Gold GOLD PRO WEEKLY, April 15 - 19, 2024

Sive Morten

Special Consultant to the FPA
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Fundamentals

This week we've decided to prepare a bit different kind of report. Usually we scrutiny watch for particular data and use them to form corresponding background that lets us to form forecasts and long-term expectations. Now after more than a year of this work we've accumulated enough components with detailed analysis, links to the sources etc., and now it would be interesting to collect the puzzle. When you will see the picture in a whole, you understand better why we at the edge of epic changes and tectonic shifts. This explains why by our opinion we're still in the beginning of big journey. Although gold has raised for ~600$ since we've seen this possibility, this was just a flowers and fruits seem still ahead. Market becomes more volatile, because big moves always attract a lot of speculators and more imposed to sharp moves, including downside, but this is just a by product of popularity.

Market overview

Gold prices temporary slipped from record-high levels on Wednesday as the U.S. dollar and Treasury yields firmed after a stronger-than-expected inflation print softened expectations of an early U.S. rate cut. A Labor Department report showed the Consumer Price Index(CPI) rose 0.4% on a monthly basis in March, compared with the 0.3% increase expected by economists polled by Reuters. Federal Reserve officials worried that progress on inflation might have stalled, making a longer period of tight monetary policy necessary, according to the minutes of the U.S. central bank's March 19-20 meeting.
"Strong employment and elevated CPI are interfering with the Fed's rate-cut plans but gold, like inflation, remains cheeky," said Tai Wong, a New York-based independent metals trader. "The minutes seem to suggest that the entire committee would be ready to reduce rates if the economy evolved as expected. Except inflation is moving as expected," Wong added.
"Escalating geopolitical risks significantly bolster gold as hot and cold conflicts, and a record number of elections this year, keep the risk thermometer high," HSBC said in a note, adding that it expects to see a wide trading range of $1,975-$2,500 for gold prices in 2024.
"Gold demand has been very strong this year buoyed by central bank buying, particularly non-western banks have been buying gold to diversify their foreign exchange reserves away from the U.S. dollar and a volatile Chinese currency," said Will Rhind, CEO of GraniteShares.

Gold prices rose above $2,400 per ounce to an all-time high on Friday, heading for their fourth week of gains, as growing tensions in the Middle East prompted investors to seek refuge in the safe-haven assets. Also softer-than-expected U.S. producer prices data boosted hopes for U.S. rate cuts this year, while persistent geopolitical concerns added to the metal's shine. A Labor Department report showed the Producer Price Index (PPI) rose 0.2% month-on-month in March, compared with a 0.3% increase expected by economists polled by Reuters.
"For the next leg higher (in prices), we still need to see a return of gold exchange-traded-fund (ETF) demand and that requires the Fed indicating a rate cut," said UBS analyst Giovanni Staunovo.
"What's really telling about the strength of gold is the U.S. dollar index and Treasury yields are climbing, yet gold continues to rally strongly - that's very indicative of strong safe-haven demand," said Jim Wyckoff, senior analyst at Kitco Metals.

Everybody starts uplifting targets

Goldman Sachs hiked its year-end gold price forecast to $2,700 per ounce from $2,300, citing the metal's bull market's indifference to the usual macro factors.
UBS Group AG boosted its year-end gold outlook by 11% to $2,500 an ounce, with a revival in demand for bullion-backed exchange-traded funds set to support another leg up when the Fed cuts rates around mid-year, according to a note from analysts including Giovanni Staunovo.

Bank of America also expects 3000$ level on gold and 30$ in silver:
Gold and silver are among our preferred commodities, with the yellow metal being pushed higher by central banks, Chinese investors and, increasingly, Western buyers thanks to a confluence of macro factors. ️Accordingly, we expect the yellow metal to rise to $3,000 per ounce by 2025 . Silver will also benefit from this as prices will also be supported by stronger industrial demand. This could push prices above US$30 per ounce over the next 12 months .

The Yardeni Research president predicted that gold prices could rise as high as $3,500 by the end of next year, implying as much as a 49% upside for the precious metal from Monday's price around $2,347. That's because inflation could follow the path it did in the 1970s, when prices began to spiral and gold went from $35 an ounce to a peak of $665 an ounce.
"The price of gold is soaring in new high territory," Yardeni said in a note to clients on Sunday, referring to gold prices notching an all-time record in March. "Another wage-price spiral attributable to rising oil prices would be very reminiscent of the Great Inflation of the 1970s, when the price of gold soared. In this scenario, $3,000-$3,500 per ounce would be a realistic target for gold through 2025."

