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GOLD PRO WEEKLY, January 01-05, 2018

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, Dec 31, 2017.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Happy and Prosperous New Year to everybody!

    Fundamentals

    (Reuters) - Gold extended its rally to a three-month high on Friday, leaping toward its biggest one-year rise in seven years as a wilting U.S. dollar, political tensions and receding concerns over the impact of U.S. interest rate hikes fed into its rally.

    Gold’s gains coincide with the greenback, in which gold is priced, sliding toward its worst year since 2003, damaged by tensions over North Korea, the Russian scandal surrounding U.S. President Donald Trump’s election campaign, and persistently low U.S. inflation.

    The dollar index touched three-month lows on Friday, lifting bullion to its highest level since late September at $1,307.60 an ounce before paring gains.

    Strong charts, the weaker dollar and expectations of bullish fundamental factors ahead have bolstered gold prices in year-end trade, said David Meger, director of metals trading for High Ridge Futures in Chicago.

    Spot gold prices were up 0.67 percent at $1,303.37 per ounce by 2:05 p.m. EST (1905 GMT), poised to finish 2017 up 13 percent. Benchmark U.S. gold futures settled up $12.1, or 0.93 percent, at $1,309.30 per ounce, finishing the year 12 percent higher.

    “Going back to the last Fed meeting with its slightly more dovish tone, commodities markets have gotten a bit of a green light,” Meger said, referring to indications this month that the U.S. central bank will keep its rate outlook unchanged in the coming year.

    “This recent bout of weakness in the dollar certainly is fostering a commodities rally and we’ve seen a light downturn in equities as well.”

    The metal will be vulnerable next year to a rebound in the currency, as well as any gains in yields, ABN Amro analyst Georgette Boele said. The opportunity cost of holding non-interest bearing bullion increases when yields rise elsewhere.

    Gold’s chart signals look positive after it broke above its 100-day moving average this week at $1,295 an ounce, ScotiaMocatta’s technical team said in a note, pointing to a target of October’s high at $1,306.


    COT Report

    After massive position closing, we see that investors tun back to buying gold. Last two weeks net long speculative position is growing. Open interest also shows growth but it stands mostly nominal. It means that some bearish positions were reversed to bullish.
    Besides, recent drop has re-established total upside potential, as no total position stands relatively far from saturation.
    upload_2017-12-31_14-48-1.

    SPDR Fund doesn't show yet any reaction on recent gold rally. This could be due balance close through new year day for taxation. So, investors have not started to re-balance their portfolios. Major activity should come after holidays.
    upload_2017-12-31_14-59-45.
    Technicals
    Monthly

    Situation on gold market is changing very fast. Only in the middle of December we've talked about weakness of gold market but in recent two weeks anything has turned from top to bottom.

    Of course, here we should remember that mostly all changes have come in "thin market" period when large hedge funds and big investors were closing financial year balances, and now this process still stands. New portfolios are yet to be created after New Year's Day holidays.

    Thus, it will be even more interesting to see whether situation will change somehow or not. Right now gold price action looks really impressive. COT report also points on bullish sentiment and existence of upside potential as well.

    December has become a turning point for gold market. There are two important technical issues are accumulated in just one month. They are bullish grabber and reversal candle.

    Grabber suggests now action above 1355 top of 2017 year. If you will take even brief look on the chart, you could imagine a lot of different extensions that could be formed with targets above 1355. They are large butterfly, AB-CD's of different scales.

    December reversal feature also is very important and bring more confidence with upside continuation. As you can see December low stands under lows of four previous months but it has closed above the top of November.

    Our major trend line (green) still stands valid. That's why long-term bull trend stands intact. December candle should provide us a lot of patterns for trading on lower time frames, in addition to large patterns that we could get here later.

    Just grabber shows on upside perspective above 1355 and this is sufficient potential for trading on daily chart.

    Here I also put new pivots for 2018...
    gold_m_01_01_18.

    Weekly

    Here we have a lot of details, guys. Weekly trend has not turned bullish yet, but with market upside pace that we have now - this is probably just a question of time.

