Gold GOLD PRO WEEKLY, 05 - 09, 2018

Sive Morten

Special Consultant to the FPA
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Fundamentals

Gold market mostly is driven by the same factors as FX market. Yesterday, in our FX research we've talked about major ones - coming Fed meeting, US interest rate rally and NFP data. For the gold market conclusion will be the same, these factors are dollar supportive by far. Still, impact on gold market could be slightly different, because it has the feature of safe haven and additional support from difficult political situation and tariffs piking. That's why Friday reversal there was not as sharp as on FX market.

As Reuters reports - Gold slipped on Friday as the dollar regained some ground on the back of strong U.S. jobs data, but the metal was still on track for a fifth week of gains.

The dollar index gained after data showed U.S. job growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years.

“Strong data helped the dollar, which put some pressure on gold. The fact that the data is strong despite storm-related disruptions, suggests the economy is humming along strongly and that the Fed will continue to hike interest rates,” said Tai Wong, head of metals trading at BMO.

“Given the fact that we had a very strong rally yesterday, we are going to struggle towards the $1,240-$1,245 highs off this move unless we get a sustained downward movement on the dollar,” Wong said.

World shares rallied on hopes that the United States and China were starting to repair their damaged trade relations.

“People who would generally buy gold out of fear as a safe-haven are lightening up on it now. There’s less of a reason to own it under that fear gauge,” said Michael Matousek, head trader at U.S. Global Investors.

Attention is now turning to the U.S. congressional elections on Nov. 6, which will determine whether the Republican or Democratic party controls Congress, with some predicting increased market volatility on the outcome.

“The return of risk appetite could be a bearish sign for gold, given how it’s benefited from its safe-haven status as of late,” Craig Erlam, senior market analyst at OANDA in London, said in a note.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose to their highest since late August on Thursday. Weekly increase stands for ~10 tonnes, which is good amount for weekly change.

At the same time COT report shows that sentiment is not quite bullish. As speculators as hedgers have closed big amount of bullish positions. As a result open interest has dropped, but it doesn't make overall sentiment weaker. This kind of change suggests that investors do not believe much in upside continuation of gold, at least in short-term perspective:

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As a result net long position has dropped:
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Source: CFTC.gov
Charting by Investing.com


So, conclusion on gold market mostly stands the same as for FX one. Although we do not have absolutely clear signs of bearish reversal, but news and fundamental background doesn't look too friendly for the market.

Technical
Monthly


Monthly picture barely has changed. On monthly chart we keep our long-term technical scenario, that could be realized. this is not single possible scenario, but currently it seems as very probable. We will keep it intact for awhile, because it illustrates our fundamental expectations on gold market. Although final downside target could be revised higher someday because as political as economical situation is not static but we keep our direction "down" by far.

Here we try to involve fundamental view in technical analysis, trying to combine patterns with real fundamental situation on gold. So, we will take broader view.

If you follow our weekly updates, you should remember our explanation and why we think that gold inability to break through 1380 resistance should be treated as bulls' defeat and gold failure. This is important in outlook of longer-term perspective.
Fundamental picture suggests two major things. In shorter-term US will keep dominate role in the world, because indirectly it controls EU economy as major EU companies have significant part of their business in US, or on US territory, US dollar is still world major currency and, as we've estimated above, China starts to show signs of chilling their economy. US economy itself feels good. D. Trump by restructuring of political role of US on international arena will safe a lot of "unnecessary" spending, such different programs of opposition financing, military spending of different kind. This should improve US budget, reduce deficit, which also will work on support of US economy.
Second important issue, this long-term relations that stand for decades start changing. Both of these moments, putting together, lead us to following conclusion. Within few years, 2-3 probably gold will remain under pressure of positive interest rates cycle. While gradually, when breaking of long-term economic relations will be seen brighter and brighter and impact not only China, EU but US as well - this will be turning point for the gold, or slightly before that. Because any global crush of any kind triggers demand for gold. That is what we see from fundamentals. The same view we see among other analysis, which they backed with statistics and fundamental research. Thus, Fathom Consulting expects starting of world crisis around 2020.

