Sive Morten
Special Consultant to the FPA
- Messages
- 18,699
Fundamentals
Gold dropped almost two percent to a near six-year low on Friday, set for a sixth straight weekly decline under pressure from a firm U.S. dollar and prospects of a U.S. interest rate rise next month.
Spot prices were down about 2 percent for the week. U.S. gold futures hit a six-year low of $1,051.10 an ounce before closing down 1.3 percent at $1,056.20 and skidding to a sixth straight weekly decline.
Gold was hit by the dollar's advance. The greenback was trading near March's multi-year highs against a basket of major currencies
The chatter is all about exchange rates ... Gold is down on the dollar," said Phillip Streible, senior commodities broker for RJO Futures in Chicago.
Greenback-denominated commodities like gold become more expensive for foreign investors when the U.S. currency rises.
The Federal Reserve is widely expected to raise U.S. rates for the first time in nearly a decade when it meets next on Dec. 15-16. Higher rates would rise the opportunity cost of holding non-yielding gold and could dent demand and boost the dollar.
"The omens are not positive for gold in the lead-up to the December rate meeting," Societe Generale analyst Robin Bhar said.
Buying in China has been good but has been unable to support prices, traders said.
Premiums on the Shanghai Gold Exchange, a proxy for demand in China, were trading at $5-$6 an ounce, versus $3-$4 at the beginning of the month.
However, other physical demand indicators were not upbeat.
India's gold buying in the key December quarter is likely to fall to the lowest level in eight years, hurt by poor investment demand and back-to-back droughts that have slashed earnings for the country's millions of farmers.
China's net gold imports from main conduit Hong Kong fell in October from a 10-month high, data showed on Thursday.
Precious metals funds posted their biggest net outflow last week in around four months, said Bank of America Merrill Lynch.
In other precious metals, silver , platinum and palladium were all heading for weekly declines. Silver was down 1.2 percent at $14.08 an ounce, platinum was down 1.9 percent at $834.25, not far off a seven-year low hit earlier in the week. Palladium dropped 1.5 percent to $547.25.
CFTC data shows further contraction of net long position, but open interest is also decreased. SPDR Fund shows outflow again - storages dropped to 655 tonnes.
Speaking honestly guys, somehow I feel that gold is near to drastic reversal. May be this will happen not today or tomorrow, may be within half a year, but... imbalances of political turmoil in the World and gold price looks stunning. Gold probably could reach 1000 or even lower levels, but reversal will be fast and furious, absolutely unexpected and stunning...
Technicals
Monthly
So, Goldman expect bearish continuation to 1000$ area and we have to return back to medium-term bearish view as drop was really miserable within last 2 weeks. Today we will expand view down a bit, since mostly all our patterns have been completed.
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 2 months or so. If you would like to see relatively true picture - watch for "zero hedge fund" website materials as on policy as on economy. These guys know what they talk about.
As market gradually will start to come to the same conclusion as gradually situation on gold market will start to change in positive area. 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.
So, 1050 level mostly has been hit (just 2$ left). 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.
If we recall dollar index chart and that it should continue move up, then it will be not a surprise to see gold drop lower.
Actually I see some artificial action in this gold weakness. I can't prove it, but something curious with this move down... it makes me feel uncomfortable.
Anyway, we'll see. Since all major targets have been hit - now it is a question of whether gold will hold below 1050 or not.
Weekly
So here gold also has completed our trading plan for the week, since last time we've discussed possible downward continuation and that we should be ready for this.
Now it seems that gold still has some potential of decreasing in short term to 1025-1037 targets. This is AB-CD, butterfly 1.618 extension. But this move for another 25$ should be treated as sub-product of major action to 1050$.
After that, as strategical target mostly has been reached - we probably will need to take some pause before we will get clarity with long-term, i.e. strategical perspectives of gold market. Tactically we will continue to monitor gold on intraday charts and probably will get some short-term trading setups.
But from strategical point of view our major question - will gold move up, back above 1100 area or will hold below 1050. Depending on what we will get - our long-term targets will be different.
On coming week, we first will watch for reaching of 1025-1038 area. Right now it seems possible.
Daily
Here, as our argue between morning star and grabber has been completed - bears won and our bet was correct... here we could just wait for other patterns. Most probable seems some DiNapoli one, based on recent thrust down. Thrust itself looks very nice. What's about DRPO? Well, may be.. we already have 1 close above 3x3 DMA... May be some other pattern will be formed...
Anyway, right now we just need for new patterns and signals. They will clarify the side which one we should follow:
4 hour
This chart just shows completion of our Friday setup and increases number of completed patterns. On Monday we probably could count on minor bounce to 1063 area - former low and WPP, but what will happen next will depend on market reaction on 1050 completion.
Conclusion:
We think that market participants gradually will start to understand that situation in World is changing, Globe uncertainty is growing and this will lead to re-assessment of gold value. But this is long-term process. That's why gold still could drift slightly lower and reach 1000-1050 area, or even lower. But if reversal will happen - it probably will be fast and furious, absolutely unexpected. In our long-term trading plan picture will depend on how market will response to 1050 level. Definitely speaking, whether gold will hold below it, or return back above 1100$.
