GOLD PRO Weekly April 13-17, 2015

[Sive Morten]

Fundamentals

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

Gold rose on Friday as chart levels were broken, but was still heading for its first weekly fall in four weeks, pressured by a stronger dollar and renewed expectations for a U.S. rate hike this year. Flat initially, it gained momentum after a break of technical resistance at $1,196 that triggered automatic buy orders.

"This move is coming during a week when we didn't really have any gold-positive news but ...the way gold is putting up a fight at the moment is potentially giving some confidence to the market," Saxo Bank senior manager Ole Hansen said.

"But to make headwinds above the resistance area around $1,225 we need to see some real buying coming in."
"The 100-day moving average should serve as some upside resistance," said Matt Bradbard, director at RCM Alternatives, boutique advisory firm in Chicago, referring to spot gold's 100-day moving average at $1,211.69, just above the session high.

Gold on Friday shrugged off the impact of a stronger dollar and world equity markets, which tested record highs.
But the longer-term outlook is still bearish, traders said, and prices had surrendered gains after Federal Reserve officials suggested a June rate hike could still be in play.

Investors tend to shun gold, which does not pay interest, when market expectations point to U.S. interest rates rising.

Gold could drop to a five-year low of $1,100 this year due to the relative health of the U.S. economy compared to Europe and emerging markets, GFMS analysts at Thomson Reuters said.

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


Recent CFTC data shows small increase in net long position, mostly due shy growth of speculative longs and corresponding contraction of shorts. Open interest mostly stands the same. In general this does not change force balance significantly. As shorts have dropped they have not been restored yet, but no money has come to longs as well. SPDR fund shows not very big outflow of 3 tonnes last week. So, storages have dropped to 734 tonnes. The one thing is interesting here that this drop stands on background of gold upside action, especially in recent two days. So, fundamentally we could make the same conclusion that any upside action right now is dangerous journey to join, will be fragile and unstable and could finish at any moment. It does not mean that we can’t take bullish positions, but it will demand more attention and discipline, especially in stop placing.

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Summary:

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.

Weekly
Trend is bearish here. Weekly chart also works “on perspective” since all patterns that we have here mostly are bearish. 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.
On previous week we’ve expected the reaction on poor NFP data but reaction mostly was mild. If even market will continue move up somehow until it 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.
This looks not very possible right now, especially when we’ve got bearish grabber on weekly. That’s the pattern that could trigger downward continuation. At least we could stick with its range for trading. It suggests taking out of former lows and could lead market simultaneously to AB=CD and butterfly destination points. This confirms that return back to 1130 area will be temporal even and just preparation for further drop.
All other targets stand significantly lower – 1080, 1050 and even 990$.

Daily
Since we’re mostly interested in weekly grabber’s swing, daily picture is not very valuable for us, especially because we haven’t got any bullish grabbers. And we didn’t get more confidence of upward continuation. Friday candle looks nice, but still it does not change situation drastically. Since weekly time frame is stronger than daily one, we mostly should rely on weekly pattern, since it also has support from sentiment data. Current move up, we probably should treat as chance to take short position at better place…

1-hour
Here is one of the possible ways, how we could deal with weekly grabber. As you can see upside bounce up from Fib level takes the shape of double bottom. Normally, target of DB pattern is distance from neckline to bottoms, counted up in direction of breakout. It gives us level around 1212. This is also 5/8 Fib resistance and will be slightly above WPP. Invalidation point of weekly grabber stands at 1224 top. If market will exceed it – then this setup will fail and gold really will be able continue move higher. Distance till potential stop order looks not really small, so control your position size.

Conclusion:
Long-term picture remains bearish and major patterns stand intact. CFTC and SDPR data does not show on some drastical shifts in sentiment. Thus, upward action has blur perspective and reliability. As weekly chart has given us bearish grabber, we mostly should prepare for taking short position.

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 reports Gold dropped for a fifth session in six on Tuesday as a firmer dollar eroded modest gains to drag bullion back below $1,200 an ounce, while prices are likely to come under further pressure amid a looming hike in U.S. interest rates.

Recent comments from Federal Reserve officials suggest the U.S. central bank has not ruled out the chance of raising interest rates by June even as some analysts doubt that possibility amid signs of renewed economic weakness.

The strength in the U.S. dollar, which has basked in the growing likelihood that the Fed would raise rates this year, has been a key headwind for bullion.

"The cycle of the strong U.S. dollar has not ended. We are not very bullish about gold's price performance this year," said Jiang Shu, analyst at Industrial Bank in Shanghai.