    Minimum target request of our "222" Sell pattern was satisfied, as gold has shown 3/8 retracement of "222". So it has not failed and was completed with minimal target right at K-support area.

    At the same time gold keeps valid both upside trend lines and harmonic swing. In fact, BC retracement down was the same as previous one.

    All these moments point of validity of upside trend, despite that it shows moderate retracements. If you will take a careful look, you'll see that gold stands in rather large triangle pattern.

    Following grabber's idea, here we could focus on nearest target above 1355 tops. It is 1384 AB-CD objective point. And, in general 1380-1390 area will be very important. Market could stand there for a long time. This is major Fib level on monthly chart (1380), new YPR1 @ 1391, multiple targets and extensions around 1380-1390 area.

    Thus, it is logical to expect some brief taking around 1380-1390 area and use this area as indicator. Because if market will break it up - this will be very important signal.

    gold_w_01_01_18.

    Daily

    On daily chart we will use the same AB-CD pattern as on weekly, but different extension. Here we will use COP - 5/8 extension that points on 1334 target. As you can see this target also coincides with January MPR1.

    Now is a question how market will reach it. In fact there are just two ways - either direct action with breaking 1311 area, or some retracement first and then upside continuation.

    In current circumstances, I would bet on retracement. First, major players will return on market in January. Second - technically market stands at major 5/8 resistance @ 1311 and daily OB. In fact, we have DiNapoli bearish "Stretch" pattern. It suggests retracement and it will be difficult for market to continue upside action immediately.

    If retracement indeed will start - we could get reverse H&S pattern here that we've mentioned previously. It's AB-CD target should get approximately the same destination around 1330-1335 area, as it is shown on the chart:
    gold_d_01_01_18.

    Finally, recent rally is a good thrust for DiNapoli directional patterns - they are also will be in focus...

    Intraday

    Here we do not have something bearish yet, except may be engulfing pattern on hourly chart and W&R here, on 4-hour chart. By this W&R gold has exceeded 1305 top and, in fact, we have upside reversal swing...

    If retracement indeed will happen - it probably will be deep. Now it seems that it will be either 1280 or even 1265. Fist level is K-support area, while second is harmonic low of potential H&S pattern. Now it seems a bit unbelievable that drop could be so deep, but the shape of the pattern tells that it is possible.

    1265-1307 recent rally is suitable for DiNapoli patterns as well. Actually appearing of DRPO "Sell" could be logical here.

    gold_4h_01_01_18.

    Conclusion

    Long term situation has turned from top to bottom and we still need to find out what was that - some obsession due thin market and absence of major players or real shift in sentiment. This drastic changes open impressive perspectives for trading in long-term period.

    Even in short-term perspective now we have a lot of potential patterns. We will start week from 4-hour thrust and start watching for bearish reversal patterns, if they will appear, of course. Then we will be watching for upside reversal moment to take a position in direction of 1380 level.


    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.
     
  2. shahsavari

    shahsavari Private, 1st Class

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    Dear Sive
    Thanks again
     
    Sive Morten likes this.
  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - Gold prices edged down on Wednesday after hitting a 3-1/2-month high, as the dollar recovered from its lows and technical indicators pointed to a short-term correction.

    Spot gold fell 0.4 percent to $1,312.71 an ounce at 0257 GMT. The precious metal earlier hit $1,321.33, its highest level since Sept. 15.

    U.S. gold futures were mostly unchanged at $1,315.60 an ounce.

    “Relative strength index shows the metal at overbought levels, which may lead to short term selling,” ScotiaMocatta analysts said in a research note.

    The 14-day relative strength index (RSI) for spot gold touched 75 on Tuesday, it highest since September 2017. An RSI above 70 indicates a commodity is overbought and could lead to a price correction.

    The dollar index, in which the gold is priced, was up 0.1 percent at 91.946 after falling to a more than three-month low Tuesday.