In short-term perspective we could count on retracement to 1063 area of WPP 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.
Gold dropped almost two percent to a near six-year low on Friday, set for a sixth straight weekly decline under pressure from a firm U.S. dollar and prospects of a U.S. interest rate rise next month.
Spot prices were down about 2 percent for the week. U.S. gold futures hit a six-year low of $1,051.10 an ounce before closing down 1.3 percent at $1,056.20 and skidding to a sixth straight weekly decline.
Gold was hit by the dollar's advance. The greenback was trading near March's multi-year highs against a basket of major currencies
The chatter is all about exchange rates ... Gold is down on the dollar," said Phillip Streible, senior commodities broker for RJO Futures in Chicago.
Greenback-denominated commodities like gold become more expensive for foreign investors when the U.S. currency rises.
The Federal Reserve is widely expected to raise U.S. rates for the first time in nearly a decade when it meets next on Dec. 15-16. Higher rates would rise the opportunity cost of holding non-yielding gold and could dent demand and boost the dollar.
"The omens are not positive for gold in the lead-up to the December rate meeting," Societe Generale analyst Robin Bhar said.
Buying in China has been good but has been unable to support prices, traders said.
Premiums on the Shanghai Gold Exchange, a proxy for demand in China, were trading at $5-$6 an ounce, versus $3-$4 at the beginning of the month.
However, other physical demand indicators were not upbeat.
India's gold buying in the key December quarter is likely to fall to the lowest level in eight years, hurt by poor investment demand and back-to-back droughts that have slashed earnings for the country's millions of farmers.
China's net gold imports from main conduit Hong Kong fell in October from a 10-month high, data showed on Thursday.
Precious metals funds posted their biggest net outflow last week in around four months, said Bank of America Merrill Lynch.
In other precious metals, silver , platinum and palladium were all heading for weekly declines. Silver was down 1.2 percent at $14.08 an ounce, platinum was down 1.9 percent at $834.25, not far off a seven-year low hit earlier in the week. Palladium dropped 1.5 percent to $547.25.
CFTC data shows further contraction of net long position, but open interest is also decreased. SPDR Fund shows outflow again - storages dropped to 655 tonnes.
Speaking honestly guys, somehow I feel that gold is near to drastic reversal. May be this will happen not today or tomorrow, may be within half a year, but... imbalances of political turmoil in the World and gold price looks stunning. Gold probably could reach 1000 or even lower levels, but reversal will be fast and furious, absolutely unexpected and stunning...
Technicals
Monthly
So, Goldman expect bearish continuation to 1000$ area and we have to return back to medium-term bearish view as drop was really miserable within last 2 weeks. Today we will expand view down a bit, since mostly all our patterns have been completed.
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 2 months or so. If you would like to see relatively true picture - watch for "zero hedge fund" website materials as on policy as on economy. These guys know what they talk about.
As market gradually will start to come to the same conclusion as gradually situation on gold market will start to change in positive area. 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.
So, 1050 level mostly has been hit (just 2$ left). 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.
If we recall dollar index chart and that it should continue move up, then it will be not a surprise to see gold drop lower.
Actually I see some artificial action in this gold weakness. I can't prove it, but something curious with this move down... it makes me feel uncomfortable.
Anyway, we'll see. Since all major targets have been hit - now it is a question of whether gold will hold below 1050 or not.
Weekly
So here gold also has completed our trading plan for the week, since last time we've discussed possible downward continuation and that we should be ready for this.
Now it seems that gold still has some potential of decreasing in short term to 1025-1037 targets. This is AB-CD, butterfly 1.618 extension. But this move for another 25$ should be treated as sub-product of major action to 1050$.
After that, as strategical target mostly has been reached - we probably will need to take some pause before we will get clarity with long-term, i.e. strategical perspectives of gold market. Tactically we will continue to monitor gold on intraday charts and probably will get some short-term trading setups.
But from strategical point of view our major question - will gold move up, back above 1100 area or will hold below 1050. Depending on what we will get - our long-term targets will be different.
On coming week, we first will watch for reaching of 1025-1038 area. Right now it seems possible.
Daily
Here, as our argue between morning star and grabber has been completed - bears won and our bet was correct... here we could just wait for other patterns. Most probable seems some DiNapoli one, based on recent thrust down. Thrust itself looks very nice. What's about DRPO? Well, may be.. we already have 1 close above 3x3 DMA... May be some other pattern will be formed...
Anyway, right now we just need for new patterns and signals. They will clarify the side which one we should follow:
4 hour
This chart just shows completion of our Friday setup and increases number of completed patterns. On Monday we probably could count on minor bounce to 1063 area - former low and WPP, but what will happen next will depend on market reaction on 1050 completion.
Conclusion:
We think that market participants gradually will start to understand that situation in World is changing, Globe uncertainty is growing and this will lead to re-assessment of gold value. But this is long-term process. That's why gold still could drift slightly lower and reach 1000-1050 area, or even lower. But if reversal will happen - it probably will be fast and furious, absolutely unexpected. In our long-term trading plan picture will depend on how market will response to 1050 level. Definitely speaking, whether gold will hold below it, or return back above 1100$.
In short-term perspective we could count on retracement to 1063 area of WPP 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.