GOLD PRO WEEKLY, 21-25 September, 2015

[Sive Morten]

Fundamentals

Reuters reports - Gold rose to a near three-week high on Friday as the Federal Reserve's decision to leave U.S. interest rates unchanged rattled investors' outlook on the global economy and weighed on equity markets in developed economies.

The Fed kept interest rates unchanged on Thursday in a bow to worries about the global economy, financial market volatility and sluggish inflation at home. It left open the possibility of modest rate rises later this year.

"More supportive is the perception that the Fed seems to have lost a little confidence itself in the rate hike cycle," said Macquarie analyst Matthew Turner. "But we still think there will be a hike in December and therefore rallies are going to be capped."

A majority of Wall Street's top banks now expect the Fed to begin increasing rates in December, according to a Reuters poll conducted on Thursday after the Fed's policy decision.

"The later the Fed starts hiking, the more the weakness in gold prices will be shifted towards next year," said Georgette Boele, an ABN Amro analyst. "We are negative about gold mainly because we expect lower demand from investors."

The Fed also forecast that inflation would creep only slowly toward its 2 percent target, which could be seen as a negative for gold, often bought as an inflation hedge.

The dollar slumped to a three-week low against a basket of major currencies before later turning higher, while bonds rose, pushing yields sharply lower.

"The Fed's hesitancy may yet reinforce investors' worries about the health of the global economy, rather than reassure them, leaving gold as one of the few lasting beneficiaries," Capital Economics said in a note.

On the physical side, gold discounts in India, the world's second-biggest consumer, widened this week as dealers struggled to offload stocks amid sluggish demand.

Chinese premiums held steady at $5-$6 despite the overnight jump in prices.

The longer-term outlook for the metal remains bearish, Julius Baer analyst Carsten Menke said in a note, due to its dependence on gold's movements and investment demand.

Currently, guys, mostly it is interesting real interest of investors to recent rally. Was it supported by real purchases or not. Here we should keep an eye on COT report as on current week as on next one, because currently COT report does not show positions after Fed decision.
Currently situation is not very supportive for gold. Open interest mostly stands the same, but speculative positions show bearish action - longs have been contracted while shorts were increased. The same dynamic stands with money managers positions. Also, guys, shorts right now stands at highest level within almost 2 decades since 2000 and around 140K contracts. They almost equal to speculative long position. It means that shorts are not at crucial level and have potential to grow more.
Open interest:

Speculative shorts:

Speculative Longs

That's being said, COT report puts under question the reliability of current upside action. As we have seen many times during the year - every time, when rally has no support from CFTC numbers - it is doomed.

SDPR Fund inflow mostly stands flat within last 3 weeks. It even has lost 3 tonnes since 20's of August. Recent rally absolutely was not supported by new inflows and storage are stand with no changes around 678 tonnes.

Technicals

As we've said last week - it is difficult to make any far going conclusions yet and mostly right now started upside action looks like tactical bounce from strong support area. To get another status market should show significant upside action and form bullish reversal swing.

Also changes barely have touched monthly time frame, currently trend is turning bullish but September month is not closed yet and it stands as inside candle. We've got very important detail here - the close of August candle. As a result, we've got bearish grabber on monthly chart that suggests moving below 1080 area. This is the answer on our questions - how far upside action could climb. In general market has reached not bad upside targets on lower time frames, completed daily DRPO "Buy" and in general this is enough to treat retracement as completed and sufficient.

When market has started explosive upside action two weeks ago, I was a bit confused, since we have very important targets around 1050 and I couldn't believe that gold just turn up, it would be too unnatural and untypical for gold, or even for any market. And appearing of the grabber explains everything.

We 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.

Last week we've discussed potential bullish engulfing, but we've got grabber instead. This drastically changes perspectives and replace deeper upside action with downward reversal probably.

If somehow gold will drop below 1050. Next destination will be 890-900$ area - major 5/8 Fib support and Agreement !!! with AB=CD pattern down, the same one that points VOB target.

So, currently based on COT data, SPDR data and technical picture we do not have any reasons to change bearish view on gold.