Citigroup said it has cut its 2015 average gold price estimate to $1,190 from $1,220, citing "fundamental tightness being outweighed by continued U.S. dollar strength and macro investment headwinds".

Gold could fare well in the current quarter if the Fed does decide not to increase rates as early as June, but the metal is still at risk of turning lower when the U.S. central bank moves later in the year, said Jiang, who sees gold moving near $1,100 towards end-2015.

Gold has not dropped too far off a seven-week top above $1,220 hit last week, indicating bulls were ready to push prices up if more signs emerge that a U.S. rate hike would be delayed.

Investors are eyeing U.S. retail sales data for March due out at 1230 GMT which may provide more clues on U.S. economic conditions. Phillip Futures analyst Howie Lee said a soft reading could lift gold to $1,210.

Amid weaker gold prices, Canadian gold miners Alamos Gold Inc and AuRico Gold Inc unveiled a $1.5 billion merger plan on Monday, setting the stage for possible competing offers as miners scout for assets.



So, it seems, guys, that our bet on weekly pattern is starting to work. Gold is dropping further. May be Retail sales today will trigger some retracement, we do not know, but according to weekly grabber - we have big journey ahead, since its target stands at 1130 lows. Now we need to discuss how we could join this party:

On daily chart we see that we've not got any grabbers, trend now is turning bearish, although bearish shift has not been confirmed yet. If we would follow to technical law right to the letter, then true invalidation point for bullish setups stands below 1175 lows that is also MPP. So, as risk of failure of weekly grabber still exists, our major task is to get position as close to invalidation point of grabber as possible. And this point stands at the top - 1224.

So, on hourly chart market right now is forming pattern that could trigger upside bounce. Currently gold is held by WPS1 and AB-CD 0.618 target (not shown on chart). But despite where market could start upside retracement - either from here or will complete butterfly and then will start retracement - think about 1200 K-resistance. It looks suitable for possible short entry. But control the size of your position, since stop should be placed above 1224. Yes, guys, this is weekly pattern and weekly distances for stops and profits...

 

[Sive Morten]

Gold Daily Update Wed 15, April 2015

Good morning,


Reuters reports recently Gold steadied above a two-week low on Wednesday after U.S. retail sales in March missed market expectations, but a firmer dollar hindered any attempt by investors to push bullion higher.

Data showing China's economy grew 7 percent in the first quarter, the slowest in six years, suggested that physical demand from the world's No. 2 consumer would remain tepid this year.

Bullion fell as much as 1.2 percent overnight but pared losses at the close as the dollar retreated after data showing U.S. retail sales rose 0.9 percent in March, just below a market forecast of 1.0 percent. The dollar has since regained some ground.

"The gold market is quite subdued at this time. There's no clear direction. I think we need a clearer catalyst down the road and that will come in the form of the FOMC meeting in two weeks' time," said Howie Lee, an analyst at Phillip Futures.

The Federal Open Market Committee (FOMC) meets on April 28-29, with recent signals from policymakers suggesting the U.S. central bank could still raise interest rates in June despite recent weak economic data.

That has pulled gold back from a recent seven-week high of $1,224.10 an ounce, as a potential rate rise limits the appeal of non-interest-yielding assets.

However, Minneapolis Fed President Narayana Kocherlakota said raising rates this year, as most Federal Reserve officials expect, would be "inappropriate" because it would delay the return of too-low inflation to the Fed's 2 percent goal.

Gold "continues to struggle for any upside ascendancy with a number of critical technical levels capping the market", MKS Group trader Jason Cerisola said, citing the $1,200 psychological level and $1,229, its 200-day moving average.

Premiums for physical gold on the Shanghai Gold Exchange picked up to $3-$4 an ounce over spot from just above a dollar earlier this week, although analysts say a slowing economy could cap Chinese demand.

"Coming from a low base in 2014, China's demand for gold should still grow this year. But given structural reforms and all this belt-tightening because of the perceived slowdown, I don't think there'll be much demand for gold for jewellery or for investment," said Lee.



So, there is no big shifts in sentiment picture. On the daily chart technical picture also has not changed much. Trend has turned bearish, although market has bounced up from MPP and has not taken lows yet around it. This has happened mostly due US Retail Sales data.
As we've said yesterday - theoretically market still keeps chances on change situation drastically until 1177 lows hold, but we continue to use weekly bearish grabber as dominant pattern for short-term perspective and expect that gold will drop lower. That's why our major task now is to get nice chance for short entry:

On 4-hour chart market has completed our butterfly and even has shown minor bounce up, but right now we see that Gold is returning back to downward action. Probably next more or less acceptable retracement could happen from an area of 1177 lows. Here we will get AB=CD, butterfly 1.618 and Fib support:

 

[Sive Morten]

Gold Daily Update Thu 16, April 2015

Good morning,


Reuters reports Gold extended gains above $1,200 an ounce on Thursday, rising for a second straight session on a softer dollar and weak U.S. industrial production data.

