Sive Morten
Special Consultant to the FPA
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- 18,695
Fundamentals
(Reuters) - Gold prices rose slightly on Friday as investors awaited the first-round of voting in the presidential French election at the weekend and possible announcements about tax changes in the United States.
Spot gold was up 0.3 percent at $1,284.62 an ounce by 2:30 p.m. EDT (1830 GMT), on track to close the week little changed after five straight weeks higher. U.S. gold futures settled up 0.4 percent at $1,289.10.
"The big news over the weekend will be the French election and the market will be to an extent on hold ahead of that," said Mitsubishi commodities analyst Jonathan Butler. There was potential for safe-haven buying of gold after France said security forces were fully mobilized for the weekend vote after an Islamist militant killed a policeman Thursday night.
"Into the near term, if the geopolitical tensions intensify, there is a chance that gold prices will reach $1,300 or more," OCBC analyst Barnabas Gan said. A move in gold above $1,290/91 would be significant as it would break above a downtrend that has been in place since gold touched an all-time high of $1,920.30 in 2011, Butler said.
"You would have thought with the Champs-Elysees attack that you would have got a little more safe-haven buying ahead of the French election," said Rob Haworth, senior investment strategist for U.S. Bank Wealth Management in Seattle. "If you're in the gold market, there's already stretched speculation and there's not a lot of new news to drive it. So in the meantime it's probably time for a bit of a pause," he said.
Investors were also watching events in Washington. President Donald Trump's administration will unveil a tax reform plan soon and expects it will be approved by Congress this year, Treasury Secretary Steven Mnuchin said on Thursday. Gold is at risk of some profit-taking after a strong recent run, but should be supported by other factors, analysts said.
"Gold struggled to hold this week's gains as the dollar strengthened and concerns over global risk eased. However, selling was relatively muted, which suggests a period of consolidation is now upon us," ANZ analysts wrote in a note.
COT Report
CFTC data shows solid bullish sentiment on gold market. Gold shows strong increase of speculative net position that is supported by open interest as well. At the same time, as you can see, gold net bullish position is far from saturation and has pretty much room to grow. SPDR fund also shows strong growth of storages that confirms existed bullish sentiment.
Technicals
Monthly
As gold shows no return back to 1100 lows - it keeps reversal moment of our H&S pattern pretty nice by far. We've talked a lot about large patterns and far perspectives on gold market.
At this moment overall fundamental background looks supportive for gold market. Right now we see few factors that could support upside action in medium-term period.
First one is Fed policy. Fed will not hurry with rate increase and will not stifle US economy by too early agressive policy. They will support inflationary growth for some time and let economy to become hot a bit. Thus, major impact of Fed policy should come in 2018. This will let gold to ride on inflation for some time in 2017.
Second - multiple elections in EU brings a lot of uncertainty and works as supportive factor for gold market. Now France is choosing the president, on 6th of May will be the 2nd round. Then elections in Germany in 24th of September etc.
Finally, big uncerntainty of D. Trump policy as domestic as international. Last steps are difficult to undertsand. Curious tomahawks attack - have you seen ever the place where just one missile hits? It will be impossible to attending for few weeks. How It could be so that 20+ missiles have hit an area and on next day Syrian command just walking around. Now is strange situation around fleet that should be on marche to N. Korea, but in reality it goes to Australia... Geopolitical tensions also should be backwind for gold market.
These factors could support gold market in medium-term period. Technical picture and sentiment analysis right now also mostly look bullish, but not excludes risk factors totally.
Technically price behavior, short-term sentiment and commodities performance mostly supports idea of bullish reversal pattern here (at least now).
As Fathom consulting suggests - Fed will lead economy to become hot a bit before aggresive rate policy. This should open door for inflation growth, which is supportive factor for gold. Currently gold could stay on its own till June and this could encourage investors to be more brave in taking long positions.
Concerning farer perspective we could make just some suggestions. As we've said technically recent upward action started in Dec 2015 is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Now this retracement stands in place. It is really big chance that gold stands in a stage of big trend changing from bearish into bullish. US economy shows inflation growing. As we've estimated, commodities across the board have turned to growth.
Besides, any Trump protection policy will be accompanied by big spending and expenses, this will lead to grow of inflationary expectations. Thus, we mostly gravitate to idea that gold now stands not in pause of bear trend, but on the eve of new bull trend. Also we expect big structural shifts in EU economy, diminishing Brussels governing role, taking direction on convergence with Russian economy, and through Russia economical infrastructure - with Middle East and Asia.
This is long political talk though, but shortly speaking, we see that the process of building new EU has started. First bell is Brexit. As you know all mature EU countries has started gold repatriation process that should be finished in 2020. So we should be oriented on this year as appearing of the shape of new EU. By gold repatriation process we could gudge on major idea of new EU - each country will out of external governing either Brussel or US and will make it's own policy according with their own national interests. This is how it should be in theory. How this process will develop on practice - we will see.