    The greenback posted its biggest annual drop since 2003 in 2017, helping gold to an annual increase of more than 13 percent. Bullion surged $55 an ounce in the last three weeks of 2017 alone.

    Gold’s medium-term outlook appeared positive, analysts said.

    “At this moment we are expecting some kind of inflationary expectations. People are more optimistic with stock rally are also expecting returns in commodities including gold,” said Mark To, head of research at Hong Kong’s Wing Fung Financial Group.

    “We should tap the short term opportunities to go long as gold has crossed $1,300 with a momentum. It may act as a support, while $1,340 could be an immediate resistance level and we might reach $1,400 in the first quarter this year.”

    Spot gold may break a resistance at $1,326 per ounce and rise toward the next resistance at $1,380 in three months, as suggested by its wave pattern and a Fibonacci ratio analysis, according to Reuters technical analyst Wang Tao.

    Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.14 percent to 836.32 tonnes on Tuesday from 837.50 tonnes on Friday.


    So, on gold market is approximately the same story as we have on EUR and DXY. Picture suggests some upside continuation before moderate retracement could start.

    If you remember in our weekly research our major concern on daily was not in direction but in the shape of upside continuation. First scenario suggests drop from 1300 area and appearing of reverse H&S pattern that should lead market to 1330 target.
    Second scenario - direct upside continuation. Now it is clear which scenario is forming, right? As gold has not shown any respect to major 1311 Fib resistance, even accompanied by OB, it means that purchases are really strong. Besides, market already stands in a few bucks below major target - COP of large AB-CD pattern and MPR1:
    gold_d_03_01_18.

    Still, existence of OB condition makes gold market to take pauses in upward action. Thus, on 4-hour chart we have bearish reversal candle that suggests some retracement here. Second important tool is DiNapoli thrust, that could be used for intraday trades:
    gold_4h_03_01_18.

    Perfect scenario would be, if we will get B&B "Buy" around 1300. It totally agrees with idea of upside continuation and could become excellent gift from market. Speaking about DRPO "Sell" here - it is not as obvious as with B&B. Mostly because we have uncompleted major 1330 target, and appearing reversal pattern in advance of its completion will look suspicious, as it easily could turn to DPRO "Failure".

    That's being said - let's watch for B&B on intraday chart. On daily some setups could be formed when market will complete 1330 target...
     
  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - Gold prices fell on Thursday after hitting a 3-1/2-month high the session before, pulled down as investors took profits and as the U.S. dollar firmed. Spot gold was down 0.4 percent at $1,306.72 an ounce
    at 0333 GMT. U.S. gold futures dropped 0.8 percent to $1,307.80 an ounce.

    Spot gold marked its highest since Sept. 15 at $1,321.33 on Wednesday, but then dropped as the dollar recovered from over 3-month lows. It fell further after minutes from the Federal Reserve's December policy bolstered expectations for more U.S. interest rate hikes.

    That meant that gold, which had rallied $85 from nearly 5-month lows hit in mid-December, posted its first day of losses in nearly three weeks.

    "People are looking to lock in some gains after a pretty strong rally over the past weeks," said ANZ analyst Daniel Hynes. "Geopolitical issues have certainly been a huge power point of the gold's rally into the year-end ... It is going to be a U.S. dollar type story going forward with markets taking a neutral view."

    The dollar was firm on Thursday in the wake of upbeat U.S. data U.S. factory activity increased more than expected in December, boosted by a surge in new orders growth, in a further sign of strong economic momentum at the end of 2017.

    Minutes from the Fed's Dec. 12-13 meeting were seen as more hawkish than anticipated, indicating the central bank is still poised to raise interest rates several times this year. The minutes suggested that the central bank would continue to pursue a gradual approach in raising rates but could pick up the pace if inflation accelerates.

    Gold is highly sensitive to rising U.S. interest rates as they increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

    The short-term technical outlook was also pressuring gold prices, with the 14-day relative strength index (RSI) touching 75 on Tuesday, it highest since September 2017. An RSI above 70 indicates a commodity is overbought and could herald a price correction, analysts said.