It could look unbelievable, but technical picture shows approximately the same. Failure of 1380 upside breakout confirms our idea of 2-3 years of US and US Dollar domination. But at the same time gold should show preparation to reversal, and here it is. One of the scenarios that might be formed here is big 1.618 butterfly, which is bullish reversal pattern. It has 1.618 target right around gold price, which is corresponds to extraction spending approximately. So, it is long-term breakeven point.
Finally, butterfly could become large reverse H&S pattern around all time 5/8 Fib support and ~40% of this pattern could be seen on the market. What we see on the chart nicely corresponds to current fundamental background. Alternative scenarios suggest appearing of different patterns, such as "222" Buy, or 1.27 butterfly but it doesn't affect the core and reflects only a degree of global political and economical processes, whether they will be smooth or drastic.

Of course, political life is not static, and it could show fast turns. But right now, everything looks very harmonic.

Here we also have mentioned huge demand on gold from emerging countries - China, Russia and Turkey. Developed countries repatriate gold from US. It means that everybody prepares to something, which should significantly increase demand for a gold. Decisive moment here will be the breakout of YPS1 where gold stands right now. But last few weeks we see that gold, oppositely, holds well and even bounces higher, up from it.
gold_m_05_11_18.png


Weekly

On weekly chart we do not have any significant advance in the same direction. Market is mostly stuck around major resistance. At the same time no signs of failure of our major setup. DRPO is still valid and we still keep our 1260 target valid. Despite that retracement could happen on next week - it doesn't cancel yet later upside continuation:

Still, In a broader picture, as we've mentioned earlier, DRPO itself is a long-term pullback as a reaction on oversold. Despite our long term bearish trend on gold, it can't show straight down action without any pauses. And we think that one of these stops we have right now. Although the scale of this "pause" looks impressive 50-70$ per contract bounce, on weekly chart this is just 3/8 pullback, which seems normal when market hits oversold and YPS1 areas. Thus, on weekly we still watch for our directional pattern, based on the thrust down.

The common target of DRPO is 50% of its thrust, which stands at $1260. Still, 1238 level is also important, because market now shows pause right below it. That's being said - weekly chart keeps bullish context.

But DRPO action is just a retracement within our large AB=CD pattern, which potentially has OP target around 1113$...

gold_w_05_11_18.png


Daily

Recent upside action very well agrees with overall bullish context. As soon as major target has been hit, we've got meaningful retracement to K-support area and fast upside jump. That is how bullish market should behave. Following this logic and technical picture we should follow bullish tendency and search chance to go long.
At the same time, we need to keep in mind not quite friendly fundamental background and coming Fed meeting on 8th of November next week. With any light signs of failure of bullish scenario, it would be better take a pause and see what will happen.

Besides, MACD trend now is bearish on daily and recent rally could be deep retracement before second leg down.
gold_d_05_11_18.png


Intraday

It is easy to recognize reverse H&S pattern on top, which suggest some retracement first, before any upside continuation, somewhere to 1223 area, if we would follow the harmony of left shoulder. This pattern could become good assistance to us, because if market will fail and start dropping back to 1212 lows, it will mean that bearish background is taking the lead and 2 leg daily retracement is possible.

Also before taking any long position, it is better to get additionally "222" Buy for example.
gold_4h_05_11_18.png


As soon as OP target has been hit, market turns to sideways retracement. Now it is forming a kind of diamond pattern (although I try to avoid this formation as it oftener fails than works). Here we have minor ab-cd pattern and its xop stands around K-support area.
The first area where retracement might be over is 1226-1227 Agreement and K-support level.
But, as usual, if drop will be very fast - don't take any long position.
gold_1h_05_11_18.png


Conclusion:
As on Forex market, Gold technically looks nice and keeps bullish sentiment. But, fundamental background could bring unwelcome adjustments. And the point where we could find out this will be 1226 area. Market either will confirm our reverse H&S pattern and re-establish upside action, or, two leg downside action will start.



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.
 