The dollar dropped to a one-week low on Thursday due to the weak U.S. economic data, though it recovered from the early lows.

The dollar weakness "provided a lift for gold as it moved over the technical 50-day moving average of $1,198 and psychological $1,200 level," said HSBC analyst James Steel.

However, Steel and others said prices could face a tough time moving much higher from the $1,200 level, leaving gold to consolidate in the near term.

"The level of $1,200 continues to prove to be an extremely stubborn support and resistance, and in the short term we can expect gold prices to continue hovering about (this) level," said Howie Lee, an analyst at Phillip Futures.

For the moment, gold was also getting support from data that showed U.S. industrial output posted its biggest drop in more than 2-1/2 years in March in part as oil and gas well drilling plummeted.

The dour report was the latest sign that growth slowed sharply in the first quarter and suggested the U.S. central bank could delay raising interest rates until later this year.

Any delay in an expected hike in U.S. rates could boost demand for bullion, a non-interest-paying asset.

Traders will be watching data to be released on Thursday and a Federal Reserve policy meeting later this month for clues on when the U.S. central bank would begin to hike rates.

Analysts have made big cuts to expectations for gold and silver prices this year and the next after the metals, weighed down by the prospect of higher U.S. interest rates, failed to recover last year's losses in early 2015.

A poll conducted by Reuters over the last month returned a median forecast of $1,209 for gold this year, down from $1,234 in a similar poll conducted in January.



So US data release has brought some adjustment to price behavior that we've expected to get. Gold has moved a bit higher. As a result on first glance we have contradictive patterns on daily - bullish dynamic pressure and possible bearish grabber. Still I would not be hurry to treat it as dynamic pressure:

On 4-hour chart we see that market has not completed AB=CD and turned up. At the same time it finally has reached 1208 Fib resistance. Our weekend conclusion tells that we need to use any upward action to take better place for short entry.

Hourly chart shows that this moment has come. Take a look, we have upside AB=CD action. Right now price meets Fib level, WPP at 1208 area. At the same time theoretically it could drift slightly higher to 1212. Thus, 1208-1212 area is the one where we have to take final decision either enter short or not.

Second important moment that we could appoint here - if market will move above 1.618 AB-CD target - this will be the sign that weekly grabber could fail.
Because technically we can explain action to 1212 area but we have no arguments to protect bearish view if market will exceed. It just should not move above it if bearish trend works. Thus, in 1208-1212 area we get as best place for short entry with weekly pattern as beacon area that will clarify whether this setup is still valid or not...

 

[Sive Morten]

Gold Daily Update Fri 17, April 2015

Good morning,


Reuters reports Gold firmed near $1,200 an ounce on Friday but the metal was headed for its second straight weekly drop, weighed down by uncertainty over the timing of an interest rate increase by the U.S. Federal Reserve.

Expectations that the U.S. central bank would start raising rates in June have been reassessed after recent sluggishness in U.S. economic data and many are now betting that policy will not be tightened until September

Strong data could still prompt the U.S. central bank to raise rates sooner, which would dent demand for bullion, and the uncertainty has led to caution in bullion markets.

However, gold failed to benefit from weak data on Thursday on U.S. housing starts and factory activity in the mid-Atlantic region, nor from a resulting drop in the dollar.

"Until upcoming economic data makes the U.S. rate picture a little more clear, we believe gold is likely to remain stuck in choppy, directionless trading in the near term," said HSBC analyst James Steel.

Adding to the uncertainty were comments from Fed officials on Thursday that showed officials at odds over the timing of the rate move.

Elsewhere, physical buying in the world's top two gold-consuming countries remained slow this week. Premiums in China improved only slightly and those in India slipped as prices stabilised at $1,200 an ounce.


On gold market everybody also waits for inflation release later in this day. As on EUR - gold has formed bearish grabber, but whether it will be triggered will depend on data:

Currently we do not see any flaws in normal bearish behavior. As you've said yesterday, bearish market has no reasons to move above 1212 area - target of upside 1.618 AB-CD pattern and should turn down somewhere between 1208-1212. THis has happened. Right now market is showing small AB-CD upside rally after yesterday's drop.

So, at least now market behaves as normal bearish market. Any return right back up above 1212 - will put the shadow on short-term bearish perspective and we will have to accept that market will not be bearish any more. THus, Inflation data today will be very important for the market.