GOLD PRO Weekly September 15-19, 2014

[Sive Morten]

Fundamentals
Weekly Gold Tading Report prepared by Sive Morten exclusively for ForexPeaceArmy.com
Gold slumped to an eight-month low on Friday, dropping 1 percent as a lack of physical and investment demand and widespread commodities losses weighed on bullion. For the week, the yellow metal lost 3.1 percent, its biggest weekly drop since May, hurt by fears of an earlier-than-expected interest rate hike by the Federal Reserve. Bullion fell after data showed U.S. retail sales rose broadly in August and consumer sentiment hit a 14-month high in September, supporting expectations for sturdy economic growth in the third quarter.
"There is very little off-take from the physical sector. There is no demand from India and China. It's just not a lot of general interest in precious metals and commodities," said Bruce Dunn, partner at New Jersey-based precious metals merchant Auramet.
"The market remains under pressure from expectations for a stronger U.S. currency in the longer run and with physical buyers still absent, unwilling to support prices on fresh lows," Andrey Kryuchenkov, an analyst at VTB Capital, said. Among the main consumers of physical bullion, dealers said a one-quarter drop in local gold prices over the past year had shaken the confidence of Indians in the precious metal as a store of value.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said on Friday that its holdings had dropped 0.32 tonnes to 788.40 tonnes on Thursday.

Source: CFTC, Reuters
Still as you can see CFTC shows significant jump in open interest, while net position remains unchanged. It could mean that traders have opened spread positions and hold as longs as shorts approximately in equal amounts on passed week. This has not impacted on sigh but increased total number of open contracts. May be investors are preparing for Fed meeting and hedge existing positions.
Monthly
As we’ve mentioned previously price should pass solid distance to change situation drastically. it could change only if market will move above 1400 area and currently we do not see any signs of it. Recent rally that has started in July totally vanished and market right now stands even below its’ bottom. Even coming shift in seasonal trend does not fascinate traders much. Physical demand stands weak, dollar strong, inflation weak and talks around rate hiking also does not add optimism to gold.
Major factors that could become a reason for more aggressive Fed comments on coming week are still valid - good economy data, that right now is confirmed by US companies earning reports, weak physical demand – all these moments prevent gold appreciation. As September bearish intentions look strong tendency could take shape of butterfly as I’ve drawn on the chart, especially because it agrees with bearish grabber target.
It is interesting that during recent rally market was not able to re-test Yearly Pivot and later has vanished our bullish weekly grabbers. This moments make difficult to count on upward reversal. Also we suspect that we could get bearish dynamic pressure here and probably already getting it. As you can see trend has turned bullish, but gold does not show any upward action. Splash in July has faded fast. Mostly this pattern will depend on action in September-October. Plunge down here and taking 1240 lows confirms it. Finally, overall action since the beginning of the year mostly bearish. Take a look – in the beginning of the year market has tested YPP and failed, then continued move down. During recent attempt to move higher – has not even reached YPP again.
That’s being said, situation on the monthly chart does not suggest yet taking long-term positions on gold. Still, fundamental picture is moderately bearish in long-term. Possible sanctions from EU and US could hurt their own economies as well, especially EU. Many analysts already have started to talk about it. It means that economies will start to loose upside momentum and inflation will remain anemic. In such situations investors mostly invest in interest-bear assets, such as bonds. Approximately the same comments we saw for recent 1-2 months from physical gold traders.
On monthly chart we have chain of targets. First one stands at former lows at 1180 and some traders already talk about it in comments (see Friday update on previous week). Next one is 1125$ - butterfly 1.27 target and then ultimate combination of 1.618 target and YPS1 around 1020-1050 area. 1180 seems most probable not only because it stands closer but also because this is the target of the grabber and bearish dynamic pressure.

Weekly
Earlier we have shown (and not once) why we think that market almost has no chances to reverse up. Explanation comes from market mechanics:
Upward move from 1240 to 1340 was really nice. This has let reasons to speak about possible break on gold market. At the same time as we’ve mentioned many times – growth mostly was based on geopolitical reasons and had no support from real purchases.
When retracement has started and market has formed three in row bullish grabbers - that was normal - reasonable retracement out from 1333 Fib resistance. Bu later as you can see situation drastically has changed. Bullish trend, price above MPP and three in a row bullish grabbers has shifted to bearish trend, price has closed below MPP and grabbers were vanished.
Bounce up from 1270 two weeks ago mostly reminds some fake rather than real bullish challenge.
Price has closed almost below MPS1, CFTC data declares massive closing of longs and bounce up from 1270 mostly reminds some fake rather than real bullish challenge.
On previous week we’ve got continuation and more confirmation of bearish power. Thus, we even do not need any pivots here since market has broken them all. Gold also has stably close below 1240 and this was not a W&R, this was real breakout. Moving below 1240 has destroyed even theoretical chances on upside butterfly that we’ve discussed on previous week.
Gathering all this stuff together we come to conclusion that market has small chances to hold around and we should be ready for action to 1240 lows. Yes, some attempts could be made to bounce up due completion of daily AB-CD, geopolitical tensions and poor NFP data, but this is obviously too few to support significant rally.
Today we do not have any important Fib levels on weekly chart, we do not need pivots, we know that trend is bearish and market right now is not at oversold. That’s why today picture of gold market is extremely simple:
Yes, we just have AB=CD pattern. And since price already has passed 0.618 target it has no choice but just complete it. AB=CD target stands accurately around 1180 lows, but as we have grabber as well – most probably that gold will wash it out. Besides, this is gold’s habit either. Hence our next destination point here is 1180 lows.