If conflict in the Middle East escalates (and it is), oil prices could rise over $100 a barrel, Yardeni predicted. He estimated there was a 20% chance inflation could rise to a second peak, which would result in the bullish run-up for gold. Yardeni isn't the only forecaster who sees more upside for gold in the years ahead. Top economist David Rosenberg said he saw 30% upside for gold prices, thanks to the risk stemming from the Fed's expected rate cuts and rising geopolitical conflict. The momentum could carry the yellow metal to $3,000 before the next business cycle shift — a 30% increase from current levels. He said in a recent note that the latest gold run is "especially impressive," because it not only surpassed bitcoin and every major currency, but also overcame typical macro headwinds that often depress its value.
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"The rise in the gold price has come at a time of dollar strength, falling inflation expectations, and during which the Fed has moved market expectations toward a 'higher for longer' conviction. All those developments would typically hurt the gold price, but it's forged ahead regardless," his team wrote in the note.
Rosenberg also attributed gold's recent rally to global geopolitical risks and unpredictable macroeconomic outlook. On the monetary side, he said — with the US debt-to-GDP ratio hitting 120%, and servicing costs escalating — investors are boosting gold holdings amid uncertainty over election outcomes and the looming possibility of a fiscal crisis.
"That the direction of travel for international relations toward greater militarization, confrontation, and polarization is difficult to argue against, and the risk hedging features of gold price have risen in importance as a result," he said.

The economist laid out two scenarios, both at which arrive at the conclusion that gold has further to rise: a "soft landing" and a typical bear market. In a "soft landing" scenario, assuming global real interest rates return to their pre-2000 averages—higher than the post-GFC stagnation era—this would lead the US dollar to drop by approximately 12% and push up gold prices by about 10%.
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But if a recession hits the economy—with global real interest rates reverting to their 2014-2024 average, stock markets stabilizing, and the dollar depreciating by around 8%—the upside for gold is more like 15%, putting it in the $2,500 range.
"Putting those observations together with our modeling exercise tells us that downside risk to the gold price is limited, but there is a lot more room to rise. It's far more likely that gold reaches $3,000 per ounce than falls back to $1,500," he said, adding that rising geopolitical tensions would further drive gold prices higher. The read-through for investors is straightforward: make sure you have gold in your portfolio, and overweight it. The downside risks are well contained (though a very near-term correction is not impossible and should be looked through), but the upside is tantalizing," Rosenberg concluded.

The current momentum is a signal to increase holdings in gold, according to Rajeev De Mello, global macro portfolio manager at GAMA Asset Management SA. Prices may now be vulnerable to a slight correction, he said, but any pullback is likely to bring in more buyers.
“It’s a relatively small market and it can squeeze higher very fast,” he said, comparing it to the size of US government debt securities. “It’s a very momentum driven asset, really.”
In New York’s Comex gold futures market, money managers are placing more bullish bets on gold, with net long positions rising to near four-year high in the week ended April 2.
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One key factor has been enthusiasm among central banks, encouraging buyers like Matthew Schwab, head of investor solutions at Quantix Commodities with $933 million under management. The firm’s long-only fund has been overweight gold since 2022, with bullion’s weighting around 30% — compared with about 15% in the Bloomberg Commodity Index.
“What I think is really, really bullish about gold is that those ounces will be taken off the market and never come back. And that’s clearly very different to the ETFs where ultimately everyone’s a trader of it.” said Duncan MacInnes, investment director at Ruffer Investment Co.
He last month increased his exposure to gold and silver to roughly 8% across his two portfolios, which combined have about $3 billion under management.

There’s one further reason to expect another boost. Unusually in this environment, investor demand for gold-backed exchange traded funds — typically a key driver for bullion — has yet to materialize. In fact, total holdings are close to the lowest level since 2019, according to data compiled by Bloomberg. According to Ben Ross, who manages about $410 million in commodities strategies at Cohen & Steers, that’s largely explained by investors chasing returns in the money market. But once the Fed actually deploys its planned rate cuts, that will eventually trigger fresh inflows into ETFs and give gold prices a further boost.

