GOLD PRO WEEKLY, May 23-27, 2016

[Sive Morten]

Fundamentals

(Reuters )Gold edged lower on Friday for the third straight session and notched its biggest weekly slide in nearly two months on growing expectations for an increase in U.S. interest rates as soon as next month.

Spot gold was down 0.2 percent at $1,252.1 an ounce by 2:43 p.m. EDT (1843 GMT), down 1.6 percent this week in its third straight week of losses. U.S. gold futures for June delivery settled down $1.90 at $1,252.90.

New York Fed President William Dudley said on Thursday there was a strong sense among central bank officials that markets were underestimating the probability of policy tightening.

That came a day after the minutes of the Fed's April meeting revealed that most policymakers felt a rate increase might be appropriate as early as next month, sending gold to a three-week low of $1,244. It has since bounced back, as ultra-low yields and concerns over economic growth lent support.

"Those minutes from the last FOMC meeting I think really gave quite a bit of light to the possibility for that June rate hike," said Phillip Streible, senior commodities broker at R.J. O'Brien in Chicago. "I think that the Fed is now challenged and the market is getting more confident that it's going to happen, provided that
the data supports it."

Gold is highly sensitive to interest rates, gains in which lift the opportunity cost of holding non-yielding bullion. The metal has rallied 18 percent this year as investors bet the Fed would hold off from further increases.

The dollar retreated from its highest in nearly two months against a currency basket, but cruised to its third week of gains, keeping up pressure on gold. "The gold environment now is substantially different from what was apparent several weeks ago, when a weaker dollar and a benign rate environment were providing an element of support," INTL FCStone said in a report. "This is no longer the case."

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, rose by 4.5 tonnes on Thursday to their highest since November 2013. Streible also said if there was some foul play discovered in
the disappearance of an EgyptAir jet this week, that could lead to gold prices rising, spurred by safe-haven buying.

Gold demand in Asia was subdued this week by a firmer dollar and weak seasonal demand in major trading centres.

CFTC data shows behavior that we've warned about. Take a look speculative net-long positions stands at absolute high and this makes very difficult, almost impossible any meaningful gold appreciation. Meantime open interest has increased within last 3 weeks while speculative position mostly stagnates and even shows shy decreasing. It means that new shorts have come to market. As bullish potential has reached maximum, appearing of new bearish positions push market lower - that is what we see right now:

Technicals
Monthly

So, guys, gold has taken a pause in upward action around 1300 area. We've warned about it two weeks ago when we've got specific numbers from CFTC. Based on situation in sentiment and existence of strong resistance area makes problems for gold on a way up.

Current uward action is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Probably it will happen very soon and may be already is happening. Still this potential downward action has a great chance to become just a retracement. Overall political and financial situation in the world probably will not give a chance to relax. Thus, we have a positive long-term view on gold market.

Although right now market shows significant drop, it has not passed the point yet where we could say that no upward action will happen till June Fed meeting. Currently chances are still exist on final upside leg, testing on YPR1. At the same time we could say that this is not really important for us, mostly because we're looking for long entry opportunity. Currenty we do not want to go long anyway and wait for this retracement down. From that standpoint we do not care much wether this drop will happen now or after 1330 area will be completed.

Drop down, if it will start could reach as far as 1120 area and become a right shoulder of pattern that could be formed here.

Weekly
Trend has turned bearish on weekly time frame. As gold stands near resistance and bullish power is mostly exhausted - gold has turned to uspide channel action, that looks like rising flag by far.

Price has dropped to MPP and was not able to hold above it. it is logical to suggest that gold should touch MPS1 around 1235 area. If this will happen, then there is only one chance will left to reach 1330 area - is to form 3-Drive "Sell" pattern.

As we've said above, currently we do not want to take long position, but if you're searching chances to go short you could do it either if gold will reach 1330 or, if it will break "dead" point and move below 1200. This also will tell that downward retracement has started. Right now as gold still could move higher - it will demand greater stop protection for any bearish position:

Daily

Here you can see the reason why we think that gold still keeps chances on upward continuation. Right now downward action does not look like miserable plunge but mostly takes the shape normal, gradual AB=CD retracement, after Butterfly 1.27 target has been hit.

As soon as market will complete it - it should happen precisely around MPS1 @ 1235 area and support line. This will be moment of truth. Real bullish market should turn up again. If market really has lost upside potential - it will drop further and turn to downward acceleration.

It is interesting that retracement to 1235 makes 3-Drive pattern possible - extensions of 1st and 2nd drives almost coincide around 1330 area. This will be our scenario to watch for on next week:

4-hour

Here you can see short-term picture in complex. On Friday we've warned you about possible trap with preterm upside action as major AB=CD pattern has not been completed but gold has formed bullish engulfing pattern. Thus, we called you to not take any long position on this pattern.