Weekly

Weekly chart in fact shows tricky picture and makes overall situation a bit complex. Trend here is bullish and we have two in a row bullish grabbers. It means that theoretically we can't take short until these grabbers will fail and trend will shift bearish.
The trick stands around grabbers. The point is they assume taking out of 1180 top, i.e. erasing of monthly pattern. So, we have two opposite patterns in different time frames. Some of them should fail probably. Taking in consideration COT numbers - situation should change on weekly chart.
At the same time we have pattern of another sort. This is upward AB-CD. If even we suggest that grabbers here will fail and market will not reach AB=CD target at 1193, gold still could show minor upside continuation to 0.618 target, that stands around 1155 area and probably we will see this.
That's being said we postpone the decision of major question what will happen on big patterns and what final direction will be established. Right now we have bullish context on weekly chart with nearest target around 1155.
BTW, if somehow market will reach just 1155 and turn down - we could get butterfly here...

Daily

Daily chart also shows bullish context. Trend is bullish, no doubts we have nice upward action. Gold has moved above MPR1. Recently we've talked on harmonic swings. Market was not stopped at the point of harmonic destination and continued move higher. Thus, it very often happens that market doubles harmonic swing in direction of breakout it. Hence, following to this theory gold has a destination somewhere around 1155 again, that in general agrees with weekly AB-CD minor target.
At the same time we see that gold has reached 5/8 Fib resistance and daily overbought. Probably, in beginning of the week we will see some pause in upside action and retracement. In fact, here we have DiNapoli bearish "Stretch" pattern. So it gives a lot of opportunities for trading. Careful traders could wait for retracement down when Stretch will work out and use it for taking long position with 1155 target. Scalp traders could try to trade Stretch short, but before taking position - it would be better to get some reversal pattern on lower time frame chart

Hourly

Here guys, we do not have yet prepared patterns yet. Recent swing up is 1.618 of previous one, so one of candidates is H&S pattern. Anyway, if retracement will start we have two major levels to watch. First one is strong conjunction of WPP+MPP+K-support and next one is major 5/8 Fib support+WPS1.
If gold really has power to continue move up, it should reverse up around one of these levels.

Conclusion:
Long term context is still bearish on gold. Based on recent COT data and SPDR fund statistics, recent rally looks really fragile and not quite reliable. Weekly chart shows opposite bullish patterns, and here we have some contradiction that should be resolved soon. Currently it seems that it should be resolved in bears' favor, if nothing will change on next week.
Meantime, in short-term perspective we have bullish context and gold could move higher without breaking major long-term bearish setup. Nearest target is 1155 level. Currently gold provides multiple variants for trading. You could wait for bounce down and use it for long entry, or you could trade this retracement down first, based on daily bearish Stretch pattern. It depends mostly on skills and personality of particular trader.


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,

Recent Reuters news - Gold steadied below a near three-week high on Tuesday, retaining overnight losses as Asian equities and the dollar edged higher and as investors worried over the possibility of a U.S. interest rate hike later this year.

Asian shares rose on Tuesday and the dollar held steady as U.S. markets bounced back and the European Central Bank said it was prepared to ease monetary policy further, denting bullion's appeal as a hedge.

Comments from Federal Reserve officials on Monday signalled that the U.S. central bank could still hike rates later this year, a move that could lower demand for non-interest-paying gold, after standing pat at last week's policy meet.

"We are quite concerned that the Fed's message has come through as relatively muddled this past week given that most governors have expressed a willingness to raise rates by year-end," said INTL FCStone analyst Edward Meir.

The uncertainty in various asset classes as investors move to the sidelines ahead of the Fed's policy meets in October and December could help support gold prices to an extent, he said.

Atlanta Fed President Dennis Lockhart said on Monday last week's decision was largely a "risk management" exercise to be sure recent market volatility would not become a drag on the U.S. economy. He said he still expects the Fed to hike rates later this year.

St. Louis Fed President James Bullard said there is "a powerful case to be made" for beginning to tighten policy and that there is "a chance" the Fed could lift rates at its October meeting.

The market is now waiting to hear from Fed Chair Janet Yellen herself, who is due to speak on Thursday. Yellen is facing growing pressure from her colleagues and global investors to clarify where the Fed is heading and how it is making its decisions.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.53 percent to 674.61 tonnes on Monday, reflective of investor sentiment. That is the first decline in nearly two weeks.

