GOLD PRO WEEKLY, October 17-21, 2016

[Sive Morten]

Good morning,

(Reuters) Gold fell on Friday as the dollar rose after U.S. economic data came in within analysts' expectations, cementing assumptions of an interest rate increase by the Federal Reserve by year-end.
U.S. retail sales rebounded 0.6 percent in September while producer prices also rose broadly to record their biggest year-on-year increase since December 2014.

The dollar gained 0.4 percent against a basket of six major currencies. Spot gold was down 0.3 percent at $1,254.26 an ounce by 2:12 p.m. EDT (1812 GMT). U.S. gold futures settled down 0.2 percent, at $1,255.50.
Later in the session, Federal Reserve Chair Janet Yellen gave a broad review of where the U.S. economic recovery may still fall short.

"While Yellen did point out some of the longer-term reasons for keeping interest rates lower than in previous cycles, she importantly didn't give any indication that she is opposed to the market interpreting recent Fed communications as signaling a rate hike is imminent this year," said Royce Mendes, director and senior economist at CIBC Capital Markets in Toronto, adding that the bank still expects a rate hike in December.
Earlier, Boston Fed President Eric Rosengren said that investors were probably right in placing "very high" odds on a U.S. interest rate increase in December.

Markets are pricing in around a 70 percent chance that the Fed will move. Gold is highly sensitive to increases in U.S. interest rates, which can lift the opportunity cost of holding non-interest-bearing gold.
"We are in the midst of one of those large Fed-related moves - we saw an almost $100 upswing in June and July and we are now seeing a $100 decline in September and October as markets see a Fed rate hike coming in," ING Bank senior strategist Hamza Khan said.

Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.28 percent to 961.57 tonnes on Thursday.

COT Report
Recent CFTC data confirms our expectation on massive contraction of speculative long positions. Net position has dropped significantly as well as open interest. This is neccesary condition for upside trend continuation. Now we need carefully estimate when this retracement will stop.

Technicals
Monthly

Well, as gold is returning back to strong action, we continue to make video researches on Gold market. Monthly picture currently supports our suggestion on deep retracement, this is just how markets work. Sooner or later but this retracement should happen and now it stands underway. Last week gold mostly was flat, so monthly picture stands almost the same.

Technically recent upward action started in Dec 2015 is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Probably it should happen but 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.

As market slightly has moved above YPR1 and our K-resistance area, something is starting to form here, I mean pattern by which long-term global trend could change on gold. Price has formed nice bearish engulfing right around this area and now gold is following to its signal

Take a careful look at the picture - could you recognize here possible reverse 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...

Finally take a look at action on downward slope and upward one of the head - last move down was slower than current move up. All these moments point on possible H&S pattern here.

If we really will get it - then we could make an assumption on possible depth of retracement. Now the bottom of shoulder stands approximately around 1160 area... Currently we could only gamble what event could push gold as low as 1160 again, but probably something will happen.

Our suggestion on initial drop was correct - growing psychological pressure among managers of Hedge and Mutual funds, good performance of gold in 2016, coming rate hike in Dec and overloading long positions forced traders to fix profit as soon as gold has dropped below 1300 area.

That's being said, taking together technical, fundamental and sentiment picture we suggest further drop on gold, at least to 1160-1180 area. Second step is watch for validity of H&S pattern. If it really will work (and we think that it should), then we expect new long-term bullish trend on gold market that should lead to new highs on 2000$+ levels. It means that 1160-1200 area should be treated as strategical point for long entry.

Weekly

Last week was inside one and our analysis stands the same. Here we've got opposite breakout of the flag that we've talked about. On weekly chart we have two different scenarios. In short-term scenario we expect that some upward bounce should happen, at least if market is not dispeared totally. Major reason - weekly oversold at K-support area. This is rather nice stimulus for upward bounce. Actually we have DiNapoli bullish "Stretch" pattern.

Second scenario - is a reversal bearish pattern. Here, guys, we could get H&S. Head stands precisely at 1.618 extension of potential left shoulder. So, we think that this is one of the patterns that we have to keep an eye on. To be formed, market needs continue dropping (after minor bounce) somewhere to 1200 area and then start to form right shoulder. Target of this direct H&S, as AB=CD pattern leads us directly to the bottom of right shoulder on monthly chart... Overall, this combination looks realy interesting.

