Sive Morten
Special Consultant to the FPA
- Messages
- 18,673
Fundamentals
(Reuters) - Gold rose on Friday and was on track for its best week in five as the dollar softened on
political turbulence in the United States, boosting bullion's safe-haven appeal.
Spot gold was up 0.6 percent at $1,253.87 an ounce by 2:47 p.m. EDT (1847 GMT), putting it up 2 percent for the week. U.S. gold futures settled up 0.06 percent at $1,253.60
"We have political turmoil in the U.S. which has driven the dollar lower... this week's sentiment has supported gold," Danske Bank analyst Jens Pedersen said, adding that it was unclear whether bullion would hold on to the gains into next week.
Gold is often seen as an alternative investment during times of geopolitical and financial uncertainty, gaining alongside bond yields and the yen while stocks usually take a hit. U.S. President Donald Trump last week fired Federal Bureau of Investigation Director James Comey. This triggered a political firestorm that culminated on Wednesday in the Justice Department's appointment of a special counsel to probe possible
ties between Russia and Trump's 2016 presidential campaign.
The dollar index , which measures the greenback against a basket of six major currencies, was poised for its
worst week in more than a year while world stocks edged up.
"Political risk is back on again after market participants became overly complacent following the outcome of the French elections," Commerzbank analyst Carsten Fritsch said. "Risk sentiment took a major hit," he said.
New applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans on unemployment rolls tumbled to a 28-1/2-year low, pointing to rapidly shrinking labor market slack.
St. Louis Federal Reserve President James Bullard said the Fed's expected plans for rate increases may be too fast for an economy that has shown recent signs of weakness. "After he spoke, it was enough to push the dollar through some key levels that brought gold up pretty easily," said Bob Haberkorn, senior market strategist for RJO Futures in Chicago.
Federal funds futures implied traders saw about a 74 percent chance the Fed would raise interest rates in June, CME Group's FedWatch program showed.
COT Report
Right now we do not see yet recent positive dynamic in CFTC data. Last data stands for 16th of May and it shows normal action during retracement - net speculative position has decreased as well as open interest. It tells that longs positions partially were closed. At the same time, last candle shows minor increase in open interest, so some new shorts even have been taken. Although this change was very small.
That's being said, CFTC data shows classical situation of retracement.
As we've mentioned yearlier, SDPR fund statistics mostly confirms this idea. Since drop has started - storages data mostly stands flat and indicates that investors keep long position and do not hurry to close it:
Technicals
Monthly
So, guys, as we've talked many times already - gold way will not be streight. As we still keep bullish view on gold market, previous retracement was rather deep and there are a lot of big entities that have bearish view...
“The rise in gold is largely a dollar play, with the dollar weakening because of Trump,” said Barnabas Gan, an economist at Oversea-Chinese Banking Corp., who also flagged overseas tensions. There’s still more risk of lower prices in the long run, and “if we divorce away all the uncertainty, the rate-hike story should at least bring gold prices to $1,100,” he said.
...or at least very careful in further forecasts as GS and HSBC:
In a report issued on March 10, 2017, Goldman Sachs analyst Abhinandan Agarwal stated that “As the market begins to re-price its expectations of rate hikes this year, we believe it could be a significant negative catalyst for gold. However, given that some of the policies being put forth by President Donald Trump (like trade barriers and border adjustment tax) could be beneficial to gold, we take a more neutral view on gold prices going forward.”
According to Reuters, HSBC analyst James Steel said that “The (gold) rally appears intact, but we think a near-term bout of profit-taking may materialize at any time, especially if there is a slowdown in ETF accumulation demand or reduced long participation on the Comex.”
Meantime, we see that our two major backwind factors for gold are working. They are - D. Trump political volatility and uncertainty and - careful Fed policy that, as we suggest, will not tight economy growth by agressive rate policy in 2017. Both of them have provided support to gold, or better to say - depressed USD las week.
From technical point of view our major pattern is reverse H&S on monthly chart. Currently, as market stands at the edge of 1170 Fib support, we could talk on H&S pattern. Besides the shape itself, some features here that in general typical for H&S. For example, relation between head and shoulders - 1.618. Butterfly... very often first part of H&S takes the shape of butterfly pattern...
At this moment we do not have questions and serious doubts on perspective of H&S pattern. Market shows normal behavior for its shape. Also we have nice bullish divergence with MACD that is also typical for reversal patterns. On monthly chart we could specify two relatively close targets. First is YPR1 around 1330, next one is neckline - around 1380 area.
We will change our opinion if market will drop below 1170 area. In this case gold will meet the hazard to get butterfly pattern with 1000 and lower targets.
Right now we have new feature here - potential bullish stop grabber. As there are fewer time till the May close as more chances that it will be formed. This pattern really will have special meaning for us, because, at least theoretically, it shoud push prices above 1380...
Weekly
So on weekly chart we do not have significant new inputs. Trend still stands bearish here. Now price shows pull down from 1278 major resistance area. As you can see, this is major 5/8 Fib resistance and minor 0.618 AB-CD target which creates DiNapoli "Agreement" resistance.
