Gold GOLD PRO WEEKLY, April 20 - 24, 2020

Sive Morten

Special Consultant to the FPA
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Fundamentals

Gold stands in relation to the same driving factors as any other market right now, including FX market. Now any statistics, Central Bank measures and other stuff that market usually reacts on, and every market reacts differently depending on its nature. Now this information takes the back seat and markets mostly are driven by the statements on virus spreading and when people return to normal life.
Thus, this week we've got jobless claims again, that cumulatively reached 22 Mln within few weeks, Consumer spending data and Retail sales that was also weak, Chinese GDP collapse for 6.8% - but all these data makes shy impact on the markets and investors mostly expect these numbers.

Conversely, statements on cancelling of self-isolation and gradual people return to normal life in some EU countries (Austria, Czech, even Spain, France), D. Trump statements on returning back to activity of economy have made impact on gold. Additionally, Gilead achievement in Covid-19 treatment supported stock market and pressed on gold as well.

It is clear now for everybody that negative impact was strong and makes shock effect on global economy and this effect mostly is priced-in. Now all eyes of investors stand on perspective - how fast and what shape of recovery will be. Yesterday we've dedicated our weekly research to this topic. The major data is yet to be released. Next week all eyes will be on PMI data and corporate earning reports that could give the picture of real damage on big companies. This should show how reasonable current expectations of "V" shape fast recovery, as stock market initially has dropped for ~ 50%, but played out the half of this drop already. So, next week we should be ready for rising volatility.

Here is some gold specific news:

Asian shares looked set to pull back from a one-month high, as warnings of a deep recession dampened investor optimism that the slowing spread of the coronavirus could allow businesses to re-open. The retreat from riskier assets followed the International Monetary Fund's prediction on Tuesday that the global economy may shrink by 3% in 2020 due to the virus outbreak, in the worst downturn since the Great Depression of the 1930s. Britain's economy could shrink by 13% this year due to the
government's pandemic-driven shutdown, its deepest recession in three centuries, the country's budget forecasters said.

U.S. President Donald Trump's May 1 target for restarting the economy is "overly optimistic," his top infectious disease adviser said on Tuesday, after Trump and state governors clashed over who has the power to lift restrictions aimed at curbing the outbreak. U.S. Federal Reserve is grappling with the complexities of how to simultaneously reopen the country's economy and protect against a resurgence of infections, while it launched a funding backstop to address liquidity problems on Tuesday.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.8% to 1,017.59 tonnes on Tuesday.

Gold dropped about 2% on Friday after President Donald Trump's new guidelines to re-open the U.S. economy and encouraging early data related to a potential
COVID-19 treatment drove investors towards riskier assets.

"Gold and stocks are negatively correlated today with the overnight equity rally pressuring gold. The guidelines from Trump for re-opening the economy have boosted equity markets," said Tai Wong, head of base and precious metals derivatives trading at BMO. "If stocks can extend overnight gains it could trigger more profit-taking in gold," he added.

World stock markets sprinted towards a second straight week of gains after Trump laid out guidelines for gradually reopening the coronavirus-hit U.S. economy. Bullion has on occasion moved in tandem with stock markets this year, with recent sharp sell-offs prompting investors to sell precious metals to cover their losses elsewhere.

Previously, D. Trump, speaking on virus said. Then it has cut financing to the WHO.
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Late on Thursday, Trump outlined a plan to ease the shutdown in a staggered, three-stage process, but the plan was a set of recommendations rather than orders and left the decision largely up to state governors. Also lifting the mood, a report detailed encouraging data from trials of U.S. drugmaker Gilead Sciences Inc's experimental
drug remdesivir in severely ill COVID-19 patients.

"Risk appetite is soaring, but it might be overdone as permanent damage to the economy will see a battered U.S. consumer," said Edward Moya, a senior market analyst at broker OANDA, in a note. "Gold will remain supported by the boatload of monetary and fiscal stimulus that will be in place for the foreseeable future. In the event of a deeper pullback, the $1,650 level remains key support."

