gold, prompted by the bank's belief that the recent fear-induced rally has been overdone, added to the bearish sentiment.

"The (precious metals) complex has benefited from the recent global risk-off attitude and heightened volatility. However, a pull-back was inevitable at some stage," said James Gardiner, trader, MKS Group.

U.S. gold futures also fell, hitting a session low of $1,191.50. Silver dropped more than 1 percent.

Spot gold may fall more to $1,178, Reuters technical analyst Wang Tao said:

The support was provided by the 50 percent Fibonacci retracement on the downtrend from the March 17, 2014 high of $1,391.76 to the Dec. 3, 2015 low of $1,045.85. The next support will be at $1,178, the 38.2 percent level, a break below which could open the way towards $1,127, the 23.6 percent level.
A sudden surge above $1,219, now a resistance, could signal a resumption of the uptrend towards $1,260, the 61.8 percent level.

A correction in gold prices had been expected as the metal had risen quickly over a short period of time. It gained $200 from its January lows to year-high last week, when it also posted its best week since 2011.

On Thursday, gold hit a year-high of $1,260.60 as concerns over the health of the banking sector and fears of a global slowdown prompted investors to steer clear of equities and buy safe-haven gold.

But world stocks rose sharply on Monday as China's central bank fixed the yuan at a much stronger rate and oil cemented recent gains, easing fears of global deflation.

Asian shares extended their gains on Tuesday on a combination of stabilising Chinese markets, a rebound in oil prices and solid U.S. consumption data.

The dollar pulled away from multi-month lows against the yen and euro, and jumped nearly 1 percent against a basket of major currencies

"Fears around China, oil and negative interest rates have likely been overstated in the gold price and other financial markets," Goldman Sachs said in a note, adding that it expects gold to fall to $1,100 an ounce in three months.

Top consumer China's return from a week-long holiday did not help either. Chinese investors sold into gold's rally, a sign they do not expect prices to go much higher and cannot be counted on to support the market, with post-Lunar New Year demand set to falter.

Well, Goldman Sachs try to scare us with 1100 drop, but somehow HSBC (Hong Kong & Shanghai Bank Corp.) has refused to changle location and run to HK out of London... Second, China's Export has dropped for 11 % so devaluation was in vain. It seems that next country-donor of resources will become a China. They will have to loose all accumulated reserves and investments will be suck out by global corporations. This is exile. HSBC knows what to do, right? Thus, Goldman Sachs calls look at least curious in current situation....
Our thoughts are the same here. Global situation is changing. Currently market really a bit overextended and needs retracement as we've expected. First leg is started and we already could think about B&B "Buy" trading:

Although market has reached Fib support we believe that it would be better to wait some clear reversal pattern on hourly chart that will trigger upside action. Currently we do not have any yet:

That's being said - overall setup looks attractive for scalp long trade, but we need clear pattern on hourly chart before taking position. Probably we should get it within 1-2 sessions...

 

[Sive Morten]

Good morning,

(Reuters) - Gold snapped a three-day losing streak on Wednesday, in choppy trade that saw the metal swing between gains and losses around the key $1,200 an ounce level as stock markets consolidated recent gains.

The stock market stabilisation, after last week's rout on concerns about the global economy, has reduced investor interest in gold as a safe-haven asset. The yellow metal hit a one-year high of $1,260.60 an ounce last week.

Concerns remain that gold could correct further as some analysts say gold gained too much, too quickly.

"Gold's price performance thus far this year... could prove to be unsustainable," Societe Generale analyst Robin Bhar said in a note on Tuesday.

Fears over the global economy are likely to fade and U.S. interest rate hikes will return to the agenda, hurting bullion, Bhar said.

Earlier this week, Goldman Sachs also said investors should short gold, as it believes the recent rally has been overdone.

Sentiment was not helped by news that John Paulson, one of the world's most influential gold investors, slashed his bets on bullion at the end of last year by cutting his stake in the top gold-backed exchange traded fund by 37 percent.