Now puzzle is collected. AB-CD has target around 1240, smaller AB-CD 1.618 target stands around 1238 while MPS1 and WPS1 stand slightly lower around 1235. As some amount of stops already have been placed below 1244 area probably - they could help market to reach pivots.

It could happen by butterfly pattern. It could be as 1.27 as 1.618 currently it is difficult to say definitely. But anyway - 1240 area is a clue to next action. Either market will turn up here or it will get all chances to start deep retracement on daily chart:

Conclusion:
We think that fundamentally gold stands somewhere near bottom and situation is starting to change. But this bottom could be "extended" in time. Thus right now we call to not take long-term bullish positions since CFTC data and technical picture tell that gold stands at the edge of solid retracement.

In short-term perspective major concern is whether gold will take another "final" leg up to 1330 before huge retracement will start, or it will start it immediately. To resolve this riddle we need to watch for 1240 area. There we should get an answer.

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 dipped on Tuesday to trade near a 3-1/2 week low hit in the previous session, pressured by expectations that the U.S Federal Reserve will raise interest rates sooner rather than later. The prospect of an early rate hike, as indicated by Fed meeting minutes released last week, and a strengthening dollar have pushed down bullion by 3.6 percent so far in May, on track for its biggest monthly decline since November.

Gold is sensitive to interest rates, gains in which raise the opportunity cost of holding non-yielding bullion.
Spot gold fell 0.3 percent to $1,244.71 per ounce by 0634 GMT. The metal on Monday dropped to its lowest since April 28 at $1,242.63 an ounce. U.S. gold futures eased 0.5 percent to $1,245.30 per ounce.

"Over the next two weeks ... if the economy is on the firm side in the U.S. and the Fed is ready to move, maybe July at the earliest, then I would say gold is ready to see a correction," said analyst Dominic Schneider of UBS Wealth Management in Hong Kong. "I definitely think gold can fall back below $1,200 in the coming one or two months."

Senior Fed officials on Monday said that rates being kept too low for too long could cause financial instability and that the U.S. central bank would continue with rate increases next year. The Fed's policymakers are scheduled to speak this week and are expected to back the case for a rate hike within months. "If there was to be a hint coming, it could come on Friday when Janet Yell appears, talks and perhaps may decide to further 'prep' the markets for a rate hike going into next week," INTO Capstone analyst Edward Meier said in a note.

Fed Chair Janet Yell will be at a panel event hosted by Harvard University on Friday. Goldman Sachs sees a 35-percent chance of a rate hike at the Fed's June 14-15 policy meeting.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.38 percent to 872.52 tonnes on Monday.

So, Gold gradually continues action to an area that we've specified - 1235-1240. This is culmination point since here all downward retracement should finish. Any deeper action will be a retracement any more.

Classical gold trick was successful again - we warned that gold still could drop further and called you to not take bet on bullish engulfing and do not take any long position by far. Now we see this continuation. Gold stands very close to completion point of large daily AB-CD and minor 1.618 AB-CD pattern. This is time to think and headache for scalp traders - how and where to go long...

Final part of this downward action probably will take a shape of butterfly on hourly chart:

I hope that on current week we will get clarity on further gold direction. Breakout of 1235 will be bearish sign and could trigger real solid retracement that we're waiting for. Upside action will keep chances on appearing 3-Drive Sell pattern and moving to 1325-1330 area. As you can see, stakes are really solid in this game.

 

[Sive Morten]

Good morning,

(Reuters) Gold dropped to a seven-week low on Wednesday, driven by expectations of an early interest
rate hike by the U.S. Federal Reserve. Bullion has taken a beating from the prospect of an imminent rate increase, as indicated by Fed meeting minutes released last week. Gold is sensitive to interest rates, gains in which raise the opportunity cost of holding the non-interest-yielding asset.

U.S. gold futures dipped 0.4 percent to $1,224.30. "I think gold prices will touch the $1,200 level in the
coming few days. The change in rate hike expectations is still the major theme, but after the end of June the overall sentiment on the rate hike will be pretty much done," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

Adding to the woes of the safe-haven bullion, the dollar stood near a two-month peak against a basket of major currencies on Wednesday after robust U.S. housing data supported the case for the Fed to raise rates in the near term. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies. The growing confidence towards a pick-up in U.S. economic growth got a boost on Tuesday as official data suggested new U.S. single-family home sales have hit the highest in eight years.

The recent negative undertone for gold notwithstanding, some analysts believe a rate increase as early as June seems unlikely and would be discounted by traders, stabilising the yellow metal. "Despite the short term negative pullback, gold is still a strong 2016 performer against a range of alternative assets and
these levels are an enticing entry price for long-term bulls," said MKS Group trader James Gardiner.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.44 percent to 868.66 tonnes on Tuesday, the first decline in a month.