The iShares Gold Producers ETF is up 17% since a double-digit decline in 2022. But it’s still way off the highs of 2011, something that makes little sense given the rise in the metal itself. There could be fireworks ahead for those miners. It is already happening in China:

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For the second time in a week, trading in an ETF that owns gold mining companies was stopped overnight in China. The ETF's price rose more than 40% over the past four sessions before falling 10% when trading resumed on Monday. This ETF rally correlated with the spot price of gold around $2,700.The premium of the ChinaAMC CSI SH-SZ-HK Gold Industry Equity ETF to its underlying assets has now risen to more than 30%...

Might it be, asks Ruffer, that we are entering a new era for gold of “price insensitive strategic buyers taking ounces out of the market that will never return?” One in which increasingly limited supply meets rising demand? If so, and if the rising price starts to pull the retail investors in the west who have little or no exposure to gold right now back in, there seems little to stop the gold price continuing to soar. As for the rise in gold prices allegedly due to the Chinese entering it, then, let’s be honest, there is not enough gold in free circulation to satisfy such a demand. Its capitalization is only ~$15 trillion. Therefore, if they seriously started going into gold, we would already see five-digit prices. In general, the real inflows to gold, if it happens, is yet to come.

The big picture

Information that we've provided above looks great and inspiring, but all comments as from private investors as from big bankers or Fund managers are single-sided. All speak about the same stuff, considering situation only from one side - Fed rates, geopolitics etc. "If Fed cuts - gold go up etc." So, they keep this market inside the existed system and move it with historical drivers. But it is not working in this way any more. Nobody tells about major thing - changing of global financial system. Let's create the big picture:

  • Nobody defeated inflation. From the simply HORRIBLE indicators of early 2022, we managed to slightly slow down their growth rate, partially by evident cheating the data and methodic of calculations. Prices, continued to rise, but not so quickly. Although, again, mostly this “not so fast” was mainly on paper as we've shown yesterday.
  • There is complete chaos and confusion in the Middle East. All Israel's efforts are ended in absolutely nothing. They didn’t defeat any Hamas, but they successfully bombed a couple of thousand babies in order to ruin as much as possible the relations of the United States, where the administration is entirely Jews, with the entire Arab world. Netanyahu generally seems to have gotten out of control. The price of oil is steadily rising. And this certainly does not help in any way to “victory over inflation.”
  • It is a fake growth of the US GDP that was achieved by bubbling of the stock market and increasing the national debt on such a scale like some world war had been going on for 4 years. On the one hand you could make the vision that you're strong but in reality you have to safe on everything. The printing press has not been working for 2 years. There is simply no money in the treasury for geopolitical adventures. In real terms, the Pentagon budget is shrinking rapidly. And here every year new “challenges” appear
  • In addition to juggling time intervals, American statisticians completely removed interest costs on mortgages, car loans and credit cards. All expenses are essentially calculated without taking them into account. When your credit rates rise, then such a system is completely divorced from reality. Now it turned out that in 2022, at its peak, inflation was not 9%, but 18%.
    Such data correlates much better with such a parameter as consumer sentiment. American statisticians have stopped taking inflation into account, the cost of money, but in reality it exists and is destroying the real standard of living of the population, which is reflected in the growth of negative sentiment and a reduction in consumption.
    When your government may or may not receive a trillion dollars from a change in official inflation by 20-30%, then you will not be so successful in the task of convincing the maximum number of economic agents that “inflation was defeated in January 2023.
  • The MOSCOW-BEIJING-TEHRAN alliance seems to have taken shape. This is a nightmare for any American strategist. Biden even spoke directly about this. France keep buying Russian LNG with outstanding volumes and nobody remember already about price ceil for Russian oil. Russian budget revenues are record high for both oil and gas and non-oil and gas revenues. Could you expect this in 2022, given the almost complete isolation from the European and Japanese markets?
  • The Americans simply pumped up the bubble of the stock and crypto markets in order to grab the money from the world economy. Of course, when some inflatable assets give 10-100 x each, it’s hard to resist looking into this casino. The problem is that the foundation for this growth is as disgusting as possible. If you ask any valuation expert why this or that “asset” has grown several times, he simply will not be able to answer anything intelligibly. This is the most banal bubble.
What are the conclusions and forecasts from the current situation?

