Sive Morten
Special Consultant to the FPA
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- 18,695
Fundamentals
(Reuters) - Gold notched a quarterly gain of about 8.4 percent on Friday, marking its best quarter in a year, as uncertainty over U.S. President Donald Trump's tax and investment plans and elections in Europe fueled
demand for bullion as a safe haven.
Gold rebounded from early losses as the dollar turned flat after a Federal Reserve official's seemingly dovish remarks and uninspiring data on the U.S. economy tamped down the sanguine mood from earlier this week.
Spot gold was up 0.4 percent at $1,247.4 an ounce at 3:48 p.m EDT (1948 GMT). U.S. gold futures ended the session 0.2 percent higher at $1247.30 an ounce. Earlier in the session, gold had dropped by the most in over than three weeks. It failed to break resistance at its 200-day moving average, triggering early technical selling.
The dollar index , which tracks the greenback against six rival currencies, was little changed from its late Thursday levels at 100.39. Backed by early-week gains, however, it is headed for its best week since mid-February.
An index of world stocks dipped on Friday as investors locked in profits, also boosting gold. Data showing the largest annual increase in U.S. inflation in nearly five years and comments by the president of the New
York Federal Reserve meanwhile reinforced expectations of U.S. interest rate hikes this year.
A stronger dollar makes bullion more expensive for holders of other currencies, while higher interest rates lead to higher bond yields and dampen demand for non-yielding gold. But gold is underpinned in the coming months by doubts over Trump's ability to enact tax cuts and investment spending and an uncertain political outlook in Europe. "The fear trade has driven the market so far this year," said David Govett at Marex Spectron. The buying as a haven from risk, plus a recovery in Indian buying, are likely to push prices to an average $1,259 an ounce this year, GFMS analysts at Thomson Reuters said in their Gold Survey 2017, published on Friday.
A failure by Trump to make progress on his stimulus plans would reduce the chances of a rise in U.S. interest rates in June, Tom Kendall at ICBC Standard Bank said in a note. "That in turn would likely give gold the impetus to break up through $1,300 again," he said.
COT Report
As on last week, CFTC data shows moderate bullish sentiment - speculative net long position increases 3rd week in a row. Open interest also shows light growth.
SPDR Fund storages also mostly stand flat and show no outflow, keeping overall bullish context by far:
Technicals
Monthly
As gold shows no return back to 1100 lows - it keeps reversal moment of our H&S pattern pretty nice by far. We've talked a lot about large patterns and far perspectives on gold market.
At this moment overall fundamental background looks supportive for gold market. Right now we see few factors that could support upside action in medium-term period.
First one is Fed policy. Fed will not hurry with rate increase and will not stifle US economy by too early agressive policy. They will support inflationary growth for some time and let economy to become hot a bit. Thus, major impact of Fed policy should come in 2018. This will let gold to ride on inflation for some time in 2017.
Second - multiple elections in EU brings a lot of uncertainty and works as supportive factor for gold market. Last 2-3 decades EU was totally depended on US policy and external governing of international policy. EU did the same as US and supports all start-ups that was needed to US, in any point of the Globe, although this was not neccesary to EU countries... Now sitation is changing.
Finally, recent inability of D. Trump to push through Congress rolling back process on Obamacare program also was a negative impact on USD. Now Investors have doubts - whether he will push through tax reforms and stimulus program. Last voting shows that D. Trump will have strong headwind even from his Republican nabours and this leads to appearing a lot of questions on perspectives of Trump's noted programs in tax cutting, fiscal stimulus and supporting of domestic production.
These factors could support gold market in medium-term period. Technical picture and sentiment analysis right now also show bullish signs.
Technically price behavior, short-term sentiment and commodities performance mostly supports idea of bullish reversal pattern here (at least now). At the same time many world top analysts (such as Barnabas Gan) worry about more active Fed policy and think that gold could finish 2017 around 1100$.