As you can see we have a lot of driving factors and all of them have significant value. It means that despite direction - either upside (as we think) or downside to 1100 (that is contrary opinion) - action will be very volatile.
But our technical "deep" retracement still could be different. Currently, as market stands at the edge of 1170 Fib support, we could talk on H&S pattern. Besides the shape itself, some features here that in general typical for H&S. For example, relation between head and shoulders - 1.618. Butterfly... very often first part of H&S takes the shape of butterfly pattern...
At this moment we do not have questions and serious doubts on perspective of H&S pattern. Market shows normal behavior for its shape. Also we have nice bullish divergence with MACD that is also typical for reversal patterns. On monthly chart we could specify two relatively close targets. First is YPR1 around 1330, next one is neckline - around 1380 area. Take a look that gold has chance to turn trend up in April, as price is crossing MACD line right now:
Weekly
So on weekly chart trend stands bullish and market is not at OB/OS. Now price is coiling around 1278 major resistance area. As you can see, this is major 5/8 Fib resistance and minor 0.618 AB-CD target. On a way up gold also has broken natural 1265 Fib resistance area. This is most important moment on weekly chart. Overall picture looks bullish in larger perspective. Here we see upside breakout of downside channel and re-testing it later. As retracement already has happened, current upward action should be treated as upside extension stage...
As market is not at Overbought - it has relatively free space right till the previous tops. It means that as all major resistance levels have been broken - upside action will become easier:
Daily
We've discussed daily chart very often recently. Thus, it is not neccesary to repeat here that market has completed some targets, but standing around them without solid pullback supports idea of further upward continuation. Right now market is not at overbought. Next destination point here stands around 1330.
The major new input here is bullish grabber that we've discussed on Friday. Now we've got it. This pattern suggests upward action and taking out previous top. We suggest that grabber will not be limited by minimal target but could become triggering pattern for upward continuation as we've said that gold actually has no real barriers above:
4-hour
On Friday we've discussed possible downward continuation to 1260 area, but price has erased bearish dynamic pressure that was forming on hourly chart and turned up. Now it stands at upper border of bullish flag pattern.
Keeping in mind bullish grabber, it is really could mean that upside action will be continued on Monday. May be this is some kind of prediction of France elections result, who knows... We've warned about surprises, but what kind of surprises there will be?
Conclusion:
In long-term perspective we think that bullish factors overhelm headwind of possible rate hike by Fed. Still this probably will lead to turmoil and excessive volatility, but we hope that this will happen with upside direction.
In shorter-term perspective as gold has formed bullish grabber on daily chart, upside action could start immediately on Monday. May be this action will be political background of France elections
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.
(Reuters) - Gold prices rose slightly on Friday as investors awaited the first-round of voting in the presidential French election at the weekend and possible announcements about tax changes in the United States.
Spot gold was up 0.3 percent at $1,284.62 an ounce by 2:30 p.m. EDT (1830 GMT), on track to close the week little changed after five straight weeks higher. U.S. gold futures settled up 0.4 percent at $1,289.10.
"The big news over the weekend will be the French election and the market will be to an extent on hold ahead of that," said Mitsubishi commodities analyst Jonathan Butler. There was potential for safe-haven buying of gold after France said security forces were fully mobilized for the weekend vote after an Islamist militant killed a policeman Thursday night.
"Into the near term, if the geopolitical tensions intensify, there is a chance that gold prices will reach $1,300 or more," OCBC analyst Barnabas Gan said. A move in gold above $1,290/91 would be significant as it would break above a downtrend that has been in place since gold touched an all-time high of $1,920.30 in 2011, Butler said.
"You would have thought with the Champs-Elysees attack that you would have got a little more safe-haven buying ahead of the French election," said Rob Haworth, senior investment strategist for U.S. Bank Wealth Management in Seattle. "If you're in the gold market, there's already stretched speculation and there's not a lot of new news to drive it. So in the meantime it's probably time for a bit of a pause," he said.
Investors were also watching events in Washington. President Donald Trump's administration will unveil a tax reform plan soon and expects it will be approved by Congress this year, Treasury Secretary Steven Mnuchin said on Thursday. Gold is at risk of some profit-taking after a strong recent run, but should be supported by other factors, analysts said.
"Gold struggled to hold this week's gains as the dollar strengthened and concerns over global risk eased. However, selling was relatively muted, which suggests a period of consolidation is now upon us," ANZ analysts wrote in a note.
COT Report
CFTC data shows solid bullish sentiment on gold market. Gold shows strong increase of speculative net position that is supported by open interest as well. At the same time, as you can see, gold net bullish position is far from saturation and has pretty much room to grow. SPDR fund also shows strong growth of storages that confirms existed bullish sentiment.