So, on daily chart gold has broken nearest 1240-1245 support and stands very close to major 1200 level. As we've specified in weekly research - the last pattern that could be formed here and that could lead market still to 1330 area is 3-Drive "Sell". If Gold will drop below 1200 it will mean that big retracement indeed has started. 1200 is important not just because this is low, but also because this is 1.618 target of current AB=CD down:

At the same time today-tomorrow gold could take some pause since it stands at oversold. Thus it could show minor bounce up to 1237 or 1245 K-resistance, hardly retracement will be higher. After that drop down should continue to 1200-1210 area.

Currently situation is not very attractive for trading on daily chart. It is too early to go short, but it is not safe to go long either. Since sutiation should become clearer soon, may be it makes sense to wait a bit...

 

[Sive Morten]

Good morning,

(Reuters) Gold logged its biggest intraday percentage gain in more than a week as traders covered short positions, a day after the yellow metal slid to a seven-week low on expectations the U.S. Federal Reserve would increase rates as early as June.

A rally in oil prices and falling dollar also boosted sentiment, ahead of an extended holiday weekend in the United States, analysts said.

Spot gold rose 0.4 percent to $1,228.95 per ounce at 0648 GMT, its biggest intraday rise since May 17. The metal fell to $1,217.25 on Wednesday, the lowest since April 6. U.S. gold was up 0.5 percent at $1,229.50.

"Today there has been a little bit of recovery due to short covering and oil prices trading near $50 is also supporting gold," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Brent oil futures climbed above $50 a barrel on Thursday for the first time in nearly seven months, boosted after U.S. government figures showed a sharper-than-expected drawdown in crude stocks last week.

The prospect of an interest rate hike, as indicated by Fed meeting minutes released last week, and a strengthening U.S. dollar have pushed gold down 5 percent so far in May, putting it on track for its biggest monthly decline since November.

Gold is sensitive to interest rates, raising the opportunity cost of holding the non-interest yielding asset.
Fed Chair Janet Yellen is due to speak on Friday, and could reinforce expectations that the central bank might raise interest rates as early as next month, or July.

Dallas Fed President Robert Kaplan on Wednesday said he would support raising interest rates in the "near future", though a vote by Britain on whether to leave the European Union will weigh on any Fed rate decision in June.

Investors will be looking for cues from U.S. weekly unemployment data and pending April home sales figures, scheduled for later in the day.

Daily chart is almost the same as yesterday. Market gradually is coming to destination point around 1200-1210 area. Here we will get the clarity what to expecti - either final uspide leg to 1325 or drop and real deep retracement:

On 4-hour chart gold is tending to 1.618 AB-CD target @ 1210 area. Currently we see short pause. It's 1.27 extension coincides with target, thus, may be we will get butterfly as finalizing pattern here:

 

[Mystery_Fx]

Good places to sell market.

Then I wıll be looking to buy after the market takes stops around 1205-1207.

 

[Sive Morten]

Good morning,

(Reuters) Gold slipped to its lowest in eight weeks on Friday, and was on track for its biggest weekly decline in nine, as expectations of a U.S. interest rate hike in two months on positive economic data hurt investor appetite. The safe-haven asset was also weighed down by Asian stocks that drifted upwards on Friday and as the dollar index, which measures the greenback against a basket of six major currencies, held steady.

Bullion has been under pressure since the prospect of an imminent rate hike was indicated by U.S. Federal Reserve meeting minutes released last week and has been consistently supported by key central bank officials. An increase in rates would raise the opportunity cost of holding gold.

"Gold is not an interest-bearing asset so that is the reason a majority (traders) might want to wait on the sidelines, or, even move out of gold at the moment," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central. "Some traders might just exit the market for now and see where it goes before they come back in." Fed Governor Jerome Powell, a voting member of the U.S. central bank's rate-setting committee, on Thursday said he felt the economy was on a "solid footing" and within reach of the
Fed's inflation goals.

Meanwhile, the Atlanta Fed on Thursday predicted the country's economy is on track to grow by a 2.9 percent annualized rate in the second quarter, following the latest data on durable goods orders and advance goods trade.

The gold market is awaiting further direction from Fed Chair Janet Yellen's comments at a panel event hosted by Harvard University on Friday. "If she (Yellen) nudges expectations towards a rate increase, the futures fund curve should start to show a higher probability of an imminent move," said INTL FCStone analyst Edward Meir.
"At this point, the dollar could start to stabilize and perhaps weaken given that a rate hike would now be mostly discounted."

So, on gold market price finally stands at point - all downward targets have been hit:

Real bullish market has no reasons to move down further. It means that if gold is really bullish - it should turn up. Otherwise, we will get deep drop in nearest 2-3 weeks. that's being said, if you would like to take long position - currently is best place, as in terms of the risk as in terms of potential reward. Besides, minor bounce here probably should happen anyway and this will give you chance to move stop to breakeven.
But, still we have to warn you that overall risk is solid, mostly due overload of bullish speculative positions that significantly limit upside potential of the market right now.