GOLD PRO Weekly April 06-10, 2015

[Sive Morten]

Fundamentals

Weekly Gold Tading Report prepared by Sive Morten exclusively for ForexPeaceArmy.com

Gold prices firmed on Friday in holiday-thinned trading, after data showing U.S. employers added the fewest jobs in over a year in March fueled speculation that a U.S. interest rate hike may be delayed.

Non-farm payrolls increased by 126,000 last month, the smallest gain since December 2013, the Labor Department said on Friday. That ended 12 straight months of job gains above 200,000, the longest streak since 1994.

"Investors are dialing back on the rate hike expectations," Naeem Aslam, chief market analyst at Ava Trade, said. "This translates as good news for gold, but bad news for the dollar."

The data has led to speculation that the Federal Reserve may delay its first increase in U.S. interest rates in nearly a decade, which had been expected later this year.

The dollar tumbled as much as 1 percent against the euro after the significantly weaker-than-expected report, while U.S. Treasuries rose, with benchmark 10-year yields hitting nearly two-month lows.

"The payroll figure is a lot weaker than anybody had anticipated," said Jim Kochan, chief fixed income strategist at Wells Fargo Funds Management. "These numbers suggest we won't see the funds rate increase at the June Fed meeting and the onset of policy normalization until later this year."

Gold tends to suffer when rates rise, as that increases the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which the metal is priced.

Gold jumped nearly 2 percent on Wednesday in its sharpest one-day gain in two months, after U.S. private hiring in March missed market forecasts, suggesting Friday's more comprehensive employment report could also underwhelm.

Trading was expected to be lean for most markets, including those in the United States and Europe, shut for the Good Friday holiday.


Recent CFTC data shows solid drop in short positions and corresponding decreasing of open interest, while long positions remain intact and has not shown any increasing. Since this data stands on 31st of March it could mean that investors have decided to close some short positions before NFP release. So, it is a bit early probably to speak on drastical shifts in sentiment. The same conclusion we can make from SPDR data. Although outflow has stopped and storages remain at the same 737 tonnes as it was on previous week – we also do not see inflows.
Based on this information we can make conclusion that investors mostly reduce shorts before NFP rather than have changed their mind and opinion on gold perspectives. This does not let us to think about real reversal but, form the other side, gives us confidence with compound 2-leg upward retracement that we’ve discussed. On Monday when market will open we will see final impact of bad NFP numbers on Gold market, since it was closed on Friday.

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Technicals
Monthly
There is really shy difference in close price from previous week. On long-term horizon we still have last big pattern in progress that is Volatility breakout (VOB). It suggests at least 0.618 AB-CD down. And this target is 1050$. At the same time we need 1130 breakout to start clearly speak on 1050 target.
In the beginning of the year market showed solid upside action. Gold was able to exceed yearly pivot, passed half way to Yearly Pivot resistance 1 but right now has reversed down and closed below YPP. From technical point of view this is bearish sign. This could be very significant moment and next logical destination will be yearly pivot support 1 around 1083$.
Recent US economy data mostly shows solid growth, but labor cost not as stably good as unemployment. Many investors concern about anemic wage growth, although in recent time this indicator shows improving. So, it seems that gold will remain hostage of dollar value and US economical data (mostly inflation) in nearest perspective. Approximately the same was announced by Fed in forecast on inflation and had become a reason of dovish approach to rate hiking. Another concern right now is too strong dollar that becomes a problem per se for economy growth.
Still, if we will take into consideration geopolitical situation and risks that have appeared recently, it could happen that situation will change, especially if situation in Ukraine will escalate and peaceful regulation will fail. Day by day we see worrying geopolitical news.
That’s being said, economical data in general (excluding recent NFP report) supports further gold decreasing but geopolicy could bring significant adjustment. Unfortunately the geopolicy is sphere where we can’t do much. As gold has passed through 1200, our next destination point is previous lows at 1130, but since gold is returning to them again – this is temporal destination and we should prepare for further downward action. Besides, right now we can clear recognized bearish dynamic pressure on monthly chart. Take a look, although trend has turned bullish, but market was unable to show more or less meaningful upside action. Right now we see the tendency of lower highs creation and this significantly increases chances on downward breakout.
At the same time on coming week market probably will work out NFP data and long-term patterns and factors will return back on first stage a bit later.