But first - upward bounce. This situtation leads us to conclusion - do not take short position, wait for upward bounce. Trading long is possible but more risky as you will go against major tendency, dealing with the "Stretch" pattern. We do not recomment to go long. But if you will decide to do this - try to get more confirmation, some bullish patterns on your back, use nearest targets etc...

Daily

Trend is bearish here, market also at oversold. As we've estimated already that gold stands at strong support, here we should discuss probably, upside potential of retracement. Personally, I like area around 1285-1292$ range. This is K-resistance on daily chart and former flag border. Re-testing of this line seems logical and typical action for gold market. Breaking K-area will be negative sign for bears and will look like irrational action.

Here we mostly are waiting for DiNapoli direcitonal pattern. Currently only DRPO "Buy" is possible. And in general DRPO looks more logical here. Standing at oversold at weekly and daily charts - deeper retracement on daily looks logical and stronger upside action usually is triggered by DRPO, rather than B&B.
Last week gold stand rather quiet, but still we've got close above 3x3 DMA and below. Right now to confirm DRPO "Buy" pattern we need second close above 3x3 DMA:

Intraday
On 4-hour chart we are watching for two major setups - possible butterfly "buy" that could become a part of daily DRPO "Buy" pattern and bearish dynamic pressure. Trend already has turned bearish here, but gold has not taken yet 1240 lows. Appearing of butterfly could provide great assistance to scalp traders, since it lets anticipate DRPO trading.

Hourly chart shows sideways consolidation between Pivot lines. Smooth action tells that investors do not take any steps yet:

Read carefully!
Conclusion:
Perspective of 1-3 months looks bearish. We mostly are watching for reverse H&S pattern on monthly chart that should provide us strategical entry point around 1160-1200 level.
Perspective of 1-2 years looks bullish. As H&S pattern will be completed, new bullish trend should start. We expect to see gold on areas above 2000$

In very short-term perspective we will be watching for upside bounce to 1285-1292 area, but we will not trade it, although this is not forbidden for scalp traders. It's major purpose - is to give us level for short entry. As minor bounce will be completed, we expect next stage of bearish action to 1200 area.


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 prices rose for a second day on Tuesday, supported by a weaker U.S. dollar amid uncertainty over when the U.S. Federal Reserve will raise interest rates. Spot gold was up 0.5 percent at $1,261.25 an ounce at 0711 GMT.

U.S. gold futures had risen 0.5 percent to $1,262.60 an ounce. Fed Vice Chairman Stanley Fischer said on Monday that economic stability could be threatened by low interest rates, but it was "not that simple" for the Fed to hike. "Gold is riding on the dollar weakness," said Helen Lau, analyst at Argonaut Securities in Hong Kong. "The U.S will eventually raise interest rates, but investors still feel that central banks across the world will continue to be accommodative," she said.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund (ETF), rose for a third
straight session on Monday. They were up 0.18 percent at 967.21 tonnes. "Markets do not think that the U.S. will continuously raise rates ... Maybe that's why they (ETFs) still want to buy gold," Lau said.

Gold is highly-sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced. The dollar index, which measures the greenback
against a basket of currencies, was down 0.2 percent at 97.746 after touching seven-month highs Monday.
A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.
Asian stocks rose on Tuesday thanks to a rebound in oil prices.

Spot gold may test resistance at $1,266 per ounce, as suggested by its wave pattern and Fibonacci projection analysis, according to Reuters technical analyst Wang Tao.

"As long as prices stay above the stiff support of $1,240, we expect a recovery in prices. A close above $1,264 could take prices higher to $1,282 to $1,300 followed by $1,312," said Hareesh V, Research Head at Geofin Comtrade Ltd. Gold is likely to recover to above $1,300 an ounce next year as a pickup in physical demand counters more potential U.S. rate increases, a Reuters poll at an industry event showed.