  • Every month, the US national debt figures are becoming more disgusting. The cost of service is growing faster than any attempts to increase budget revenues.
  • You can forget about “victory over inflation”. Inflation will remain consistently high. At the same time, in trying to maintain the growth of your GDP in this way, you are driving yourself further into a corner: the cost of debt servicing is growing rapidly (it is already equal to the income for the quarter of the federal budget, this is 1/4 of all income). That is, at some point you will still have to release the rate. This will mean an even greater acceleration of inflation.
  • At some point, the market will “see the light” and Nvidia and Bitcoin will fall by 70 percent in a week. Let me remind you that at the peak of Bitcoin’s acceleration, the market expected SEVEN rate cuts this year, then three, and now two. Jimi Dimon (JP Morgan Bank) actually said that it looks like there won’t be any reduction with such inflation and the rate will most likely continue to be raised. I fully believe that there will be no reductions this year. And if there is no cheap money, there is no life for bubbles.
  • Russia&Co feels great in this situation. Sooner or later, the Americans will finally lose control over the price of commodities. The dollar will devaluate and there will be a more equitable distribution of value and GDP around the world. In fact, this has been happening smoothly for a whole year now. Everything is so positive that Putin seems to be able to even keep the ruble at these levels and not devalue it at all. Unless, of course, some force majeure happens.
  • The idea of diplomatic isolation of the Russian Federation has completely failed, and without it the victory for Ukraine that the states and Zelensky fantasized about is impossible. In this case, the Ukraine project becomes too expensive and useless. The failed attempt at this same isolation led to the formation of a “Eurasian bloc” in which everyone hates the states. In order to do something about this, we will have to offer Putin such “gifts” against the background of which “the return of NATO to the borders of 1997” will not seem such an insane demand. Time plays exclusively on Putin.
  • The political conflict inside the US is raising. Publications on fake inflation and job market statistics have turned public. They come not from "just independent experts" but from former Financial Minister and the Phil Fed Bank. Yellen speaks about households savings deterioration. As we've mentioned yesterday, it could happen that June rate cut might be a political decision that is already made. Some indirect signs point on this - Goldman Sachs reduce saving rates and increase Gold market forecast. It means that existing reserves are coming to an end and not enough to keep the image of "Strong" economy.
This is how it looks in big picture. And you could see - nothing has crashed yet, it's still a tension raising, like steam pressure in a closed boiling pot. Everything is going out of the US control as inside as on foreign arena. This is the real reason why gold is raising and keep raising in nearest few years. And this happens not because of "soft landing" in the US or because the next Fed's rate step. The scale of driving factors are on the higher level. This is out of the Fed's control already and is becoming
"natural" accommodation of financial system to new reality. This explains why common methods of analysis are working with limitations, because drivers are of different nature and have significantly higher level of the time perspective. We suggest it is better to not go against them and follow only bullish view on long term time frames, keeping our call to accumulate physical metal and use it for wealth preservation.
 
Technicals
Monthly

So, as we've explained above, technical analysis works right now with limitations due to different nature of driving factors. Nevertheless, on long term chart it is better applicable than on short term ones. Besides, we still could use it for target estimations.

Let's recall all time gold chart and our 2456 target which is 1.618 extension of BC leg. It has been completed. Now retracement has started. Formally, this is relief due gentle Iran response (it seems market has expected worse scenario) and we see "selling by fact" process.

Price stands overbought at all time frames, started from quarterly charts. Reverse H&S on top is doing well. OP target is passed, while XOP is still ahead around 2567$ area. Taking in consideration recent acceleration, when tactical speculative retracement will be traded out, we should keep going higher.