So, currently we see what we've expected - gold stands under pressure on new expectations on rate hike. Upside potential really is limited. As we've estimated rally was not supported by real inflows and SPDR has lost another 4 tonnes on Monday. Let's see what willl happen next.
If you remember our idea here is - gold could move slightly higher to 1155-1160 area to complete some short-term targets but within nearest sessions it probably could show downward retracement since we''ve got bearish Stretch pattern on daily chart and market needs to abandon uncofmortable condtiion of overbought at Fib resistance.

At the same time this retracement should not be too deep. We've estimated 2 major areas to watch for:
K-support accompanied by WPP and MPP, and WPS1+5/8 Fib support. So, daily traders should wait when market will reach these areas and then decide - wether to go long or not, while scalpers could think about trading Stretch. It seems that our suggestion on possible H&S pattern on hourly chart could be correct.
In this case market will create Agreement of AB-CD down with first support area and 1.618 AB-CD with second one. Very cool matching...

 

[Sive Morten]

Good morning,

Recent Reuters comments - Gold rose after two days of losses on Wednesday as equities took a hit from weak Chinese factory data, while platinum slid to a fresh 6-1/2-year low as investors feared a drop in demand from the auto industry.

Platinum fell to $925.30 an ounce, its lowest since January 2009, before recouping losses to trade up 0.3 percent at $936.55 by 0722 GMT.

The metal has been hurt by news of Volkswagen AG's falsification of U.S. vehicle emission tests as investors believed it could affect demand for diesel cars. Platinum is used in diesel catalysts.

"The white metal is still trading within a downward bear channel dating back to mid 2014 and if recent developments in base metals, U.S. dollar and automaker stock turmoil persist there is certainly scope for platinum to test below $900," said MKS Group trader Alex Thorndike.

If regulators uncover widespread violations across the industry and environmentally conscious drivers in Europe switch to gasoline, it could "reshape the picture" for platinum, said Erica Rannestad, senior analyst, precious metals demand at GFMS.

The recent sell-off in platinum has added to a malaise that has weighed on prices for the past year amid concerns about weakening demand from top consumer China and surplus inventory as investors have exited exchange-traded funds.

Bullion had come under pressure earlier in the session as the dollar jumped to its highest in nearly three weeks before giving back some gains on expectations the Federal Reserve would hike U.S. interest rates this year.

But a sell-off in equities due to concerns over the Chinese economy provided support for gold towards the end of the Asian session, traders said.

Asian stocks looked set for their biggest single-day fall in a month on Wednesday after a private survey showed activity in China's factory sector unexpectedly shrank to a 6-1/2-year low in September.

Gold's outlook, however, continues to be clouded by a looming U.S. interest rate hike. The Fed stood pat on interest rates last week but the U.S. central bank has also said it would move to increase rates later this year.

Higher rates would dent demand for non-interest-paying gold, while boosting the dollar. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

Inflows into SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, supported prices on Wednesday. The fund's holdings rose 0.18 percent to 675.80 tonnes on Tuesday, the first inflow in almost a month.

So, Gold stands on retracement that we've discussed yesterday. We do not see crucial shifts by far and market still keeps chance to move slightly higher to 1155-1160 area.

Now our primary task is to estimate possible retracement's depth. Currently gold has reached our first predefined level - K-support and Agreement. Still reaction here is heavy and market shows not really bright signs of upside reversal. Besides, CD leg was really fast. That's why chances are not small that gold will continue to our next one range - Agreement around major 5/8 Fib level and WPS1:

 

[Sive Morten]

Good morning,

Recent Reuters comments - Platinum recovered some lost ground on Thursday on bargain-hunting after a four-day rout prompted by fears that demand from the auto industry, where the metal is used in diesel catalysts, could take a hit following the Volkswagen emissions scandal.

Palladium, the predominant metal used in gasoline catalysts,extended gains to a second session, jumping to its highest since mid-July.

Volkswagen AG , the world's biggest carmaker by sales, admitted to U.S. regulators that it programmed its cars to detect when they were being tested and alter the running of their diesel engines to conceal their true emissions

Platinum is used in diesel catalysts to clean up exhaust emissions.

The driving factor for the metals "is a worry that consumers will swing more in favour of gasoline vehicles, which have palladium heavy autocatalyst loadings with little or no platinum, and away from diesel vehicles, which require heavier platinum loadings in their autocatalysts," said HSBC analyst James Steel.

Gold also climbed for a second straight session, gaining 0.4 percent to $1,134.56, as Asian shares were subdued after a bruising selloff the previous day.

Worries that an eventual tightening in U.S. monetary policy and slower growth in China could knock the global economy have scared investors, prompting some safe-haven bids for gold.

Holdings in SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, rose for a second straight session, providing some support for prices. The fund added 0.60 tonnes on Wednesday, bringing total holdings to 676.40 tonnes.

Investors will be closely monitoring a speech by Federal Reserve Chair Janet Yellen later in the session for clues on when the U.S. central bank will begin to raise rates.

So, some lazy support of upside action is coming, based on SPDR stats. Still, storages are lower than in the beginning of the week, when they were standing at 678 tonnes.

Anyway, we will continue to track technical picture. On daily chart we do not see any big changes and still keep our idea of possible reaching 1155-1160 resistance area. Also, if, say, gold will form butterfly - it's 1.618 extension will stand precisely around 1155:

On hourly chart market still was able to hold above K-support area, although action has hinted on possible deeper retracement down. This is not big deal for us, since anyway we should take action only after upside bounce, depsite from which level it has started. Right now market stands above WPP and MPP and take a look - it has formed upside reversal swing. Downward AB-CD has been erased as "c" point has been taken out. It means that now we see upside continuation. If market is really bullish it should not drop down below 1120 level.
Right now we should wait for small retracement based on most recent swing up. From butterfly point of view - this could become the start of right wing. So, we could try to catch the bottom of this wing.

 

[Sive Morten]

Good morning,

Reuters reports today - gold dropped from its highest in a month on Friday as the dollar rallied on an assurance from Federal Reserve chair Janet Yellen that the U.S. central bank would begin raising rates this year.

Spot gold had fallen 0.5 percent to $1,147.40 an ounce by 0642 GMT, below a one-month high of $1,156.30 reached on Thursday. Bullion, which gained 2 percent in the previous session in its biggest daily jump in eight months, was on track to post its second straight weekly gain.

But the metal came under pressure after Yellen said late on Thursday that she and other Fed policymakers do not expect recent global economic and financial market developments to significantly affect the Fed's policy and that it would hike rates this year.

Higher rates could dent demand for non-interest-paying gold, while boosting the dollar.

"Gold is taking cues from the dollar. Yellen's comments that the Fed will raise rates this year are not very positive for gold," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers Ltd in Hong Kong.

"There is also some profit-taking after the big overnight jump in prices," he said.

The dollar rose against a basket of major currencies after Yellen's remarks, which come after a delay in a long-anticipated rate hike last week

News of inflows into gold-backed funds and purchases by central banks provided some support for gold.

SPDR Gold Trust , the world's top gold-backed exchange-traded fund, saw a third straight day of inflows. The fund's holdings rose 3.87 tonnes to 680.27 tonnes on Thursday.

Russia and Kazakhstan raised their gold holdings for a sixth straight month in August, while Jordan and the United Arab Emirates both bolstered their reserves in July, according to International Monetary Fund data.

So, gold has hit our target @ 1155 area and today probably we will see relatively quiet session. I do not see COT report yet, but it seems (at least based on SPDR) that some money are coming on gold market. COT data will important for us, since we will see reaction on FED meeting. If it is really so - then may be upside rally is not as empty as it was seemed initially.

Market has hit Overbought at our target. Here, guys, we could create multiple suggestions on further upside perspectives. It could be AB-CD, butterfly etc. But all of them have no relation to today's session and mostly we will discuss it on next week.

on 4-hour chart we see retracement started. 1134 seems as strong support, since it is K-area. But for bullish it will be better if market will stuck somewhere around former top - 1140. This will keep intact recent thrusting bar and will be more positive for bullish scenario.
If market will drop to 1120 again, this could lead to appearing of H&S pattern and chances on bearish reversal will increase