GOLD PRO WEEKLY, April 11-15, 2016

[Sive Morten]

Fundamentals
(Reuters) Gold weakened on Friday as strength in equities prompted investors to cash in some of the previous day's gains, remaining on track for its biggest weekly rise in five weeks as the Federal Reserve remained cautious on U.S. interest rate increases.

Global stock markets rebounded but still were set to end a bruising and volatile week lower, fed by growing uncertainty surrounding the U.S. economic and policy outlook.

The metal has been hemmed into a narrow range by uncertainty about the path the U.S. central bank will take to raising interest rates.

"Gold prices rallied because the market anticipated a change in the Fed's rate hike outlook," said Stefan Wieler, vice president of GoldMoney in Vancouver. "Now the Fed says two hikes, the market thinks zero, and gold prices hover somewhere around $1,200-$1,250 until this question gets answered."

Fed Chair Janet Yellen, in a conversation with former Fed chairmen on Thursday, said the U.S. economy is still on track to warrant further rate rises. But U.S. interest rate futures still indicate a less than 20 percent chance of a rate increase in June.

Higher rates would weigh on gold by lifting the opportunity cost of holding non-yielding bullion. Waning expectations for further rate increases this year helped gold to its best quarter in nearly 30 years in the three months to March.

"Janet Yellen said (the Fed) will be moderate in making hikes in the future, so the markets no longer anticipate the four interest rate hikes they did at the end of 2015," LBBW analyst Thorsten Proettel said.

Proettel said he remains bearish on prices, saying that positioning on the futures markets looks overstretched, while inflows into gold-backed exchange-traded products are drying up.

Data from the world's largest gold-backed exchange-traded fund - New York-listed SPDR Gold Shares - showed its holdings are little changed this week after posting the year's first weekly outflow last week.

Demand for physical gold from Asia also has been muted of late, analysts said.

CFTC data shows moderate bullish information. As price goes down slowly, open interest also slightly has decreased but net long position has increased. It means that some shorts were closed, while new open longs are still smaller than shorts that were closed. Still, this dynamic points on bullish direction of CFTC data changes.

Technicals
Monthly
Last week gold has shown quiet action since it stands in retracement and it mostly has made no impact on monthly chart. Trend is bullish on monthly chart. As market already has moved above YPP, next target based on pivot framework is YPR1 around 1315 area.

Since New Year gold stands in upside action. Reasons could be different - geopolitics, investors' assets distribution in the beginning of the year. Upside action currently has not changed situation drastically yet on but we will monitor how situation will change.

We still think that currently gold should be mostly driven by geopolitics, rather than economics. This driving factor creates absolutely new scale of uncertainty and leads to very fast changes on Globe political situation. That's why we suspect that gold market hardly will fall dramatically, since we're just in the beginning of different geopolitical tensions.

Not just Middle East stands in our focus. We see that fumes of this conflict spread over planet. Recall Paris terrorist attack, Brussels, refugees tensions in EU, Brexit voting, a lot of contradiction inside EU as political as economical - North Stream-2, mutual sanctions, Ukraine membership voting in Netherlands, Montenegro NATO membership, right now Armenia and Azerbaijan conflict and a lot of others. China's financial sphere is isolated theme for discussion. All these stuff is happening on a background of reducing population wealth and solvency and currency wars between major economies. Recent Fed shift just proves this conclusion. So, we see that entropy is growing. Currently we could just gamble what game stands under curtain of political meetings among major leaders.

As market gradually starts to come to the same conclusion as gradually situation on gold market starts to change in positive area. International banks purchase gold in big volumes, mostly PBoC and Russian Central Bank. Besides, as now we see clear signs of currency war - gold will get support here either. Germany stands on a way of own gold repatriation from US and UK, as we've mentioned above. Soon probably will follow other countries, say, Netherlands, France and others.

Speaking on breakeven points between bullish and bearish sentiment - market should show significant upside action and form bullish reversal swing to destroy current bearish domination. It means that gold has to exceed 1380 area.

At the same time gold needs to move above 1308 to break current bearish trend by forming upside reversal swing.

So, on long-term charts it could happen, that we will not get yet clear tendency and gold could turn to some wide range action. Because right now it is too many sources that could initiate impact on gold market. They will push market in one and other sides. Geopolitical situation in the World has reached very high degree of uncertainty and we believe that sooner rather than later it will become a dominating factor for gold market and already it's becoming.

Anyway, gold's shift from downward action to flat one, even it will be wide - already will be significant moment.
Monthly chart trend has turned bullish.

As you can see upside action has started right after butterfly "Buy" has been completed. Currently market has reached 5/8 resistance of butterfly 's swing. Gold has exceeded Yearly Pivot and this tells on existing bullish trend on monthly chart. As gold is not at overbought here - next logical destination is 1314 area of Yearly PR1.