U.S. gold futures narrowing their lead over London spot prices and signalling hopes for an improvement in strained supply chain logistics that have hampered bullion shipments to the United States to meet contract requirements.

China's coronavirus crisis is expected to have tipped its economy into its first decline since at least 1992, data is set to show on Friday, raising pressure on authorities to prop up growth as mounting job losses threaten social stability.

U.S. data showed 5.2 million Americans sought unemployment benefits last week, down from a slightly revised 6.6 million the week before, but lifting total filings for claims over the past month to a record 22 million. This almost equals job loss of 28 Mln. in 2008 crisis that US has lost almost for the whole year.

The Federal Reserve's balance sheet increased to a record $6.42 trillion this week
as the central bank used its nearly unlimited buying power to soak up assets to keep markets functioning amid an abrupt economic free fall due to the virus.

CFTC Data

Well, recent COT report shows increasing of net long position as well as open interest. Changes are not very significant, but they tell that investors keep long positions without any valuable sell-off. This lets us to keep long-term bullish view intact.

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SPDR Fund adds around 28 tonnes to the storage per week, that is also supportive factor for long-term bullish tendency.

That's being said guys, now investors intend to look at data and companies' earnings in particular to assess the negative impact on economy. Volatility could rise on next week. If companies report better earnings and lighter impact of virus on performance gold probably will show deeper retracement as investors start rebalancing of their portfolios and re-establish previously closed stock positions. Another data in focus is PMI as in EU as in US.

Conversely, stronger negative impact on economy supports gold even in short-term. That's what we intend to do on coming week.

In longer-term perspective, I sense that big political shifts are coming. Now it is difficult to imagine and looks unbelievable, but turmoil becomes tougher as we're coming to 2nd D. Trump term. US hegemony gets deadly hit as its debt jumped to the levels that never could be paid out. Thus, the death of hegemone is not in the interest of those, whom he is owed money. In this case, if hegemone suddenly collapses, the loss burden could lay upon countries that should get benefits. It means that global society could start resolving of US debt problems. I see two major ways - political reforms of US, splitting them in some parts and put all debt on weakest political force to withdraw it. This is more difficult and long-term process. Besides, this way is less acceptable for debt holders.

Second scenario is more acceptable - support the strength of US Dollar but to get external control over it. It means that other countries will get control over global dollar liquidity and use it until they get all benefits that they should, proportionally to the debt that they hold. Then, they could turn to 1st scenario of political reforms and withdraw debt officially. Currently, I do not see any other ways to resolve this situation. As you understand - any of these scenarios put gold on exceptional place.

Technicals
Monthly


So, first attempt to abandon doji range has failed. It means that gold should spend some more time inside of it, pulling back deeper to the middle of the range, probably. Overbought level stands above the market. Last week we already said that - "The only reason to suggest some pullback is CFTC data and speculators' behavior, that suggest possible technical pullback."

Here, as on EUR, direction depends on breakout. Although we tend to bullish scenario, especially on a background of fundamental events, mentioned above, formally gold keeps both scenarios valid. As we have doji - next direction depends on breakout. It's a huge size and correspondingly action after breakout also should be significant. In the situation of upward breakout, I will not surprise if we will see gold at 2K point.

Downside target mostly stands the same - YPS1 and major 5/8 Fib level around 1300 area.
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Weekly

Here is you can see how weekly overbought level works. Market could try to struggle it, but not too long. As price has climbed too high in the overbought range - pullback also is solid. As a result, we have price below OB level again and shooting star pattern on the top that is equal to bearish engulfing pattern by following price performance. Our last week bullish divergence is done well as price has created the new top...
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Daily

In general, we already talked about this picture. Now, as downside action becomes stronger, there are more chances to see gold around our major support area of 1635-K and daily oversold. Now this level becomes our primary object where we could consider long entry. Even if overall data of coming week will be negative to the gold - this level should trigger at least some technical respect. It makes relatively safe to trade up from here:

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Intraday

Existence of AB=CD pattern and a bit slower CD leg tells that 3/8 pullback here, to our major 1635 area is not something outstanding. This is common thing and normal reaction to OP target. At the same time, action right on top tells that some other pattern should be formed, as current AB-CD leads price to only 1676 level, where XOP stands. It means that once XOP will be reached - we expect some upside pullback and then appearing of larger downside AB=CD pattern to 1635 area. The same type of action weekly shooting star suggests as well:
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Conclusion:

It is not as important guys as what will happen in short-term. What is really important - what will happen when world will wake up of pandemic madness and start to decide what to do with US debt and dominant role of US Dollar. This is the major driving factor that set trend on gold for long-term.
 