Overall picture still stands bullish in larger perspective. Here we see upside breakout of downside channel and re-testing it later. As retracement already has happened, current upward action should be treated as upside extension stage...
The only thing here that brings some confusion is weekly bearish grabber. Theoretically it suggests drop below 1213 lows and mostly corresponds to idea of downward AB=CD action on daily chart. At the same time, this is a weaker type of grabber that fails more often. That's why, situation here stands difficult, it is insofficient context to talk definitely on bearish perspective here and we can't rely just on it. But until price will stand below 1265 - this pattern will be valid.
Besides, this pattern stands in opposite direction to monthly one. Thus we will try to catch more insights on daily chart, may be it will let us to undertsand, what will happen on higher time frames.
Daily
So, our regular follower probably know that last week we spent in trading of daily B&B setup, or better to say in preparation to trade it. Trend has turned bullish here, but we have at least to technical reasons to expect deeper retracement. One of them is our B&B "Sell" pattern, second - bearish DiNapoli "Stretch" pattern.
Take a look that gold price hit overbought (OB) right at major 1264 Fib resistance. This combination of OB level and Fib resistance calls bearish "Stretch". It means that on coming week we mostly will be watching for downward AB=CD pattern on intraday charts:
Intraday
Our minor intraday B&B "Buy" pattern also has been completed - take a look upward daily retracement takes the shape of perfect upside thrust on 4-hour chart and has created perfect setup for B&B "Buy" pattern. Now it has hit the target mostly, which is 5/8 resistance of whole downward action from 1264 to 1245.
It means that on coming week we will watch for chance to take short position and try to ride on larger AB=CD action down to 1235 area that is also Fib support and target of daily B&B "Sell" pattern. Entry point should come on Monday probably. As you can see overall upside action looks very gradual and smooth and mostly corresponds to retracement type of action:
On 15-m chart nice butterfly Sell pattern is forming and may be it will become a triggering pattern for downside action right from 1257 Fib resistance:
Conclusion:
Thus, although gold shows deep retracement, but we do not see any real hazard for long-term bullish trend yet. So, it is too early to panic and scream that "everything is lost". Market could form even 1190 retracement, but this will not hurt long-term bullish tendency yet. Besides, investors shows weak reaction on gold drop and mostly keep long positions in gold.
Short-term gold action provides good patterns. Daily B&B "Sell" pattern is the one that we will try to use on coming week. Entry point probably should be achieved right on Monday.
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 rose on Friday and was on track for its best week in five as the dollar softened on
political turbulence in the United States, boosting bullion's safe-haven appeal.
Spot gold was up 0.6 percent at $1,253.87 an ounce by 2:47 p.m. EDT (1847 GMT), putting it up 2 percent for the week. U.S. gold futures settled up 0.06 percent at $1,253.60
"We have political turmoil in the U.S. which has driven the dollar lower... this week's sentiment has supported gold," Danske Bank analyst Jens Pedersen said, adding that it was unclear whether bullion would hold on to the gains into next week.
Gold is often seen as an alternative investment during times of geopolitical and financial uncertainty, gaining alongside bond yields and the yen while stocks usually take a hit. U.S. President Donald Trump last week fired Federal Bureau of Investigation Director James Comey. This triggered a political firestorm that culminated on Wednesday in the Justice Department's appointment of a special counsel to probe possible
ties between Russia and Trump's 2016 presidential campaign.
The dollar index , which measures the greenback against a basket of six major currencies, was poised for its
worst week in more than a year while world stocks edged up.
"Political risk is back on again after market participants became overly complacent following the outcome of the French elections," Commerzbank analyst Carsten Fritsch said. "Risk sentiment took a major hit," he said.
New applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans on unemployment rolls tumbled to a 28-1/2-year low, pointing to rapidly shrinking labor market slack.
St. Louis Federal Reserve President James Bullard said the Fed's expected plans for rate increases may be too fast for an economy that has shown recent signs of weakness. "After he spoke, it was enough to push the dollar through some key levels that brought gold up pretty easily," said Bob Haberkorn, senior market strategist for RJO Futures in Chicago.
Federal funds futures implied traders saw about a 74 percent chance the Fed would raise interest rates in June, CME Group's FedWatch program showed.
COT Report
Right now we do not see yet recent positive dynamic in CFTC data. Last data stands for 16th of May and it shows normal action during retracement - net speculative position has decreased as well as open interest. It tells that longs positions partially were closed. At the same time, last candle shows minor increase in open interest, so some new shorts even have been taken. Although this change was very small.
That's being said, CFTC data shows classical situation of retracement.
As we've mentioned yearlier, SDPR fund statistics mostly confirms this idea. Since drop has started - storages data mostly stands flat and indicates that investors keep long position and do not hurry to close it:
Technicals
Monthly
So, guys, as we've talked many times already - gold way will not be streight. As we still keep bullish view on gold market, previous retracement was rather deep and there are a lot of big entities that have bearish view...