Weekly
Trend is bearish here. Weekly chart also works “on perspective” since all patterns that we have here mostly are bearish. As we’ve said previously gold was not able to hold above 1200 strong support and moved below not just Fib level, but also MPS1. This tells that previous upside trend has failed. If you will take a look at weekly chart closely you will find a lot of different targets – AB-CD’s, couple of butterflies etc. By the way, most recent action also could turn to butterfly… and all of them have targets below current level.
Our analysis of weekly chart probably will have weak relation to coming week. On coming week market will be busy with reaction on NFP data and this reaction obviously will be up. Right now market stands at natural resistance area of 1200 level, but we can suggest that gold will open with upside gap. From this standpoint it is important to specify the edge level between bullish and bearish trend. Until market will hold below 1313 top – bearish sentiment will be valid, because monthly bearish dynamic pressure will be valid and market will keep chance on forming butterfly. Only if market will move above 1313 top – it will break tendency of lower highs and put under question further downward action.
Hence, despite how strong upside retracement will be – hardly should it exceed 1313 level, if it will be just retracement. Even extended AB=CD target stands below this level. And when market will finish with response on NFP data it should return back to downward tendency.
Our most close target is based on most recent AB-CD pattern. 1130 level is very close and it makes sense to take a look a bit lower. This AB-CD points on 1095-1100 destination point. Downward action could be reestablished as soon as investors will start to restore previously closed short positions…
All other targets stand significantly lower – 1080, 1050 and even 990$.

Daily
Daily chart gives us clear potential AB=CD pattern with three targets. As we’ve said even 1.618 extension stands below 1313. Our primary interest stands for 0.618 extension, since it coincides with MPR1 and daily overbought. This level market probably will reach within 1-2 sessions. After that some downward retracement is possible before challenge of 1250 AB=CD target.

4-hour
Market could reach first target around 1225-1230 by forming of butterfly “Sell” pattern. It is very probable that we will see gap on right wing on Monday.
Also if you will take a look at contracted 4-hour chart you could recognize the shape of H&S pattern. Still, we think that better to deal with AB=CD as we do on daily chart mostly because H&S does not hold harmonic ratios. Shoulders are very small, head stands below 1.618 extension of shoulders. Besides, if even we will treat it as H&S – we will use the same target. That’s why in current circumstances its no need to add more complexity in picture, especially because adding of H&S brings nothing valuable in overall analysis.

Conclusion:
Long-term picture remains bearish and major patterns stand intact. On coming week larger picture probably will be moved on second stage, since investors will be busy with market reaction on NFP release. As soon as investors will start to restore recently closed short positions market will return to bearish action. Hardly single negative numbers of NFP will crucially impact on market’s force balance.
In short-term perspective we expect reaching first of 1225-1230 target level and retracement after that, since market will reach strong resistance cluster.

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 07, April 2015

Good morning,


Reuters reports Gold steadied below a seven-week high on Tuesday as the dollar regained momentum, although uncertainty about the timing of a U.S. interest rate hike kept bullion above $1,200 an ounce.

Friday's bleak U.S. non-farm payrolls data fuelled expectations that the Federal Reserve could delay an anticipated rate increase this year, boosting gold's safe-haven appeal. U.S. jobs posted the slowest growth in more than a year in March.

New York Fed President William Dudley said the timing of the U.S. rate hike, which would be the first in nearly a decade, is unclear and policymakers must watch that the U.S. economy's surprising recent weakness does not signal a more substantial slowdown.

"We haven't changed our expectation of a mid-year rate hike but the weak number we had on Friday certainly eschews the risk towards more of a later rather than an earlier hike," said Victor Thianpiriya, analyst at Australia and New Zealand Bank.

Thianpiriya said he still expects gold to drop to $1,100 by end-June, under pressure from a firmer dollar. A stronger greenback makes dollar-denominated assets such as gold more expensive for holders of other currencies.

"We expect the momentum in the U.S. economy is still there and we will get that tone in (incoming) data and that will be reflected in a stronger U.S. dollar," he said.

Growth in U.S. services sector slowed in March to its lowest level in three months, but the index of new export orders rose to the highest level in more than two years.

Technically, bullion is finding support around $1,210 and a close above $1,225 will suggest a trend higher, said MKS Group trader Sam Laughlin.

But Asian physical demand remains tepid at current levels.

Premium for physical gold at the Shanghai Gold Exchange was less than a dollar an ounce over the global spot benchmark on Tuesday, from around $2-$3 last week as the Chinese return from a long holiday weekend.

"The gold price right now for a Chinese consumer is not cheap, it needs to be cheaper," said ANZ's Thianpiriya.


In general setup here is almost the same as on EUR although gold has reached new highs. Thus no butterflies are possible here.
At the same time gold mostly has completed 0.618 AB-CD target and now turns to logical retracement down trying to fill the gap. Trend stands bullish on daily chart. Gold right now has only two supportive factors - poor US data and geopolitical tensions in Yemen and Ukraine. Any negative surprises could inforce bulls. But right now CFTC data tells that no sentiment shift has happened yet. Speculators just have closed part of bearish positions:

Still, action looks heavy and reaction on NFP not as strong as many analysts expected. So, we do not see any challenge of daily overbought and any impulse thrusting action here. Market hardly has completed 0.618 target and now is dropping lower. It could mean that retracement up is ready to over...

On hourly chart gold has completed DRPO "Sell" and start move down. Right now it is approaching to solid 1206 K-support area that lets it to close the gap. If market is really bullish it should not break this level down. IF still breakout will happen - this significantly will increase perspective of further action to south.

 

[Sive Morten]

Gold Daily Update Wed 08, April 2015

Good morning,


Reuters reports Gold hovered above $1,200 an ounce on Wednesday, trading not far below a seven-week high as expectations grow that the Federal Reserve could delay an anticipated U.S. rate hike this year.

The Fed will release the minutes of its March meeting later in the day and analysts say this would likely affirm policymakers' cautious outlook on the U.S. economy.

At that meeting, Fed officials opened the door for a rate increase as early as June by removing a pledge to be "patient" in normalizing monetary policy. But its cautious economic outlook reflected the Fed's overall dovish bias, sending gold on a seven-day rally in its longest winning run since 2012.

Last week's dismal U.S. nonfarm payrolls suggested the Fed would be in no rush to tighten policy, lifting gold to a seven-week high as investors moved to assets seen as less risky.

"I expect the minutes to confirm that the Fed will remain dovish in the near future, with a cautious outlook along the lines of the U.S. economy is not ready for a rate hike soon," said Howie Lee, investment analyst at Phillip Futures, who sees gold testing $1,250 in the current quarter.

U.S. gold for June delivery was also little changed at $1,209.70 an ounce.

Minneapolis Fed President Narayana Kocherlakota on Tuesday laid out a case for waiting until the second half of 2016 to start raising rates, a day after New York Fed President William Dudley said the timing of an increase was unclear.

Physical demand from No. 2 gold consumer China stayed weak as the premium for physical gold at the Shanghai Gold Exchange held just above par with the global spot benchmark on Wednesday.

"There are more investment venues for the Chinese to look into other than gold. Equities are roaring ahead and they can now buy bond futures. I don't see why people should buy gold at this time," said Lee.

Gold needs to close above the 200-day moving average of around $1,232 "to instil confidence that this latest short-term rally has further impetus", said MKS Group trader James Gardiner, adding that the continued strength in the dollar is hampering bullion's gains.


In general gold as many other assets takes "waiting" position. After initial reaction on poor ADP and NFP reports market needs to think and assess the importance of this issue. May be Fed minutes will clarify something.

So, on daily chart after completion of minor 0.618 AB-CD target gold has turned to some retracement and filled Monday's gap.
As we've said yesterday, actually we've counted on more upside pressure that gold will challenge overbought and resistance. But market just has barely tested minor target and move down. This makes difficult to expect euphoric upside continuation and forces us to get assurance that gold will hold above key supports:

At the same time market has slowed recently its plunge and right now situation shows possible upside continuation. Take a look at hourly chart - market stands at gap and K-support area. Existence of bearish dynamic pressure points on possible new lows before reversal will happen. And reversal itself probably will take a shape of butterfly "Sell:

 

[Sive Morten]

Gold Daily Update Thu 09, April 2015

Good morning,


Reuters reports today Gold retreated for the third session in a row on Thursday after comments from Federal Reserve officials suggested that a rate increase in June remained on the cards despite recent weak data.

Bullion pulled further away from a seven-week high reached on Monday that was spurred by hopes the Fed would delay a rate rise after last week's disappointing U.S. jobs data.

A U.S. interest rate increase, which would be the first in nearly a decade, dims the appeal of non-interest-yielding assets such as gold.

"The near-term outlook for gold looks weak, with the path of least resistance lower," said HSBC analyst James Steel.

New York Fed President William Dudley and Fed Governor Jerome Powell on Wednesday sketched out scenarios in which the central bank could make an initial move earlier than many now expect and then proceed in a slow and gradual manner on further rate increases.

But while minutes of the Fed's March 17-18 meeting showed it concluded with the Fed opening the door to a June rate rise, there was a divergence of views among policymakers, suggesting no consensus on the timing of a move.

But Phillip Futures analyst Howie Lee said gold's decline could be temporary, arguing there was "little chance" the Fed would raise rates at this time, "given how fragile the economy is".

"What this means is that the current decline in gold prices could just be a technical correction; while it may fall to $1,190 today, I would highly expect it to return above $1,200 in the coming weeks," he said.

Gold demand from No. 2 consumer China remained weak with premium on physical gold at the Shanghai Gold Exchange at about a dollar over the global spot benchmark after flipping to a small discount earlier.

While demand from top gold consumer India appeared stronger, HSBC's Steel said that, overall, "physical buying may not be sufficiently powerful to push prices higher near-term."



So, yesterday we've said that although upside action looks fragile and heavy - market was stand at gap support and even was forming butterfly pattern. But Fed comments have broken all these stuff and pushed market in free drop.
Technically market has not destroyed yet chances on upside continuation, since lows around MPP are still valid and current action is not very fast. Also gold is approaching to MACDP line and appearance of grabber could help us much. So, based on daily chart we could make simple conclusion. If you're bearish - wait breakout through MPP. With bullish position it is not as simple.
Recent CFTC data absolutely does not encourage us for going long, mostly because nobody goes long. It makes hopes on upward continuation look phantom, or to wait some "surprise" that could change situation drastically.

On 4-hour chart this chance could materialize through H&S pattern. Although it does not keep harmony, but right shoulder looks better. Appearance of this pattern lets us to estimate invalidation point of current setup - bottom of right shoulder. The same point as on EUR, GBP etc.:

On hourly chart although market has dropped yesterday and broken our short-term setup, but still holds above WPP and 5/8 Fib support. This time frame is not very important right now, since major points stand on 4-hour chart and crucial one is 1175 lows.

Thus conclusion is relatively simple. As we've said, for bears - wait breakout through 1175, while bulls could try to take position as closer to 1175 as possible. Not because we sure with upside continuation, but mostly because it will allow to minimize potential loses. In current situation it does not need to risk much, since bullish signs are weak.

 

[Sive Morten]

Gold Daily Update Fri 10, April 2015

Good morning,


Recent Reuters news tells Gold remained near a one-week trough on Friday and was expected to end a three-week rally, pressured by renewed expectations for a U.S. rate hike this year despite recent soft economic data.

Bullion has surrendered gains inspired by a weak U.S. employment report last week as Federal Reserve officials suggest a U.S. rate hike in June could still be in play, lifting the dollar to three-week highs versus a basket of major currencies.

What is changing rapidly is people's expectations as the actual rate hike timing approaches," said Mark To, head of research at Hong Kong's Wing Fung Financial Group, who believes the Fed is on track to raise rates in June.

Data on Thursday showed the number of Americans filing new claims for jobless benefits rose less than expected last week and the four-week moving average of claims hit its lowest level since 2000, suggesting an abrupt slowdown in job growth in March was likely a fluke.

Investors tend to shun gold, which doesn't pay interest, when market expectations point to U.S. interest rates rising.

"Whether the Fed raises rates in June or decides to wait till September is a moot point in our view since we think that once the first rate hike takes place, the Fed will likely stand aside for a period of time to see what the repercussions of its move will be," INTL FCStone analyst Edward Meir said in a note.

Gold could drop to a five-year low of $1,100 this year, before a recovery in 2016 spurred by Asian demand, GFMS analysts at Thomson Reuters said.

Demand from India and China, the world's top two gold consumers, has been slack so far this year, with Beijing's anti-corruption drive hurting Chinese appetite.

Gold buying in Asia was slow this week as firmer spot prices turned off buyers, especially in China, and a potentially weak monsoon threatened demand in India.

Premiums for physical gold at the Shanghai Gold Exchange stood at a modest $1-$2 an ounce over the global spot benchmark on Friday.

In India, gold demand risks falling for a second straight year as millions of Indian farmers hit by erratic weather and falling commodity prices trim purchases.


On Gold market shows a bit different action compares to FX. Thus, on EUR, GBP we see clear bearish development and potential bearish patterns and targets, while gold stands tight at support level. On daily chart gold has not taken lows that FX did and theoretically keeps chances still on upside action.
Grabber that we've discussed yesterday was not formed yet, but could be on next week:

On 4-hour chart we have to closely watch for opposite bearish pattern. Because this is potential hazard for whole H&S pattern and bullish setup (although as we've said yesterday it has blur chances on success). Anyway, if this grabber will be formed - it could take out lows of right shoulder and simultaneously it could lead to failure of H&S:

On hourly chart we do not see anything really interesting - just reaction on WPP and Fib support that we've discussed yesterday.