Global stock markets have calmed since last week's declines. Asian shares were taking a breather on Wednesday after two sessions of solid gains, while U.S. shares registered gains in Tuesday's session.

The dollar has recovered from multi-month lows hit last week against the euro and the yen.

Despite the recent losses, gold has risen 13.1 percent in 2016, making it the best performing asset this year.

Investors will be eyeing the minutes of the Federal Reserve's Jan. 26-27 meeting to be released later on Wednesday to gauge the U.S. central bank's view of the economy and its outlook on interest rates.

Speculation has increased in recent days that the Fed might resort to negative interest rates to stimulate the economy after Fed Chair Janet Yellen said last week it was an option that would not be taken "off the table."

Lower or negative rates would boost demand for non-interest-paying gold.

However, Boston Fed President Eric Rosengren said on Tuesday it would take a grimmer economic picture to prompt the central bank to cut rates. The Fed raised interest rates in December for the first time in nearly a decade.

Gold right now behaves very logical. But we would like to warn you "do not believe" different relations on temoral gold's growth. This is fairy tales. Situation in the world is changing. China is a bright example and we will show you this in our weekly research. As well as Gold - Crude Oil price relation...

So, theoretically B&B "Buy" has been confirmed, but I wouldn't hurry to go long. Now gold is forming bullish grabber, but market is not ready yet to strong upside action, retracement was too short. My suspicions - grabber probably will not be formed and we need to wait for 1-2 sessions before taking long position. Gold still has 2 days in reserve without breaking B&B setup.

Here is why. First - take a look at current upside action. It is very weak, not sufficient to trigger serious upside action. It means that hardly we will get grabber by the end of the day. Hence, we should get some minor downward action, probably to 1180. By this action we will get all that we want - reversal pattern, which is butterfly, B&B setup will not be broken, market will reach YPP and WPS1 and will be ready for upside action. Also current grabber will not be formed and there will not be any contradiction among patterns.
Thus we call to wait at least till tomorrow.

 

[Sive Morten]

Good morning,

(Reuters) - Gold on Thursday clung to overnight gains that helped the metal snap a three-day losing streak on bets the Federal Reserve could slow the pace of U.S. interest rate hikes.

Minutes from the Fed's last policy meeting released on Wednesday showed that policymakers considered changing the U.S. central bank's planned interest rate hike path for 2016 on fears that a global slowdown and financial market selloff could hurt the U.S. economy.

Although most of the policymakers still expected to raise rates this year and even discussed a hike at the Jan. 26-27 policy meeting, they were divided over how to interpret financial market volatility

A slower rate hike pace could boost demand for gold, which posted its third straight annual decline in 2015 on fears that higher rates would dent the appeal of the non-interest-paying asset.

"With the uncertainty in the global economy and the relatively dovish Fed minutes that were out yesterday, gold prices will still be supported above $1,200," said Barnabas Gan, an analyst at OCBC Bank in Singapore.

Gan said there was a greater possibility of a rate hike in the second half of this year rather than the first half, and gold prices could give back some gains then.

Bank of America Merrill Lynch on Wednesday reduced its forecast for the number of times the Fed will raise rates this year to two from its earlier projection of three to four due to recent market turbulence.

It would be "unwise" for the Fed to continue hiking rates given declining inflation expectations and recent equity market volatility, St. Louis Fed President James Bullard said on Wednesday in comments that mark a stark change of direction for one of the Fed's more hawkish inflation foes.

Bullard joins a growing list of Fed officials who have said this week that the U.S. central bank shouldn't rush into further rate hikes.

The comments should further support gold, which had rallied to a one-year high of $1,260.60 last week on the back of the turmoil in stock markets.

However, stocks have stabilised for the time being. Asian stocks rose on Thursday, while U.S. shares advanced for a third straight day on Wednesday as the jump in oil prices boosted energy shares.

