GOLD PRO WEEKLY, November 16-20, 2015

[Sive Morten]

Fundamentals

Reuters reports Gold fell back towards near six-year lows on Friday, staying on track for a fourth straight weekly loss, on expectations the Federal Reserve is set to raise U.S. interest rates next month for the first time in nearly a decade.

A raft of Fed officials lined up behind a December rate rise on Thursday.

Rising rates tend to weigh on gold, as they lift the opportunity cost of holding non-yielding assets while boosting the dollar. Gold has fallen more than 5 percent since the start of November, when a stronger-than-expected U.S. payrolls report fueled expectations for a near-term rate hike.

"Quite clearly, with the growing sense that there will be a December rate hike after the strong U.S. data last week, investors have been bailing out of gold," Citi analyst David Wilson said. "I suspect that is likely to continue."

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares , fell by another 1.5 tonnes on Thursday.

The platinum group metals also came under pressure from fund selling. Holdings of platinum ETFs were at a two-year low, while assets of palladium funds were at their lowest since April 2014.

"This additional near-term supply from ETFs and other liquidation took platinum to seven-year lows and undermined palladium also," HSBC said in a note.

"While we find physical demand for the PGMs from industrial sources to be broadly steady, investors are retreating and we see no early signs of further production restraint."

Platinum was at $855.50 an ounce, down 2.1 percent, having earlier slid to its lowest since December 2008 at $854.

"PGMs are suffering with palladium having an ultimate breakdown towards critical long-term support near $518," said Amaryllis Gryllaki, sales associate for TD Securities' Global Metals in New York in a note.

"During Asia time it sold off 5 percent on less than 1,000 lots."

Palladium was down 3.9 percent at $536.50 an ounce after touching a 2-1/2-month low of $530.75. Prices of the autocatalyst metal are down more than 13 percent this week, its biggest weekly decline since May 2010.

Speaking on COT data, last numbers we've got on 3rd of November. They are a bit too old for current situation. Anyway, we see drop in net long position with simultaneous growth in open interest. Also, as we've said last time % of longs stands very close to 80-82% level. This is critical and significantly increases chances of reversal or deep retracement. Fundamental reasons could be different, but technically - particularly now we see this drop on gold market.

Due to events in Paris, we can't exclude jump on gold market on Monday. It is difficult to say how long-term it will be but probably terrorist attack is just a beginning. Some geopolitics steps will follow. By looking at this situation from this point of view - rally could last for considerable period of time, may be with some pauses, but sentiment really could change...
That's why W&R on Friday could take very special meaning from technical point of view on coming week.

Technicals
Monthly

Here, guys, we will have to look at technical picture without taking in consideration terrorist attack in Paris. I'm almost sure that our analysis hardly will be useful on next week, since market definitely will give clear reaction on this event.
That's why, right now we will take a look at Friday charts, while on Tuesday will make update with Monday reaction...

So, Goldman expect bearish continuation to 1000$ area and we have to return back to medium-term bearish view as drop was really miserable within last 2 weeks.

At the same time we think that currently gold is 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 2 months.

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.

We still have just one long-term pattern in progress that has not achieved it’s target yet. This is VOB pattern. It suggests at least 0.618 AB-CD down. And this target is 1050$. Besides, in the same area we have 1.618 target of most recent butterfly pattern.

Also we have extended bearish dynamic pressure here. Although trend shifted bullish in 2014, but market still forms sequence of lower tops. Speaking on VOB again - it assumes reaching of minor 0.618 target and gold stands very close to it. That's why chances are really not small that we could get another drop to 1050 and Goldman could be right. And as we've said, even when rally was strong - we call to not hurry to write-off bearish strength by far.

Still, it doesn't mean that we will ignore bullish setups and just wait for chances to enter bearish trade. Absolutely not. We will just keep in mind that bearish scenario exists, but we will trade any clear and attractive setups that gold will form, despite whether it will be bullish or bearish. We do not trade on monthly chart directly and just use it for understanding overall picture.