In general, guys, coming area of 1315-1330 will become a real test of bullish strength. Monthly overbought, YPP and Fib level... hardly market will pass it easily and without solid reactions. May we will even get here extended H&S reversal pattern...

Weekly
So within past week we have appealed to weekly levels many times, finally major resistance has been hit. We not occasionally have said that the ceil now is 1285 area - Fib level and overbought on weekly chart. Currently gold market totally matches our expectations - retracement down has started precisely from predefined level.

Gold has formed something like bearish Stretch pattern on weekly chart, but mostly it is completed already since market has reached the middle between OB and OS bands. Reversal was prepared by forming butterfly "Sell" on daily time frame.

We suggest minimum weekly destination point is 1180-1200 area. As you can see it includes trend line support, Yearly Pivot and major 3/8 support level. MPS1 also stands close. Although at first glance it seems that 1180 area is too deep, in fact this is just 30% retracement. Trend holds bullish on weekly chart.

That's being said re-testing of long-term broken trend line is very typical for gold market. Besides this will be test for bullishness. Real bullish market should hold as above broken line as above MPS1, despite existed YPP and Fib level.

Currently guys, we still have one question here - whether recent upward action is continuation of upside trend, or just temporal bounce, and we will see some kind of AB=CD action to 1193 level still. Unfortunately we haven't got bullish grabber here that could clarify this.

Question appears mostly because upside reversal has happened unexpectedly. Here, as you can see, gold has not reached our major level where this should happen. I mean 1193, MPS1 and trendline. Reversal has happened earlier. That's why chances that gold still will reach this support exist. Absolute clarity we will get only around 1260 area probably, when market either will turn down again or continue upward action.

Daily

On daily chart situation barely has changed. Actually, Friday was an inside session. On Thu market has formed bearish grabber that theoretically suggests return back down below lows, but I'm afraid that grabber has more chances to fail rather than to work.

At first glance on daily chart picture has not changed - the same shape of possible H&S pattern. But major problem with early upward reversal. Neckline stands steep and right slope of the head has not been finished correctly. On 4-hour chart 3-Drive has not been completed, although it's completion should happen and could be logical finish of the head. But suddenly gold has turned north.

It means that current upward action is not simple and logical development of H&S, but in reality it could happen so, that current upward action does not belong to H&S pattern already. And although we do not see it clearly yet, but it might happen that H&S already has failed...So, we still keep it's shape here, but at the same time our major level to watch is the top of right shoulder. Current action significantly increase chances that shoulder will fail and market will continue move higher.

4-hour
So, this chart we already saw previously, it shows how gold has betrayed 3-Drive and turned up earlier. Although theoretically as 3-Drive as butterfly are still valid, but this mostly theoretically only. Large part of work to their failure already has been done - market has broken trend line and stands few cents below invalidation point.

And take a look - on Friday we've got bullish grabber that suggests action above invalidation point. It means that as soon as this will happen - next target will be 1260 area.

1-hour
On hourly chart market stands in upside channel, here we could see clear signs of thrust. On a way up market already has completed AB-CD 1.618 ultimate target, but after retracement down market returned back to upside action, although bearish market should reverse down and drop further. It makes us think that we could get some kind of butterfly pattern that could trigger upside breakout.

On a way down market should not show too deep retracement - move to WPP and 1233 Fib level will be OK. But to keep upside perspectives gold should hold inside the channel.

Conclusion:
We think that fundamentally gold stands somewhere near bottom and situation is starting to change. But this bottom could be "extended" in time.

In short-term perspective gold shows signs of unexpected preterm upward reversal. Now we need to get final confirmation of our suspicions. Probably it should happen around 1260 area.

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,

(Reuters) Gold jumped to a three-week peak on Tuesday on expectations the Federal Reserve would not raise U.S. interest rates soon and as the dollar traded close to its lowest in nearly eight months, though profit-taking chipped away at some recent gains.

The U.S. currency has been on the back foot since Fed Chair Janet Yellen last month doused expectations for hikes in U.S. interest rates anytime soon, making dollar-priced commodities cheaper. Lower rates underpin demand for non-interest-yielding bullion, while hurting the dollar.

"While policy uncertainty is supportive of gold, it is the currency markets that we look to, to wield the biggest influence on bullion," HSBC said in a note. The dollar remained on the defensive on Tuesday after slumping overnight to its lowest since August against a basket of major currencies and a 17-month low against the Japanese yen.

The dollar index has shed nearly 3 percent after recent dovish comments by Yellen. Scaled-back expectations for further monetary tightening this year helped gold to its best quarter in nearly 30 years in the three months to March, after the U.S. central bank raised rates in December for the first time in nearly a decade.