Still we have new input here - neutral comments on further rate hike. As Fathom consulting suggests - Fed will lead economy to become hot a bit before aggresive rate policy. This should open door for inflation growth, which is supportive factor for gold. Currently gold could stay on its own till June and this could encourage investors to be more brave in taking long positions.
Concerning farer perspective we could make just some suggestions. As we've said 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. Now this retracement stands in place. It is really big chance that gold stands in a stage of big trend changing from bearish into bullish. US economy shows inflation growing. As we've estimated, commodities across the board have turned to growth.
Besides, any Trump protection policy will be accompanied by big spending and expenses, this will lead to grow of inflationary expectations. Thus, we mostly gravitate to idea that gold now stands not in pause of bear trend, but on the eve of new bull trend. Also we expect big structural shifts in EU economy, diminishing Brussels governing role, taking direction on convergence with Russian economy, and through Russia economical infrastructure - with Middle East and Asia.
This is long political talk though, but shortly speaking, we see that the process of building new EU has started. First bell is Brexit. As you know all mature EU countries has started gold repatriation process that should be finished in 2020. So we should be oriented on this year as appearing of the shape of new EU. By gold repatriation process we could gudge on major idea of new EU - each country will out of external governing either Brussel or US and will make it's own policy according with their own national interests. This is how it should be in theory. How this process will develop on practice - we will see.
But our technical "deep" retracement still could be different. Currently, as market stands at the edge of 1170 Fib support, we could talk on 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...
At this moment we do not have questions and serious doubts on perspective of H&S pattern. Market shows normal behavior for its shape. Also we have nice bullish divergence with MACD that is also typical for reversal patterns. On monthly chart we could specify two relatively close targets. First is YPR1 around 1330, next one is neckline - around 1380 area:
Weekly
Currently weekly chart does not bring something special. Overall picture looks bullish, trend stands also bullish. Bearish engulfing pattern mostly has completed it's target and we see strong upside bounce. Despite that this drop looks solid on daily chart - here this is just minor retracement to 3/8 Fib support.
Now here we have just trend context, it's bullish. But unfortunately gold here doesn't bring any more clarity on perspective. As deep retracement is possible in shape of some AB-CD, for example, as upward action is possible as well. Mostly it will depend on challenging of 1250 resistance. Now gold comes to it for 2nd time:
Daily
Last week price mostly stand in tight consolidation, and situation has not changed significantly. Even new monthly pivots for April stand approximately at the same levels. All our bullish issues that we've discussed in regular daily videos are still here and valid - bullish trend and hidden divergence with MACD.
On Friday we haven't got bullish grabber, but we still could get it on coming week, as MPP stands very close to price action and wasn't touched yet. Next upside target stands around 1282 area and market could formed upside butterfly to reach it:
Hourly
Hourly chart shows that gold has completed our trading plan during last week. As you can see butterfly has been formed, AB=CD was completed and all this happened right around K-support area. As it was rather strong support area market already has shown nice respect of this area by good upside action.
This is the reason why we allways try to take positions around such kind of levels. Because if even gold or any other market by some reasons will turn backward later - current upside action gives us chance to move stop to breakeven. Thus, if you've taken longs there, you could do it on Monday...
Others, who do not have longs yet will have to wait for more confidence. Actually we have bearish grabber on 4-hour time frame chart, that brings some risks. Although I'm not sure that it will work - we need some insurance. Thus, it would be better to wait for upside reversal swing - price action above 1255 area. This will prove market's strength and brings more confidence with upward continuation. If market will fail to form upside reversal swing, then downward retrecement could continue a bit more. Next target stands around 1230.
Conclusion:
In long-term perspective we think that bullish factors overhelm headwind of possible rate hike by Fed. Still this probably will lead to turmoil and excessive volatility, but we hope that this will happen with upside direction. Fed probably will let economy to become hot before they will start aggressive tightening, thus right now gold has some time, when investors could take longs without any fear be trapped by unexpected rate decision.
In shorter-term perspective this leads to appearing of some bullish signs on daily chart that we will check out on coming week.