Based on monthly chart analysis gold stands as close as never to reaching of 1050 target.
By taking in consideration Paris tragedy we still have to call you - do not hurry with any position taking on Monday. Wait when first reaction will calm down...

Weekly
Action on weekly chart suggests that market should reach 1025-1035 area. Yes, our beacon is 1050, but it stands on monthly chart and +/- 20$ is normal for monthly levels. Besides, if gold will trigger stops below 1050 - this will add fuel to bearish fire and market could drop another 20$ just by momentum.

Here we see that gold stands below MPS1 and this indicates bear trend. Since drop was really significant - we do not take into consideration minor AB-CD extension of "222" Sell pattern but will be watching AB=CD target directly. Besides, market is not at oversold by far, but already has broken all major Fib levels.

If you will take a look carefully at this chart - you will recognize 2 butterflies to the left from "222" pattern. Both of them have 1.618 extensions around our AB=CD. That's why most probable destination is not 1050$ but slightly lower - 1025-1035$.

Don't pay attention to grabber that was formed last week (yes, this big nasty black candle is bullish grabber). Having such drop makes it almost useless, at least on weekly chart. To make it work - something really big and unexpected should happen either on market or in geopolitics.

That's being said in normal market conditions (here I again talk on Paris event) gold should continue move down, especially after such drop as we saw 2 weeks ago. Last week was minor one and absolutely does not change overall picture:

Daily

On Friday we've dedicated our daily update to W&R pattern on daily chart. Was it some prophesy of Paris tragedy - we do not know. But, we've said that it could get absolutely special meaning. W&R is a bullish pattern and usually leads at least to short-term upside bounce. Also it simplifies overall situation for us.

Thus, if market will drop below W&R lows - it will be clear signal of downward continuation and will tell us that bearish trend re-established. While upside action could give us some other patterns. For example, B&B "Sell" on daily chart, if market will reach 1115 level.

As you can see, by keeping in mind tragic event in Europe, W&R could become a triggering factor for solid upside rally. That's why, currently, we may be do not have any clear patterns that could confirm this. But existing and validity of W&R keeps this potential rally possible.

Hourly

Here picture becomes a bit blur, compares to Friday. And market probably will not keep nice harmony on Monday. But we mostly are interested in levels. If Gold will jump up and will form the head in one way or another, or even if it will form upside reversal swing - chances on getting some DiNapoli directional pattern will increase. What will happen after that - nobody knows. Mostly it will depend on market assessment of Paris event. If it will not get any far-going consequences (and I'm sure it will), then reaction will be short term and B&B could shift to bearish continuation.

While opposite scenario suggests major long-term reversal on gold market after B&B will be worked out. So, as you can see - let's focus on B&B first and then we will see what will happen

Conclusion:
Currently charts do not reflect real situation that we will meet on Monday. Somehow, guys, I'm strongly sure that this will not be "ordinary" terrorist attack in Paris. It will lead to far-going consequences, more escalation on Middle East and Globe political tensions. That's why, currently we mostly will focus on short-term setups.

Right now chances on getting daily B&B "Sell" are significant. What will happen after it - we will see...


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 reports today - Gold sank back towards five-year lows on Tuesday as the downward impact of a firmer U.S. dollar and weaker demand in major gold buyers weighed on prices.

Expectations are growing that the United States will hike interest rates next month, which has pushed the dollar to its highest in half a year against a basket of currencies, making precious metals more expensive for holders of other currencies.

"It seems all over the world, the economy is weak, also within China and India, so the potential market for consumers has also declined," said Dick Poon, general manager of Heraeus Precious Metals.

China and India are the world's top two consumers of gold.

French President Francois Hollande called on the United States and Russia on Monday to join a global coalition to destroy Islamic State following the attacks across Paris, and announced a wave of measures to combat terrorism in France.