“The rise in gold is largely a dollar play, with the dollar weakening because of Trump,” said Barnabas Gan, an economist at Oversea-Chinese Banking Corp., who also flagged overseas tensions. There’s still more risk of lower prices in the long run, and “if we divorce away all the uncertainty, the rate-hike story should at least bring gold prices to $1,100,” he said.
...or at least very careful in further forecasts as GS and HSBC:
In a report issued on March 10, 2017, Goldman Sachs analyst Abhinandan Agarwal stated that “As the market begins to re-price its expectations of rate hikes this year, we believe it could be a significant negative catalyst for gold. However, given that some of the policies being put forth by President Donald Trump (like trade barriers and border adjustment tax) could be beneficial to gold, we take a more neutral view on gold prices going forward.”
According to Reuters, HSBC analyst James Steel said that “The (gold) rally appears intact, but we think a near-term bout of profit-taking may materialize at any time, especially if there is a slowdown in ETF accumulation demand or reduced long participation on the Comex.”
Meantime, we see that our two major backwind factors for gold are working. They are - D. Trump political volatility and uncertainty and - careful Fed policy that, as we suggest, will not tight economy growth by agressive rate policy in 2017. Both of them have provided support to gold, or better to say - depressed USD las week.
From technical point of view our major pattern is reverse H&S on monthly chart. Currently, as market stands at the edge of 1170 Fib support, we could talk on H&S pattern. Besides the shape itself, some features here that in general typical for H&S. For example, relation between head and shoulders - 1.618. Butterfly... very often first part of H&S takes the shape of butterfly pattern...
At this moment we do not have questions and serious doubts on perspective of H&S pattern. Market shows normal behavior for its shape. Also we have nice bullish divergence with MACD that is also typical for reversal patterns. On monthly chart we could specify two relatively close targets. First is YPR1 around 1330, next one is neckline - around 1380 area.
We will change our opinion if market will drop below 1170 area. In this case gold will meet the hazard to get butterfly pattern with 1000 and lower targets.
Right now we have new feature here - potential bullish stop grabber. As there are fewer time till the May close as more chances that it will be formed. This pattern really will have special meaning for us, because, at least theoretically, it shoud push prices above 1380...
Weekly
So on weekly chart we do not have significant new inputs. Trend still stands bearish here. Now price shows pull down from 1278 major resistance area. As you can see, this is major 5/8 Fib resistance and minor 0.618 AB-CD target which creates DiNapoli "Agreement" resistance.
Overall picture still stands bullish in larger perspective. Here we see upside breakout of downside channel and re-testing it later. As retracement already has happened, current upward action should be treated as upside extension stage...
The only thing here that brings some confusion is weekly bearish grabber. Theoretically it suggests drop below 1213 lows and mostly corresponds to idea of downward AB=CD action on daily chart. At the same time, this is a weaker type of grabber that fails more often. That's why, situation here stands difficult, it is insofficient context to talk definitely on bearish perspective here and we can't rely just on it. But until price will stand below 1265 - this pattern will be valid.
Besides, this pattern stands in opposite direction to monthly one. Thus we will try to catch more insights on daily chart, may be it will let us to undertsand, what will happen on higher time frames.
Daily
So, our regular follower probably know that last week we spent in trading of daily B&B setup, or better to say in preparation to trade it. Trend has turned bullish here, but we have at least to technical reasons to expect deeper retracement. One of them is our B&B "Sell" pattern, second - bearish DiNapoli "Stretch" pattern.
Take a look that gold price hit overbought (OB) right at major 1264 Fib resistance. This combination of OB level and Fib resistance calls bearish "Stretch". It means that on coming week we mostly will be watching for downward AB=CD pattern on intraday charts:
Intraday
Our minor intraday B&B "Buy" pattern also has been completed - take a look upward daily retracement takes the shape of perfect upside thrust on 4-hour chart and has created perfect setup for B&B "Buy" pattern. Now it has hit the target mostly, which is 5/8 resistance of whole downward action from 1264 to 1245.
It means that on coming week we will watch for chance to take short position and try to ride on larger AB=CD action down to 1235 area that is also Fib support and target of daily B&B "Sell" pattern. Entry point should come on Monday probably. As you can see overall upside action looks very gradual and smooth and mostly corresponds to retracement type of action:
On 15-m chart nice butterfly Sell pattern is forming and may be it will become a triggering pattern for downside action right from 1257 Fib resistance:
Conclusion:
Thus, although gold shows deep retracement, but we do not see any real hazard for long-term bullish trend yet. So, it is too early to panic and scream that "everything is lost". Market could form even 1190 retracement, but this will not hurt long-term bullish tendency yet. Besides, investors shows weak reaction on gold drop and mostly keep long positions in gold.
Short-term gold action provides good patterns. Daily B&B "Sell" pattern is the one that we will try to use on coming week. Entry point probably should be achieved right on Monday.
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.