Greetings everybody,

Gold very accurately follows our trading plan. First entry point has been achieved and now price stands in reasonable respect of 1676 support area. On daily chart we should keep an eye on possible bullish grabber that could formed today. Despite that we're watching for 1635 area - we can't exclude possible upward action immediately:
gold_d_21_04_20.png


On 4H chart our XOP target and Agreement support has been hit. So, that was first entry point. If you've got there, now you could move stops to b/e and watch either for grabber on daily, to keep long position, or - look for resistance level on 1H chart:
gold_4h_21_04_20.png


Here, if no grabber will be formed - second leg down could start around 1700-1715 resistance level, by "222" Sell pattern:
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Our major plan doesn't suggest short entry (although it is not forbidden) but to get gold at perfect entry area - 1635 daily K-support.
 
Greetings everybody,

So, gold is still coiling around 1670 and only today has started upside bounce. As a result, yesterday we haven't got bullish grabber on daily chart:
gold_d_22_04_20.png


For us overall situation has not changed, as we've taken longs around 1675 - we just keep them with b/e stop orders. Bounce up is started:
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Yesterday we haven't got our "222" sell, as market has formed butterfly instead. But it doesn't mean that pullback will not happen. It could be just different pattern. Now it seems that H&S could be formed:
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So, in general everything stands the same. We have 30% of long position at 1675 now just wait what will happen. Bears could watch for 1714 area as pullback could happen, or even downside continuation to our 1635 level. Scalp bulls also could consider long entry at 1675 on the bottom of right arm potential H&S pattern.
 
Greetings everybody,

So, market hits 1715 intraday resistance, although in a different way but it doesn't matter for us. Currently market stands at the edge - it either has to start dropping to 1635 support, or upward action continues. This is the reason, guys why we've called to split position and take 30% at 1675 Fib support. Since gold stands on a good upward marche we're not sure that 1635 definitely will be reached.
On daily chart market stands close to show bullish dynamic pressure, as it comes to MACDP line and in a way of upward breakout we should expect action to 1770 target:
gold_d_23_04_20.png


It means that today we keep an eye on 'C" point and downside reversal, hoping that AB=CD still will be formed. Bears could consider scalp short trade.
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Here is what we have. Market almost hits XOP and major 5/8 level. Here is 1.27 extension as well. It is not safe to go short as gold has strong upside momentum, but current point provides minimal risk and best risk/reward ratio as you could place stop just above XOP. Gold either turns down right from here, or bearish context will be destroyed. Clarity should come fast.

For the bulls - nothing to do. If you've missed long entry at 1675, just wait and hope that it will 1635 chance.
gold_1h_23_04_20.png
 
Greetings everybody,

Gold indeed moves higher, showing bullish dynamic pressure on daily and tending to 1770 target, potentially.
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Yesterday we've said that everything is around "C" point. Either gold drops or upward action continues - no compromises. And you can see - gold moves above "C". This breaks bearish context and denies downside AB-CD pattern. In fact, here we should be ready for possible upside butterfly:
gold_4h_24_04_20.png


Why this "C" point is so important. Because, when market stands in retracement it accurately reacts on Fib levels and/or upside retracement targets. Last place where proper reaction was able to happen is "C" point. But gold has broken as the target as the level. It means that current upside action is not a retracement any more.
This, in turn, means, that if even we will get some downside pullback - this will be not bearish continuation but pullback inside the bullish trend. Thus we could consider only 1710, or 1690 levels. They are actually, where butterfly right wing could start.
gold_1h_24_04_20.png

Thus, no shorts, for long entry - we're waiting for pullback to major Fib support levels.
 
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