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Weekly

Except "Shooting star" pattern, we have nothing else here. Local XOP target stands slightly lower, around 2516$ area, which probably could be treated the same as monthly one. No other patterns are formed yet here:
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Daily

Despite that drop looks solid on intraday charts - here it is very small. Trend remains bullish. Two Fib support areas look interesting now - 2322 and 2255-2260. Besides, oversold is also near. Speaking about patterns - we have nothing yet, but thrust up looks nice and B&B is definitely the one that we could watch for. Recent news show that Iran-Israel escalation is over (at least based on official statements), so retracement has good chances to continue:
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Intraday

Here we still need to wait a bit. Most reasonable here is to suggest the H&S pattern, but it still needs 1-2 days to be formed. Once we get clear AB-CD shape, we could estimate downside retracement targets with more precision. Scalp traders could try to sell with this H&S, but you know our opinion on this subject - we do not consider now bearish positions.
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Greetings everybody,

So, we haven't got either DRPO or B&B on daily chart by far, although they are still could be formed later on. But, we've got another wonderful stuff - bullish grabber that makes trading process very simple. Target is the top of ~2435 area. Good point here that its invalidation stands near the Fib support and oversold level. This lets us to place good protected stop:
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On 4H chart we see clear signs of damage of H&S shape and hidden bullish divergence, suggesting the same target:
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Thus, on 1H chart we could watch for predefined Fib levels to consider long entry. You could split entry in parts, or drop the time frame even lower and try to catch reversal patterns to save money on tighter stop orders.
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Greetings everybody,

So, while everything goes with the plan - we do not need to comment too many things. On daily chart - everything stands the same. Grabber is valid, and we're still watching for its target around 2435 top at least:
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On 4H chart the H&S shape is touted even more, so, now I would say it is not recognizable already. Divergence remains, so, picture looks bullish as well:
gold_4h_17_04_24.png


On 1H chart yesterday entry around 3/8 has worked nice, now market is showing another pullback and here we already have K-support area. Since we have daily grabber, by all rules stop has to be placed under its lows, which seems a bit far. Thus, if you're not ready for that, you could try to place it under 2360 lows or below 5/8 2350$ support - this will some reasonable compromise. And let's keep watching...
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Good morning,

So, retracement starts across the board, not only on Gold market but on EUR, Bonds as well. Mostly it seems that here are purely technical factors, no changing of geopolitical or fundamental background yet. Powell said - its no fruits from inflationary fight efforts, while Israel has postponed attack on Iran. So, traders also start booking results.

Still, daily bullish context remains valid as well as bullish grabber:
gold_d_18_04_24.png


On 4H chart market keeps signs of bullish dynamic pressure, divergence still in place. The only new thing that I would consider here is 2332$ level. It seems important because if gold will keep going lower, this is COP downside target. We do not consider OP because it under grabber's lows and it is not interesting. But, completion of COP doesn't hurt the daily grabber and might be another interesting point for potential long entry. It doesn't mean that gold can't keep going higher right from blue trend line - it could, but in a case of the drop, we should be ready and know in advance what to watch for.
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On 1H chart we see good price response on all Fib support levels that we've predefined. On every level entry was relatively safe, letting us to move stops to breakeven. Now market stands in pullback from 5/8 support. But recently gold has formed bearish reversal swing that increases chances on another leg down. In this case AB=CD target stands at the same 2336$ level. Potentially we also could get "222" Buy. That's why it makes sense to watch over it:
gold_1h_18_04_24.png


Once again - this is "potential" level, which could be reached but not 100% forecast that gold has to move down and reach it. Just to let you know that we have this level and it could be considered for potential long entry.
 
Good morning,

Gold obviously have some problems with upward continuation and it is not surprising because it is overbought on weekly chart. Still, currently we do not see any reasons to tell that bullish scenario has failed. On daily chart grabber is still valid:
gold_d_19_04_24.png


On 4H chart market keeps valid upside trend line, divergence still stands in place. Despite sharp drop now, market is flirting with MACDP, so we could get bullish grabber here. At the same time I keep downside COP level here, at 2352$ area, but not as a target for downside action. It might be useful for stop placement to avoid occasional stop fill if gold will still show deeper retracement:
gold_4h_19_04_24.png


On 1H chart market now stands around K-support area. 2354$ is 5/8 support that coincides with 4H COP. Thus, 2350$ seems like vital area for this setup. Minimum upside target here is AB=CD OP that leads us precisely to the top. We also could get here upside butterfly on 4H chart later with more extended targets.
gold_1h_19_04_24.png


Still, if you consider long entry today, maybe it makes sense to split it in parts, as for now it is not clear yet whether gold turns up right here or makes another leg down first.
 
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