Daily
Meantime daily chart has its own target slightly closer to current market. This is 1.618 extension of smaller AB=CD pattern. As gold has shown real breakout of 1240 and has passed below 1.0 extension – price now has no other choice but follow down. Also, as we’ve said there is no any support around current levels, so market stands in some sort of “free space”.
Placing of weekly pivots gives us additional assistance. Thus, WPS1 almost coincides with AB=CD target and daily oversold and WPP coincides with 1240 lows. Hence we could agree here only on shy upward retracement for twofold purpose – test WPP and re-test broken 1240 lows. Any other upside action will be irrational from normal development of situation and should be treated as worrying sign for bears.

4-hour
Since market right now shows strong and gradual downward action – there is not much to discuss on intraday charts, at least until market will not reach significant targets that we’ve discussed above. Here we would like to make just couple of observations. First is, applying harmonic swings of retracement, we can estimate that market indeed could re-test 1240 area and WPP. This is also 3/8 Fib resistance. Thus this could be level for possible short entry with 1220 target.

Conclusion:
Situation on gold market remains sophisticated. Due bearish moments, such as bullish USD sentiment, lack of physical demand, gold has re-established recently downward action. Recent action shows more and more bearish signs as well as fundamental data and overall market sentiment. On a way down market could pass through multiple target and closest one is 1180$.
In short term perspective market could show minor bounce to test WPP and re-test 1240 broken lows. Any deep return right back up above 1240 should be treated as worrying sign.

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]

Gold Daily Update Tue 16, September 2014

Good morning,

As Reuters reports, Markets are eyeing the Fed's words closely for any clues on the timing of the first U.S. rate hike in more than eight years. Any hike in interest rates would dim the appeal of gold, a non-interest bearing asset.

Some believe the Fed could signal that it may begin raising rates sooner than mid-2015, the current target for many economists.

"The price gain we are seeing is from some position covering ahead of the Fed statement," said one Singapore-based precious metals trader. "But it will face resistance at $1,240 and continue to be hurt by the stronger dollar."

"We remain biased to further downside (for gold prices), with the market appearing to be entering a period of sustained dollar strength, which will be a significant headwind for the gold price," ANZ analysts said in a note.

Investors were looking to physical demand is Asia to lend support. The recent drop in prices failed to attract consumers in a robust way, dealers said, though buying picked up slightly.

In top buyer China, daily trading volumes of 99.99 percent purity gold on the Shanghai Gold Exchange hit a two-week high on Monday. Premiums climbed to about $4-$5 an ounce, from $2-$3 last week.



So recent comments in general confirms our view that we've announced yesterday. Market hardly will show sizable retracement as prior Fed as prior reaching 1220 - 1.618 AB=CD target:

4-hour chart shows as target 1237-1240 area, is confirmed by Fib level, harmonic swing and daily broken lows:

On hourly chart we see smaller patterns that point approx. on the same are - upward AB=CD and butterfly "Sell" target right around 1240.

So today and tomorrow morning market still could re-test 1240 prior Fed policy announcement.

 

[Sive Morten]

Gold Daily Update Wed 17, September 2014

Good morning,

As Reuters reports, Gold inched up for a third straight session on Wednesday as speculation mounted that the Federal Reserve would vow to maintain interest rates at low levels when the U.S. central bank concludes its policy meet later in the day.

The Fed is expected to make a statement on policy decision at 1800 GMT, with markets awaiting hints on when the Fed would increase rates. Any increase in interest rates would dim the appeal of non-interest-bearing assets such as gold.

The Fed had said earlier that it would keep rates near zero for a "considerable time" after ending its bond-buying program, with the markets believing that no change would be made until mid-2015. Talk of an earlier rate hike have increased due to strong economic data.

Any change in the 'considerable time' guidance hinting towards an earlier rate hike "may have important ramifications for gold and would likely press prices lower", HSBC analysts said in a note.

Bearish investor sentiment was reflected in the flows of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund. The fund's holdings fell 4.18 tonnes to 784.22 tonnes on Tuesday.

Bullion investors were also eyeing Thursday's referendum on Scottish independence to gauge the impact on the dollar.

"A yes vote is likely to be bullish for gold and a no vote slightly bearish," HSBC said, adding that investor uncertainty from a yes vote would boost gold demand.


From a technical point of view nothing has changed drastically. Daily chart is the same - and we expect that any sizable retracement could start only after reaching 1220 major target, if it will start at all, of cause:

On 4-hour chart market has reached our target of retracement and any further upward continuation should be treated as worrying sign for short-term bearish context:

On hourly chart we clearly see how market feels the resistance of 1240 area. Potentially market could move slightly higher to 1243 area - as you can see new Butterfly "Buy" could be formed here and at the same time it could complete AB=CD target, but in general this move will stay in a row with concept of shy bounce.

Generally speaking, we do not see what could be done right now on gold market. May be it is really better to sit on the hands at least till Fed policy anouncement.

 

[Sive Morten]

Gold Daily Update Thu 18, September 2014

Good morning,

According to Reuters news Gold tumbled to its lowest in 8-1/2 months on Thursday as the dollar index jumped to a four-year peak after the Federal Reserve signalled that a faster hike in U.S. interest rates might be on the horizon.

The Fed on Wednesday renewed its pledge to keep interest rates near zero for a "considerable time", but also indicated it could raise borrowing costs faster than expected when it starts moving.

"The shift higher in the anticipated Fed funds rate for the end of 2015 and 2016 could further weigh on gold prices longer term and act as a headwind to future rallies," HSBC analysts said in a note.

"If the dollar remains firm, gold should stay on the defensive," they said.

"Technically gold looks vulnerable, with the psychological $1,200 and the critical $1,180 now a real possibility of being tested in the coming days or weeks," said MKS Group dealer Jason Cerisola.

Any support for gold prices could come from a pick up in physical demand in Asia as a drop towards $1,200 an ounce could potentially attract bargain hunters.

Premiums in top buyer China picked up on Thursday, climbing to $5-$6 an ounce, up from about $4 in the previous session.



So, in short-term perspective market has completed minimum requirements for bounce - 1220 target has been hit. So, right now gold theoretically has chances to show at least some technical bounce.
Today-tomorrow investors, probably will be focused on GBP action. In weekend we need to take a look at CFTC data to understand how investors assess Fed comments. But as yesterday plunge was right to 1220 - it seems that retracement is really possible:

On 4-hour chart our bet on harmonic swing has worked perfectly. At the way down market has formed nicely looking butterfly "Buy" that could become a trigger of possible bounce:

 

[Sive Morten]

Gold Daily Update Fri 19, September 2014

Good morning,

As Reuters reports, Bullion came under pressure after the Federal Reserve indicated on Wednesday it could raise borrowing costs faster than expected when it starts moving, though it renewed its pledge to keep interest rates near zero for a "considerable time.

"It is hard to make a turnaround after the Fed news with the U.S. economic data also strong," said one Singapore-based precious metals trader. "There are only minor supports now and the likelihood of falling to $1,200 is high."

Gold was also hurt after data showed that the number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting a sharp slowdown in job growth in August was an aberration.

Bullion investors were eyeing the results of Scotland's independence referendum to gauge the impact on the dollar and for any safe-haven bids, as the break up of the world's sixth-largest economy could have had geopolitical and financial implications.



So, on gold this was rather calm week. As political turmoil around Scotland has ended - gold has not shown any volatility and upward spikes. Thus, we have not got any reaction even on 1.618 target that was achieved previously.
As we know gold right now stands in "free space" and next solid support is only 1180 lows. It means that we have to shift to larger pattern - big daily AB=CD with 1192 target. This pattern is not new for us - we've discussed it already many times. Also, guys we should understand that 1192 means that 1180 will not hold, especially because we have bearish monthly grabber in progress. So, our bet on reaching 1192 and washing 1180 or even breakout of this level in medium term perspective:

Still, hardly any solid activity will come today. It is very probable that after such week - Friday will be relief time.
on 4-hour chart we see that market was able to show just minor 0.382 respect to butterfly. It allows as to complete butterlfy as demostrate weakness and intention on further downward action:

On hourly chart you can see it even better - long white candles indicate pressure on voting. And when results were known - fast return right back down.

 

[peeterwoolf]

Another great analysis on gold, thanks.

 

[Kleinerbroker]

Spasiba

Sive, thank you very much ! This makes long-term short positions atractive . This the more , as my broker pays positive Swaps for Shorttrades in Gold . I understand, this might change in the near future (but is a detail) . KB

 

[Hashim Raza]

Thanks for the information. Situation is becoming more interesting between 1220 - 1240 area. Hope to see 1183 again

 

[Lolly Tripathy]

Gold