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.
(Reuters) - Gold notched a quarterly gain of about 8.4 percent on Friday, marking its best quarter in a year, as uncertainty over U.S. President Donald Trump's tax and investment plans and elections in Europe fueled
demand for bullion as a safe haven.
Gold rebounded from early losses as the dollar turned flat after a Federal Reserve official's seemingly dovish remarks and uninspiring data on the U.S. economy tamped down the sanguine mood from earlier this week.
Spot gold was up 0.4 percent at $1,247.4 an ounce at 3:48 p.m EDT (1948 GMT). U.S. gold futures ended the session 0.2 percent higher at $1247.30 an ounce. Earlier in the session, gold had dropped by the most in over than three weeks. It failed to break resistance at its 200-day moving average, triggering early technical selling.
The dollar index , which tracks the greenback against six rival currencies, was little changed from its late Thursday levels at 100.39. Backed by early-week gains, however, it is headed for its best week since mid-February.
An index of world stocks dipped on Friday as investors locked in profits, also boosting gold. Data showing the largest annual increase in U.S. inflation in nearly five years and comments by the president of the New
York Federal Reserve meanwhile reinforced expectations of U.S. interest rate hikes this year.
A stronger dollar makes bullion more expensive for holders of other currencies, while higher interest rates lead to higher bond yields and dampen demand for non-yielding gold. But gold is underpinned in the coming months by doubts over Trump's ability to enact tax cuts and investment spending and an uncertain political outlook in Europe. "The fear trade has driven the market so far this year," said David Govett at Marex Spectron. The buying as a haven from risk, plus a recovery in Indian buying, are likely to push prices to an average $1,259 an ounce this year, GFMS analysts at Thomson Reuters said in their Gold Survey 2017, published on Friday.
A failure by Trump to make progress on his stimulus plans would reduce the chances of a rise in U.S. interest rates in June, Tom Kendall at ICBC Standard Bank said in a note. "That in turn would likely give gold the impetus to break up through $1,300 again," he said.
COT Report
As on last week, CFTC data shows moderate bullish sentiment - speculative net long position increases 3rd week in a row. Open interest also shows light growth.
SPDR Fund storages also mostly stand flat and show no outflow, keeping overall bullish context by far:
Technicals
Monthly
As gold shows no return back to 1100 lows - it keeps reversal moment of our H&S pattern pretty nice by far. We've talked a lot about large patterns and far perspectives on gold market.
At this moment overall fundamental background looks supportive for gold market. Right now we see few factors that could support upside action in medium-term period.
First one is Fed policy. Fed will not hurry with rate increase and will not stifle US economy by too early agressive policy. They will support inflationary growth for some time and let economy to become hot a bit. Thus, major impact of Fed policy should come in 2018. This will let gold to ride on inflation for some time in 2017.
Second - multiple elections in EU brings a lot of uncertainty and works as supportive factor for gold market. Last 2-3 decades EU was totally depended on US policy and external governing of international policy. EU did the same as US and supports all start-ups that was needed to US, in any point of the Globe, although this was not neccesary to EU countries... Now sitation is changing.
Finally, recent inability of D. Trump to push through Congress rolling back process on Obamacare program also was a negative impact on USD. Now Investors have doubts - whether he will push through tax reforms and stimulus program. Last voting shows that D. Trump will have strong headwind even from his Republican nabours and this leads to appearing a lot of questions on perspectives of Trump's noted programs in tax cutting, fiscal stimulus and supporting of domestic production.
These factors could support gold market in medium-term period. Technical picture and sentiment analysis right now also show bullish signs.
Technically price behavior, short-term sentiment and commodities performance mostly supports idea of bullish reversal pattern here (at least now). At the same time many world top analysts (such as Barnabas Gan) worry about more active Fed policy and think that gold could finish 2017 around 1100$.