So, recall what we've talked yesterday and let's continue... Here we've got least pleasant situation with second leg of retracement in mind, but with bullish grabber on chart. This makes overall situation complex. As you understand - either grabber should fail or... right.

On daily chart we have interesting gathering of patterns - bullish grabber (suggests new top), B&B "Buy" also suggests upside action and reversal swing - it suggests deeper 2-leg retracement down. How to combine them?

Let's see what we have on intraday charts. Yesterday we've warned you - to not hurry with long entry. On 4-hour chart we do not have any extension that could specify downside targets, but we have bearish pressure and pennant pattern. Current action does not look yet as upside continuation:

On hourly chart we also do not have yet neither rally nor some reversal pattern. That's being said the only bullish pattern that we have is grabber.

Hence you have simple choice - take the risk and build your strategy purely on grabber and go long. Or, wait a bit more and see what will happen - may be we still will get minor dive here and butterfly will be completed. In this case confidence for long entry will be greater...

 

[Sive Morten]

Good morning,

(Reuters) - Gold gave up some of its sharp overnight gains on Friday, but held above $1,200 an ounce as a drop in equities stoked fresh safe-haven demand for the metal.

Asian shares slipped from near three-week highs on Friday, following a drop in U.S. equities overnight that snapped a three-day rally

Bullion's 16 percent rally so far this year has made it the best performing asset amidst turmoil in stock markets and concerns over the global economy. But some analysts say markets have over-reacted and that the price for gold will fall further.

"We think the current gold price rally will reverse, once risk-sentiment buying fades, similar to the trend seen in early 2014 and 2015," Nomura said in a note, adding that they expect prices to average $1,055 in the first half.

"Despite current financial market volatility, we do not think there has been a major change in the fundamentals of the global economy."

For now, the metal was supported by inflows into gold-backed exchange-traded funds (ETFs), holdings of which have already risen this year by more than they fell in the whole of 2015.

Assets in SPDR Gold Trust , the world's top gold ETF, rose 0.38 percent to 713.63 tonnes on Thursday.

Gold is also being bolstered by rising speculation that the Federal Reserve would not be able to hike U.S. interest rates due to concerns about the economy, though economists polled by Reuters see two rate hikes this year.

"The key factor underpinning our bearish view for gold prices will still be the FOMC rate outlook for the year," said OCBC Bank analyst Barnabas Gan, referring to the Federal Open Market Committee.

Gan raised his year-end gold forecast from $950 an ounce, but still kept the estimates below bullion's current levels.

He expects gold to reach $1,000 if the Fed introduces three rate hikes, and $1,150 if the central bank hikes rates just once this year.

In the physical markets, Asian gold demand slowed this week as consumers opted to wait out the metal's biggest rally in years, with discounts in key consumer India hitting a record high as some investors cashed-out holdings.

So, on gold market rally still has happened, but it was not as high as grabber suggested. Now we have another grabber in place. It is difficult to tell on reasons on this rally. Nothing special has happened yesterday, except may be agreement difficulties on Brexit subject...
Anyway we still think that gold market looks overextended to the uspide and one way or another deeper retracement should happen. Here we could argue only on the way how it will start. Either it will be some kind of DRPO /Double Top pattern (to complete grabbers) or direct AB=CD....

For us, this is not really big deal - since we mostly need only final point of this retracement (as on JPY) to take long position and join rally continuation.
Here, guys I've drawn 2 possible scenarios. Just we've stopped talking yesterday - market has formed minor grabber and broken pennant to the upside. Right now it is a question, whether it will down right from here or will form another top first...
If we will get AB-CD, then gold will reach our desirable level around 1165 Fib support:

Appearing of butterfly will make retracement longer in time a and postpone major move down.
Here is the reason why market could turn down - it has met 5/8 Fib resistance, completed butterfly and 1.618 AB-CD pattern.

Anyway, guys we do not call you to trade it short - this is too risky. We repeat that our major object is to get nice level for long entry. Now chances are not lost yet, that we could get it around 1165 area.