On Gold market price action stands according to our expectation. Current upward action could lead to DRPO "Buy" pattern confirmation. As a result, we expect to get upside retracement to 1290 area during current and may be next week:

On 4-hour chart price has taken a bit different shape, but this hasn't changed the core. We've got "222" Buy pattern instead of butterfly. This pattern has two targets. Nearest around 1268, next is 1285. But if we will get DRPO on daily chart, we will use its target and major destination point of daily K-resistance, trend line around 1290

On hourly chart we also see bullish price action - gold climbs above WPP, now is challenging WPR1. But major acceleration should happen, as soon as it will take out the top of daily high wave pattern:

That's being said, here we have two issues. Our primary object is 1290 area, as it is important for short entry on daily chart. Scalp traders also could get DRPO "Buy" setup...

 

[Sive Morten]

Good morning,

(Reuters) Gold prices held ground on Wednesday on a weaker dollar amid uncertainties around the timing of a rate hike by the Federal Reserve and upcoming U.S. presidential election.

Spot gold was firm at $1,262.00 an ounce at 0731 GMT. In the previous session, the precious metal touched $1,264.78, its highest since Oct 10. U.S. gold futures was broadly unchanged at $1,262.8
an ounce.

Recent support for gold prices has had to do with the demand mostly from China and emerging markets, said Richard Xu, a fund manager at HuaAn Gold, China's top gold exchange-traded fund. "If you look at the Chinese local gold prices, they are roughly 2 percent higher than the global gold prices," Xu added.

"The dollar is probably showing some kind of a weakness after pushing out so high, so that might also help the gold stabilise for a while." The dollar stepped back from a seven-month high against an index of currencies on Wednesday after U.S. consumer prices showed a moderation in underlying inflation, prompting markets to trim bets on a December Federal Reserve rate hike. A Reuters poll showed chances the Federal Reserve will raise interest rates in December are now put at 70 percent.

Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced. Spot gold may test resistance at $1,266 per ounce, as
suggested by its wave pattern and Fibonacci projection analysis, according to Reuters technical analyst Wang Tao.

Asian shares rose for a second session as a barrage of Chinese data confirmed that the economy had stabilised.
"We remain relatively negative on gold short-term despite a stronger start to the week," INTL FCStone analyst Edward Meir said in a note. "We expect further dollar strengthening going into Q4 on account of an election victory for Hillary Clinton along with the likelihood of a Fed rate hike."

So, just few comments on gold market. Price has closed above 3x3 DMA, and we've got confirmed DRPO "Buy" pattern. Yesterday we already have discussed it's target - 1290 area, that is K-resistance, trend line and 50% level of DRPO thrust.
But, guys, keep in mind that DRPO is not our primay pattern. Actually we would like to get market around 1290 to think about short position, but how market will climb there - this is not really important. So, for us DRPO is mostly a tool but not trading object, I mean on daily chart. Actually you could trade it, but be careful, since it goes against previous drop.

On 4-hour chart we see some other bullish signs. First is standing above WPR1. This hints on upward contiuation. Second - consolidation right below daily high wave's top. This is a sign of preparation for breakout. Gold is building an energy...Trend is bullish as on daily as on 4-hour charts..

 

[Sive Morten]

Good morning,

(Reuters) Gold pared some early gains on Thursday as the dollar strengthened and markets awaited the outcome of a European Central Bank policy later in the day. The ECB is set to keep policy unchanged but will likely lay the groundwork for more easing in December as it tries to sustain a long-awaited rebound in consumer prices.

Accommodative monetary policies favor gold and equities because low interest rates encourage investors to opt for assets that do not rely on interest yields. Some of the shine was taken off gold's earlier move, which was driven by Chinese buying, as the U.S. dollar edged higher, MKS PAMP Group trader Sam Laughlin said.

The dollar index, which measures the greenback against a basket of currencies, was up 0.1 percent at 98.006. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

"The yellow metal will be looking toward support broadly between $1,265 - $1,267.90 (the 200-day moving average) for an extension to $1,277 to break above the 200-week moving average," Laughlin said.