    On gold market price also takes the pause in upward action. In fact, that was expected as yesterday gold has hit daily OB. By overall price action we do not expect deep retracement, but mostly minor bounce and then upward creeping with OB line till major 1330 target:
    gold_d_04_01_18.

    We haven't got desirable B&B "Buy" on 4-hour chart but DRPO "Sell" instead. Appearing of DRPO is tricky situation because it is reversal pattern. But it is too early to reverse for gold as 1330 target stands untouched. That's why dealing with this DRPO will be a bit more risky than usual. Still, it suggests 1293 target that is not too far from current level and may be it will be reached while investors are preparing for NFP release tomorrow.
    gold_4h_04_01_18.
    Besides, if you will take a look at the shape of DRPO on hourly chart - you'll see that second top mostly reminds retracement from the first one rather than attempt of the market to go higher.

    This is not as important for us, because our context is bullish and we mostly watch for chances to go long. But, if you intend to trade this DRPO - take these nuances in consideration...
     
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Good morning,

    (Reuters) - Gold prices dipped on Friday from the previous session's 3-1/2 month high, ahead of U.S. non-farm payroll data, but remained on track for their fourth straight weekly gain.

    Spot gold was down 0.3 percent at $1,318.40 an ounce at 0655 GMT. U.S. gold futures were down 0.2 percent at $1,319.10 an ounce. Spot gold marked its highest since Sept. 15 at $1,325.86 on Thursday on a weaker dollar. It has risen over 1 percent so far this week.

    Weighed down by the greenback's weakness against the euro, the dollar index against a basket of six major currencies was poised for a loss of 0.2 percent this week, during which it probed a three-month low of 91.751 The dollar index was last up 0.1 percent at 91.946.

    "The support for the gold continues to emerge on dips", said MKS PAMP trader Alex Thorndike, adding that the market would be in "wait and see mode" ahead of the U.S. jobs data.

    U.S. private employers added 250,000 jobs in December, data from ADP Research Institute showed, the biggest monthly increase since March. Economists surveyed by Reuters had forecast a gain of 190,000 jobs.

    Friday's U.S. non-farm payrolls report is expected to show job gains of 190,000 for December, according to a Reuters survey.

    Softer economic data weakens the case for a U.S. rate hike, boosting gold, which is highly exposed to interest rates and returns on other assets. Rising rates lift the opportunity cost of holding non-yielding bullion.

    "There are some new long-positions after gold crossed $1,300 and they are trying to push prices up ... We can see people buying at corrections", said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. "The dollar will be the key to gold's moves going forward ... Markets are waiting for more clues on the pace of the interest rate hikes and how the tax reforms are going to help the U.S. economy."


    So, on gold market our suspicions were confirmed. Indeed, gold shows just minor retracement and turned DRPO on 4-hour chart to "failure". On daily price is creeping with OB line by doing minor intraday retracements. That's why we've said that only 1330 level has good chances to trigger some more or less solid bounce. As upside rally stands very fast, reaction on COP could be shy, but existence of OB and MPR1 makes 1330 level more reliable:
    gold_d_05_01_18.

    On 4-hour chart you can see what has happened with DRPO-shaped pattern. Yesterday we've estimated that this is not DRPO by its market mechanics, but only by visual shape. This is the lesson, how inner components are important when you analyze patterns, such as DRPO. It's not enough just to see 3x3 DMA double penetration...
    Now, bears have only puny bearish grabber on top, but it is not very reliable context for going short:
    gold_4h_05_01_18.

    And here is why... Personally I suspect that we could get 3-Drive "Sell" pattern. At least it totally agrees with daily COP target at 1330. And overall price action looks so that current leg down is not reversal:
    gold_1h_05_01_18.

    Well, may be NFP data will change something. But right now it seems that it is better to wait 1330 level to go short. This will be safer with all patterns on your back. Right now bears have nothing but weak grabber on 4-hour chart.

    Also 3-Drive could trigger retracement that we're waiting for. B&B pattern could start to form on daily chart.
     

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