Still we have new input here - neutral comments on further rate hike. As Fathom consulting suggests - Fed will lead economy to become hot a bit before aggresive rate policy. This should open door for inflation growth, which is supportive factor for gold. Currently gold could stay on its own till June and this could encourage investors to be more brave in taking long positions.
Concerning farer perspective we could make just some suggestions. As we've said 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. Now this retracement stands in place. It is really big chance that gold stands in a stage of big trend changing from bearish into bullish. US economy shows inflation growing. As we've estimated, commodities across the board have turned to growth.
Besides, any Trump protection policy will be accompanied by big spending and expenses, this will lead to grow of inflationary expectations. Thus, we mostly gravitate to idea that gold now stands not in pause of bear trend, but on the eve of new bull trend. Also we expect big structural shifts in EU economy, diminishing Brussels governing role, taking direction on convergence with Russian economy, and through Russia economical infrastructure - with Middle East and Asia.
This is long political talk though, but shortly speaking, we see that the process of building new EU has started. First bell is Brexit. As you know all mature EU countries has started gold repatriation process that should be finished in 2020. So we should be oriented on this year as appearing of the shape of new EU. By gold repatriation process we could gudge on major idea of new EU - each country will out of external governing either Brussel or US and will make it's own policy according with their own national interests. This is how it should be in theory. How this process will develop on practice - we will see.
But our technical "deep" retracement still could be different. Currently, as market stands at the edge of 1170 Fib support, we could talk on 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...
At this moment we do not have questions and serious doubts on perspective of H&S pattern. Market shows normal behavior for its shape. Also we have nice bullish divergence with MACD that is also typical for reversal patterns. On monthly chart we could specify two relatively close targets. First is YPR1 around 1330, next one is neckline - around 1380 area:
Weekly
Currently weekly chart does not bring something special. Overall picture looks bullish, trend stands also bullish. Bearish engulfing pattern mostly has completed it's target and we see strong upside bounce. Despite that this drop looks solid on daily chart - here this is just minor retracement to 3/8 Fib support.
Now here we have just trend context, it's bullish. But unfortunately gold here doesn't bring any more clarity on perspective. As deep retracement is possible in shape of some AB-CD, for example, as upward action is possible as well. Mostly it will depend on challenging of 1250 resistance. Now gold comes to it for 2nd time:
Daily
Last week price mostly stand in tight consolidation, and situation has not changed significantly. Even new monthly pivots for April stand approximately at the same levels. All our bullish issues that we've discussed in regular daily videos are still here and valid - bullish trend and hidden divergence with MACD.
On Friday we haven't got bullish grabber, but we still could get it on coming week, as MPP stands very close to price action and wasn't touched yet. Next upside target stands around 1282 area and market could formed upside butterfly to reach it:
Hourly
Hourly chart shows that gold has completed our trading plan during last week. As you can see butterfly has been formed, AB=CD was completed and all this happened right around K-support area. As it was rather strong support area market already has shown nice respect of this area by good upside action.
This is the reason why we allways try to take positions around such kind of levels. Because if even gold or any other market by some reasons will turn backward later - current upside action gives us chance to move stop to breakeven. Thus, if you've taken longs there, you could do it on Monday...
Others, who do not have longs yet will have to wait for more confidence. Actually we have bearish grabber on 4-hour time frame chart, that brings some risks. Although I'm not sure that it will work - we need some insurance. Thus, it would be better to wait for upside reversal swing - price action above 1255 area. This will prove market's strength and brings more confidence with upward continuation. If market will fail to form upside reversal swing, then downward retrecement could continue a bit more. Next target stands around 1230.
Conclusion:
In long-term perspective we think that bullish factors overhelm headwind of possible rate hike by Fed. Still this probably will lead to turmoil and excessive volatility, but we hope that this will happen with upside direction. Fed probably will let economy to become hot before they will start aggressive tightening, thus right now gold has some time, when investors could take longs without any fear be trapped by unexpected rate decision.
In shorter-term perspective this leads to appearing of some bullish signs on daily chart that we will check out on coming week.
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.