Asian stocks rose across the board on Tuesday, relieved after seeing Wall Street take the Paris attacks in stride and surging overnight, while expectations for a December rate hike by the Federal Reserve kept the dollar on a bullish footing.

The leaders of the world's largest economies stuck to a goal of lifting their collective output by an extra 2 percent by 2018, even though growth remains uneven and weaker than expected globally, they said in a statement on Monday.

Euro zone inflation was revised up to 0.1 percent in October, the EU's statistics agency said on Monday, pushed into positive territory by price increases for fruit and vegetables.

So, on Gold market reaction was mild. Yes, we've got upside gap but it was closed very fast. But as we've said - we do not care. For us clear signals are important, but in what direction they will be - it is not as important.
Thus, right now we see clear sign that gold will continue action to 1035 target. probably. Stil guys, situation will start t change. This transformation could be slower or faster, depending on geopolitical events. But stuff, that we have in the World right now - is for a long time. That's why, gradually it will impact on market opinion and sentiment that should lead to grow demand on gold.

Meantime we see clear break of upside reversal shape on hourly chart. Despite that gold has opened the week with gap - it has failed to pass through neck and WPR1. Now it has closed the gap and dropped even below WPP, breaking potential right shoulder.
Thus, it seems that most recent swing will be enough to trade this situation. If market will re-test WPP and FIb level, this could be suitable area for short entry. But this testing should not be skyrocket upside action:

 

[Sive Morten]

Good morning,

Recent Reuters comments - Gold prices hit their lowest in nearly six years on Wednesday as the dollar rose and investors braced for the first U.S. interest rate rise in nearly a decade next month.

Bullion prices have fallen for 15 out of 16 sessions under pressure from expectations that the U.S. Federal Reserve is set to raise interest rates next month.

Data on Tuesday showing U.S. consumer prices increased in October further fuelled those expectations.

The dollar sat near a 7-month high against a basket of currencies as the euro slid on expectations for more monetary easing by the European Central Bank in December.

"We saw a pop in the last few days, but the knee jerk reaction didn't really last. The overriding factor has been the rising dollar and the expectation of Fed hiking rates in December," said Victor Thianpiriya, analyst at ANZ.

However, heightened security concerns in Europe after Friday night's attacks in Paris in which 129 people were killed continue to underpin gold's safe-have appeal.

German authorities have called off a soccer game which Chancellor Angela Merkel was due to attend, citing threats of bombing, while two Air France flights to Paris from the United States have been diverted.

On Gold market sutation is very similar to EUR. As market has dropped below W&R lows and holds there - this is bearish sign. At the same time, our primary target stands around 1037 level and normally, bearish market should not show solid retracement till target will be hit. As gold is not at oversold, it has only one major support area on a way to 1037 is 1050.

At the same time we know the gold's habit to re-test broken lows. Thus, market could show 1077 retracement up - this is Fib level and former lows of summer 2015. From bearish point of view - we do not want to see market's return back above them. Normal bearish market should test them and turn down again:

 

[Sive Morten]

Good morning,

Recent Reuters comments - Gold prices revived on Thursday from their lowest in more than five years the previous session as the dollar fell back, releasing its stranglehold on commodities and making gold more affordable for buyers paying with other currencies.

Federal Reserve officials on Wednesday continued to flag December as a likely time for interest rates to rise after seven years near zero, with two expressing confidence they will be able to pull off a rate hike smoothly despite fears of an abrupt market reaction.

"I'm convinced that the start of the (rate hike) cycle will see relative dollar weakness as investor money flows into other regions and other types of investment, away from the U.S. where the cost of capital - and doing business will also grow," said Chief Investment Officer Jonathan Barratt of Ayers Alliance in Sydney. He added that a rate increase could also boost gold's appeal as a hedge against inflation.