Gold has also been buoyed by some safe-haven demand. Weak economic data and uncertainty over U.S. monetary policy has contributed to risk aversion, boosting investor appetite for bullion and other assets perceived as safer stores of value, including the Japanese yen.

In the near term, gold's rally could be capped following recent sharp gains. "We expect profit-taking in gold at these levels with $1,250 to be supported," said MKS Group trader Jason Cerisola. Some selling was seen in other precious metals as well on Tuesday.

So, it seems our doubts were correct, concenring interruption of 3-Drive "Buy" pattern and gold has jumped right to our major "clarification" level at 1260. Here is should be the top of right shoulder. If market will turn down here - then H&S will be still possible and we still could see market around 1180-1190 area. But as we've told many times already - breaking the normal development of 3-Drive pattern is a hidden sign that there could be some problems with H&S... Grabber has failed, by the way, as we've suggested. Trend has turned bullish and don't forget about huge bullish dynamic pressure on daily chart. Thus, it probably will be no profit taking around 1250;

On 4-hour chart - price climbed above WPR1 and MPP. It means that current action is not just upside retracement, this is bull trend continuation. Major 5/8 resistance has been broken. Here we could recognize potential Double Bottom pattern with 1280 target - right near former top and MPR1:

On hourly chart market is approaching to 1.618 AB-CD target @ 1260. Thus, some downward retracement is possible and particular this retracement will answer on our question - whether we will get H&S on daily or not.
Thus, if gold will drop below 1240 area - then H&S will survive. If not - it will mean upside action to 1280 or even higher. 1240 is not just K-support, MPP. This is also neckline of double bottom. Drop below it will erase DB pattern:

 

[Zilvinas]

Hi Sive,

what do you think about possibility of D1 Gartley sell? If I look at W1 and D1 charts closely, I see that D1 Gartley sell target expansion 100 coincides with fibo W1 38.1, MPS1 and ABCD W1 target 100 is nearby (which should be for retracement after such high bullish reversal on W1 chart) and natural W1 support.

 

[Sive Morten]

Hi Sive,

what do you think about possibility of D1 Gartley sell? If I look at W1 and D1 charts closely, I see that D1 Gartley sell target expansion 100 coincides with fibo W1 38.1, MPS1 and ABCD W1 target 100 is nearby (which should be for retracement after such high bullish reversal on W1 chart) and natural W1 support.

Well, it is possible, but again - this setup stands in relation to 1260 level. How you will call it - Gartley Sell, or H&S, it doesn't matter. Anyway market will have to turn down from 1260 to keep them valid...

 

[Sive Morten]

Good morning,

(Reuters) Gold was flat after rising to three-week highs on Tuesday as the dollar nudged up from a near 8-month low against a basket of currencies, with the rally in oil helping to improve risk appetite, while silver rose to a 5-1/2-month high.

"The market may be thinking that inflation's going up so metals are going up," said Dan Pavilonis, senior market strategist for RJO Futures in Chicago.

"Then you see markets like silver and copper technically looking like they're going to break out. That entices traders to come in and start buying it."

Brent crude oil prices hit a four-month high and energy equities rose.

The bullion prices are being driven by the poor performance of the dollar and of stock markets, Afshin Nabavi, head of trading at MKS in Switzerland, said, with silver driving the market.

"If silver continues, gold should break above $1,265 and eventually move towards $1,300," he said.

The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, hit its lowest in two months as silver outperformed gold. An ounce of gold now buys 77.7 ounces of silver, compared with 83.3 ounces in late February.

Speculation that interest rates will stay low also helped gold and silver in their own right. Rising rates lift the opportunity cost of holding non-yielding assets such as bullion.

"Negative yields in my opinion remain the key reason for buying gold, and silver. That story will not go away," Saxo Bank's head of commodities research Ole Hansen said.

"(Gold) found the expected resistance at $1,255 and it was only when silver took off that it managed to get through. Silver ETF holdings have risen strongly this past month while gold has been almost flat. That could indicate some switch in focus to silver, and the move yesterday highlighted that."

Right now market shows absolutely logical behavior, as we've suggested recently. By reaching 1260 area it keeps the harmony of potential H&S pattern:

Right now we turn to second stage of our plan. Since market could form double bottom pattern as background of possible upside breakout, now we're mostly intereted in whether price will stay above its neckline @1240 area:

If market is really bullish it should not drop below it. Hourly chart shows that current retracement down is logical - market has reached 1.618 AB-CD target. But 1240 is MPP, K-support and Agreement. The strength of this level is sufficient to support really bullish market. That's why this level is so important in short term.