Greetings everybody,

Gold market mostly has the same tricky situation as EUR. Good technical picture but bad fundamental and sentiment background which we've mentioned in our weekly report. Now the major question - whether gold will be strong enough to overcome it, or its pressure (I mean negative signs) will be stronger and Gold will show 2-leg downside retracement on daily chart.
The key to solution is price behavior around major intraday supports. If recent just up from 1211 K-support area is really upside countinuation, gold should hold above major intraday Fib levels:
gold_d_06_11_18.png


On 4H chart we're watching for a kind of reverse H&S price action, but not quite H&S by letter. Mostly we're interested in harmony. Both retracement to the left correspond to Fib levels and market should keep this simmetry to proceed higher. So, it needs to re-start upside action from one of these levels. Otherwise, 1211 lows will be broken and drop below 5/8 major Fib support will be the sign of short-term reversal:
gold_4h_06_11_18.png


On 1H chart market respects our 1st entry area of 1226 K-support and Agreement + WPP. Bounce up has happened. Now, if you have taken long position here - move stops to breakeven. If you didn't, do nothing and wait. It would be better to get either upside channel breakout and then take position on retracement, or wait for next 1221 major support, where another opportunity to go long could appear.
If market will break 1221 - don't be long.
gold_1h_06_11_18.png
 
Greetings everybody,

So, market still struggles with resistance. First attempt to break it yesterday was unsuccessful. Negative background that we've mentioned in weekly report makes impact on the market, brings volatility and makes it difficult for gold to proceed higher.
Today-tomorrow we will get another bulk of external factors - elections results and Fed meeting.
gold_d_07_11_18.png


On 4H chart we continue to keep an eye on simetrical price action. Once market has bounced up from 3/8 level it was not able to break the "roof" and dropped lower. Now all eyes on 5/8 Fib support, whether market will be able to complete this. If gold will break major 5/8 Fib level here and start action back to the lows, this could be the sign of deeper action on daily chart and here we could get a kind of Double Top pattern:
gold_4h_07_11_18.png


On hourly chart recent drop was fast and now price has completed OP target of larger AB-CD. Upside action that we have mostly looks like retracement after the drop. Next, XOP target stands around 1220 support area, slightly below it.
As you can see, despite inability of the market to start stable upside action, it reacts well on strong support areas. So, if you still try to take long position - better to do it around strong support areas with AB-CD target on the back, as we did it yesterday around K-support and WPP. Although it has been broken later but upside bounce initially was pretty nice. This let you to move stops to breakeven.
We still think that overall context is not very good for trading on gold market at all. Still, next suitable area for short-term long setup should be around XOP target. Here again, gold could show good respect of this area at first touch. Speaking on shorts - it is too early for them by far, as we need to get breakout of all major support areas first.
gold_1h_07_11_18.png
 
Morning guys,

So, gold still can't get started upside action and stands in the range of daily upside candle from 1211 K-support. Gold has lost a lot of support on massive close of bullish positions last week. If EUR was able to complete our AB=CD target, but gold even has not started this action. And as longer it drops, as less chances on upside rebound.
gold_d_08_11_18.png


Here is our "simmetry roof" again. 3/8 support has been broken and gold has failed twice to break the roof resistance. Now, the last area where it is possible - 1221 major 5/8 support. If no upside action will start we could get either downside AB=CD pattern on daily chart, or, ultimately Double top that could push gold back to 1180 area:
gold_4h_08_11_18.png


It means that if you still want to go long, market is coming to the last area where this could be done, because it provides some support at least. Here on 1H chart - 1221 major Fib support is also an Agreement with OP target. Breaking of this area will open road to the lows and chances on upside reversal will drop significantly.
At the same time, as gold sentiment background stands weak - move stops to breakeven as soon as possible. Today Fed rate decision and comments could change situation on the markets drastically:
gold_1h_08_11_18.png
 
Greetings everybody,

Widely expected Fed decision and negative fundamental background in the beginning of the week have pushed gold prices down and confirmed our doubts on bullish perspective of a gold market this week.

As a result chances on further drop have increased and now we could start talking on 2-leg downside retracement with 1205 target:
gold_d_09_11_18.png


Here you can see this major AB-CD pattern. As all upside attempts were unsuccessful, market was moving lower and lower until it has hit COP target of this pattern. All major support levels have been broken:
gold_4h_09_11_18.png


On 1H chart market has shown some volatility around 1221 major support and confirmed again our always recommendations - try to take position around strong areas. Once you'll be wrong on major direction, technical respect of this area in most cases will let you move stop to breakeven.
Now market also stands at WPS1. As OP target has been passed already, next one is XOP around 1213 area. Although some retracement could happen today, as reaction on COP target and WPS1, downside action probably will continue, because overall background remains dollar-supportive. To change context bullish again, market has to break 1235 tops.
gold_1h_09_11_18.png
 
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