The dollar pulled back in Asian trading on Thursday as investors took profits following its rise to seven-month highs, as the Fed officials' comments as well as minutes from the central bank's latest meeting hinted that an interest rate hike could be right around the corner.

U.S. housing starts in October dropped to a seven-month low, weighed down by a steep decline in the construction of multi-family homes, but a surge in building permits suggested the housing market remained on solid ground.

Meanwhile, South Africa's Gold Fields Ltd is considering putting its Damang mine in Ghana "under care and maintenance" until gold prices recover, the bullion producer said on Thursday.

On gold market situation is very similar to EUR. Gold now stands below major 1077 support and between 0.618 and 1.0 targets of AB=CD. Since market is not at oversold and at no strong support - retracement should not be deep. Besides, market has failed to use W&R pattern and simply erase it by dropping below its low. This tells about gold weakness.

That's why as on EUR we have to keep an eye on action around 1077 resistance. Normally bearish market should not return back above it. On hourly chart we see that this is also Fib resistance. If still gold will move and hold above this level - this will not cancel bearish setup totally but could postpone downward continuation by deeper upside retracement.
That's why if you would like to take short possition - better to act as we've discribed in EUR. Wait when hourly trend will shift bearish (gold has to be below 1077 area) and then you can use some of Fib resistance on most recent downward swing. Although this will not guarantee positive result, but significantly reduce potential loss if gold still somehow will continue move up. Currently trend is still bullish here:

So let's keep watching...

 

[Sive Morten]

Good morning,

Reuters reports today - Spot gold firmed on Friday but was still set to finish the week trapped near its cheapest in more than five years as the metal struggles against a stronger dollar ahead of a widely expected U.S. rate rise next month.

"We're still negative and target $985 in the short run," said analyst Dominic Schnider of UBS Wealth Management in Hong Kong. "The rationale is fairly clear. The Fed is going to hike, the dollar is going to see further strength and in that environment it's going to be fairly difficult to sustain current prices."

A stronger dollar hurts demand for commodities priced in the greenback by making them costly for holders of other currencies.

New U.S. applications for unemployment benefits fell last week while a gauge of U.S. economic activity rebounded in October, signs of a healthy economy that could give the Federal Reserve confidence to raise interest rates next month.

The dollar steadied on Friday after a recent rally that took the greenback to 7-month highs against a basket of peers.

Gold could come under further pressure from news that Chinese banks were turning more cautious on gold lending.

Chinese banks are growing alarmed by a rising number of defaults among jewellery manufacturers, prompting them to review new gold lending more carefully, according to sources with direct knowledge of the issue.

The top four Chinese banks alone have up to 443.4 billion yuan ($69.63 billion) tied up in gold leasing, so any pull back could cut China's imports and hit global bullion prices.

There is, however, evidence of some bargain hunting that may help slow the pace of gold's fall, a trader in Singapore said.

"For gold it's all about dollar strength. Looks like gold borrowing rate is getting a bit tighter with physical demand."

On Gold market price has formed opposite patterns on daily chart. Thus, we have simultaneously as bearish grabber and morning star. One of them should fail. Taking in consideration former analysis and overall situation, it seems that grabber has more chances to succeed. But we should not rely just on gambling. I hope that we should get some more clarity from intraday picture:

On hourly chart market has climbed a bit higher than we've suggested initially, but this is not drastic breakout yet. Gold is stuck inside 1080 consolidation and market still prevents upside continuation. Gold has tested WPP and Fib resistance.
This level is very important and technically market could break it up only due some significant reasons. Simple retracement will be insufficient for this purpose. That's why technically odds stand on the side of bears.
As on EUR here you also have choice. For example, you could try trade bearish grabber directly - enter at some upside retracement on hourly chart with stops above it tops. Or, you could wait for destruction of morning star pattern on daily chart.
If you're bullish - you could trade morning star by taking long position on some retracement down inside the body of the pattern. But keep in mind that bullish setup has minor chances since gold is just under strong resistance.