If gold will drop below it - this could lead to confirmation of daily H&S pattern and following deeper retracement to 1180-1190 area. While holding above 1240 - should lead to upside continuation.

 

[Sive Morten]

Good morning,

(Reuters) Gold dropped 1 percent on Thursday, extending losses into a third session as the U.S. dollar strengthened and Asian stocks gained on hopes that global central banks would ease monetary policies to support softening economies.

Asian shares rose to their highest levels in more than four months and regional currencies weakened against the greenback after Singapore's central bank surprised markets by setting the rate of appreciation of the Singapore dollar policy band at zero percent.

"Gold is weakening on a recovery in investor risk appetite. The sharp (equities) rally and the levelling off of gold-ETF demand recently argue for some period of price consolidation," HSBC analyst James Steel said.
"It is possible this consolidation turns into liquidation, but we think any continued sell-off, though likely, should be modest."

Bullion-backed exchange-traded funds have seen outflows in recent days following sharp inflows earlier in the year. Assets of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 5.05 tonnes to 810.09 tonnes on Wednesday, its lowest in a month. Traders said charts looked weak for gold, with sharp selling seen as prices fell through 50-day moving average near $1,230. Uncertainty over U.S. monetary policy also weighed.

Gold has rallied 16 percent this year on waning expectations of aggressive U.S. interest rate hikes. But Richmond Fed President Jeffrey Lacker, San Francisco Fed President John Williams and Philadelphia Fed President Patrick Harker all suggested this week that several hikes were possible this year, cutting into gold's recent gains.

In an interview published on Wednesday, Fed Chair Janet Yellen said she still favours a cautious approach to monetary policy because the U.S. central bank must try to avoid making "big mistakes."

Data overnight showed U.S. retail sales fell in March as households cut back on purchases of automobiles and other items, further evidence that economic growth stumbled in the first quarter and reinforcing Fed caution on rate hikes.

On gold market we continue to montior potential H&S pattern. Currently gold keeps harmony well and has turned down precisely around 1260 - top of left shoulder. Although previously we've said that harmony could be broken, but right now we do not have any signs of this yet. It means that we could return back to discussion of long position only in 2 cases. First - if price will break above 1260 again. Second - somewhere when H&S will be completed - around 1180 or 1130 wherever this will happen.

Yesterday as gold has dropped below our key 1240 level - double bottom has been cancelled. Currently market has reached 1230 Fib support and oversold on 4-hour chart, that's why it show reasonable bounce up:

That's being said - conclusion here is very simple. We will take long either after 1260 upside breakout or H&S completion. About short trading you should decide by yourself...

 

[Sive Morten]

Good morning

(Reuters) Gold nursed losses on Friday after posting three days of declines and was heading for its
first weekly drop in three as strength in the dollar and global equities curbed appetite for the safe-haven metal.

Stocks across the globe rose to their highest levels since late December on Thursday and the U.S. dollar gained for a third day running as investors embraced risk.

* Markets are awaiting Chinese GDP data due later on Friday and Sunday's meeting of top oil producers in Doha for near-term cues.

* Bullion-backed exchange-traded funds have seen outflows in recent days, weighing on gold prices.
* Assets in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell to 806.82 tonnes on Thursday, the lowest in a month.

* Gold has steadied after its biggest quarterly rise in nearly 30 years in the three months to March, driven by a retreat in expectations that the U.S. Federal Reserve will push ahead with several rate hikes this year.

* Atlanta Fed President Dennis Lockhart on Thursday made it clear he would not support a rate hike this month and set a high bar for supporting any move even at the Federal Reserve's June meeting.

* The Fed will raise interest rates twice this year, most likely in June, but the probability has faded on signs of a weak start to the year, inflation that is still tame and a brittle global backdrop, a Reuters poll showed.

* Deutsche Bank AG agreed to settle U.S. lawsuits accusing it of conspiring with other banks to manipulate gold and silver prices at investors' expense, court papers show.

Right now gold behaves very logical, according to our expectation. Gradual action to neckline is continuing. Today we will get some data from China and US, thus, gold has chances to reach 1215 neckline today. Hardly any deeper action will follow, since this will be also Fib level and daily oversold.
If H&S pattern will start to work, then it will have 2 major targets. First one is AB=CD @1190 second 1.618 AB-CD ~1140. Do not treat moving to 1140 as a tragedy. This will be absolutely natural and reasonable retracement on gold market by 2 reasons. First is - 1000-1280 swing is first rally after long-term bear action. To fade bearish momentum market needs deep retracement. Second - deep retracements are natural for gold:

On 4-hour chart is also nothing special. Market stands on a way down. As we've suggested gold yesterday just re-tested 1240 and dropped lower. Now it is coiling around 1225 Fib support. So, may be today it will pass 10 $ more and finally reach the neckline: