Sive Morten
Special Consultant to the FPA
- Messages
- 18,699
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.
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.
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