Spot gold was up 0.1 percent at $1,272.20 an ounce as of 0651 GMT. On Wednesday, it had hit its strongest since Oct.5 at $1,273.34. U.S. gold futures were up 0.2 percent at $1,271.80 an ounce.

"We're looking for gold prices to rally further into the year-end. The market is waiting for the outcome of the
(U.S.)presidential elections in November and what the Fed is going to do in December," said OCBC analyst Barnabas Gan. "Gold rides on suspense and uncertainty and for the very reason we expect gold to touch about $1,300 by the end of the year."

The safe-haven asset's reaction was fairly subdued after the third and final U.S. presidential debate between Democrat Hillary Clinton and Republican Donald Trump. "U.S. election clarity in terms of Clinton taking lead coupled with U.S. rate hike in December is bearish for gold," said Amit Kumar, research head at Adroit Financial Services.

Spot bullion may rise to touch $1,280 per ounce, as it has cleared resistance at $1,265, according to Reuters technical analyst Wang Tao.

"Upside reversal in the dollar, coupled with a more robust rally in stocks, could easily sabotage the recent improvement we have been seeing," said INTL FCStone analyst Edward Meir. Asian stocks advanced on Thursday, propelled by strong U.S. earnings and oil prices near a 15-month high.

So, on gold we see right now absolutely logical action. Upward bounce continues. DRPO is still valid and yesterday market has broken up the range of daily high wave pattern. Our suggestion that gold should reach 1285-1292 resistance area. This will be the range where we will think about short entry, since our suggestion that after 1292 market should drop to 1200 area:

On 4-hour chart gold has moved above as WPR1 as top of high wave. Breakout of latter one was rather fast. Now market has completed first AB-CD target and stands at reasonable pause. May be it will re-test broken area. Next 1.618 target agrees with daily resistance area:

 

[Sive Morten]

Good morning,

(Reuters) Gold prices edged lower in Asian trade on Friday as stocks firmed and the U.S. dollar rose on expectations the Federal Reserve would raise interest rates by year-end.

Spot gold was down 0.1 percent at $1,256.50 an ounce by 0059 GMT. U.S. gold futures were up 0.1 percent at $1,258.50 an ounce. The dollar index, which measures the greenback against a basket of six major currencies, gained 0.1 percent to 97.613.

Asian stocks edged higher and the dollar bounced on Friday as global markets took a breather after being churned by downbeat Chinese economic data the previous day. Markets will next look to Friday's U.S. retail sales data and remarks from Fed Chair Janet Yellen, who will address a Boston Fed economics Conference at which Boston Fed governor Eric Rosengren will also speak.

The number of Americans filing for unemployment benefits held at a 43-year low last week, pointing to sustained labour market strength that could pave the way for the Fed to raise interest rates in December.

The U.S. central bank may want to hold off on monetary policy changes until after the U.S. presidential election on Nov. 8, Philadelphia Fed President Patrick Harker said on Thursday.

China's September exports fell 10 percent from a year earlier, far worse than expected, while imports unexpectedly shrank after picking up in August, suggesting signs of steadying in the world's second-largest economy may be short-lived. Azerbaijan's top gold producer Anglo Asian Mining said on Thursday its January-September output was 7.8 percent lower than in the same period last year at 49,874 ounces and it
was cutting its 2016 production target.

Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.28 percent to 961.57 tonnes on Thursday.

South Africa's mining output fell 0.2 pct in August, according to Statistics South Africa's monthly mining production data released on Thursday.

Well, action on gold is very smooth, it has not been hit by volatility after Draghi comments. Today we will get retail sales, may be some more activity will come closer to the end of the session, but right now everything is OK.
Minor retracement, that we've discussed yesterday has happened and it stands minor indeed. Thus, DRPO pattern is still valid and currently we do not see any signs that gold will not reach our 1290 area:

On 4-hour chart gold has shown retracement as we would like to see - very small, just to 3/8 Fib level and re-tested broken WPR1 and high wave's top. Retracement has happened after price has completed AB=CD target:

Thus, next destination point is 1.618 @ 1285 area and this is, in fact, our K-resistance on daily chart. Let's keep an eye on statistics later in the session and what Yellent will say in Boston.