Technicals
Monthly
As gold shows no return back to 1100 lows - it keeps reversal moment of our H&S pattern pretty nice by far. We've talked a lot about large patterns and far perspectives on gold market.
At this moment overall fundamental background looks supportive for gold market. Right now we see few factors that could support upside action in medium-term period.
First one is Fed policy. Fed will not hurry with rate increase and will not stifle US economy by too early agressive policy. They will support inflationary growth for some time and let economy to become hot a bit. Thus, major impact of Fed policy should come in 2018. This will let gold to ride on inflation for some time in 2017.
Second - multiple elections in EU brings a lot of uncertainty and works as supportive factor for gold market. Now France is choosing the president, on 6th of May will be the 2nd round. Then elections in Germany in 24th of September etc.
Finally, big uncerntainty of D. Trump policy as domestic as international. Last steps are difficult to undertsand. Curious tomahawks attack - have you seen ever the place where just one missile hits? It will be impossible to attending for few weeks. How It could be so that 20+ missiles have hit an area and on next day Syrian command just walking around. Now is strange situation around fleet that should be on marche to N. Korea, but in reality it goes to Australia... Geopolitical tensions also should be backwind for gold market.
These factors could support gold market in medium-term period. Technical picture and sentiment analysis right now also mostly look bullish, but not excludes risk factors totally.
Technically price behavior, short-term sentiment and commodities performance mostly supports idea of bullish reversal pattern here (at least now).
As Fathom consulting suggests - Fed will lead economy to become hot a bit before aggresive rate policy. This should open door for inflation growth, which is supportive factor for gold. Currently gold could stay on its own till June and this could encourage investors to be more brave in taking long positions.
Concerning farer perspective we could make just some suggestions. As we've said technically recent upward action started in Dec 2015 is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Now this retracement stands in place. It is really big chance that gold stands in a stage of big trend changing from bearish into bullish. US economy shows inflation growing. As we've estimated, commodities across the board have turned to growth.
Besides, any Trump protection policy will be accompanied by big spending and expenses, this will lead to grow of inflationary expectations. Thus, we mostly gravitate to idea that gold now stands not in pause of bear trend, but on the eve of new bull trend. Also we expect big structural shifts in EU economy, diminishing Brussels governing role, taking direction on convergence with Russian economy, and through Russia economical infrastructure - with Middle East and Asia.
This is long political talk though, but shortly speaking, we see that the process of building new EU has started. First bell is Brexit. As you know all mature EU countries has started gold repatriation process that should be finished in 2020. So we should be oriented on this year as appearing of the shape of new EU. By gold repatriation process we could gudge on major idea of new EU - each country will out of external governing either Brussel or US and will make it's own policy according with their own national interests. This is how it should be in theory. How this process will develop on practice - we will see.
As you can see we have a lot of driving factors and all of them have significant value. It means that despite direction - either upside (as we think) or downside to 1100 (that is contrary opinion) - action will be very volatile.
But our technical "deep" retracement still could be different. Currently, as market stands at the edge of 1170 Fib support, we could talk on H&S pattern. Besides the shape itself, some features here that in general typical for H&S. For example, relation between head and shoulders - 1.618. Butterfly... very often first part of H&S takes the shape of butterfly pattern...
At this moment we do not have questions and serious doubts on perspective of H&S pattern. Market shows normal behavior for its shape. Also we have nice bullish divergence with MACD that is also typical for reversal patterns. On monthly chart we could specify two relatively close targets. First is YPR1 around 1330, next one is neckline - around 1380 area. Take a look that gold has chance to turn trend up in April, as price is crossing MACD line right now:
Weekly
So on weekly chart trend stands bullish and market is not at OB/OS. Now price is coiling around 1278 major resistance area. As you can see, this is major 5/8 Fib resistance and minor 0.618 AB-CD target. On a way up gold also has broken natural 1265 Fib resistance area. This is most important moment on weekly chart. Overall picture looks bullish in larger perspective. Here we see upside breakout of downside channel and re-testing it later. As retracement already has happened, current upward action should be treated as upside extension stage...
As market is not at Overbought - it has relatively free space right till the previous tops. It means that as all major resistance levels have been broken - upside action will become easier:
Daily
We've discussed daily chart very often recently. Thus, it is not neccesary to repeat here that market has completed some targets, but standing around them without solid pullback supports idea of further upward continuation. Right now market is not at overbought. Next destination point here stands around 1330.
The major new input here is bullish grabber that we've discussed on Friday. Now we've got it. This pattern suggests upward action and taking out previous top. We suggest that grabber will not be limited by minimal target but could become triggering pattern for upward continuation as we've said that gold actually has no real barriers above:
4-hour
On Friday we've discussed possible downward continuation to 1260 area, but price has erased bearish dynamic pressure that was forming on hourly chart and turned up. Now it stands at upper border of bullish flag pattern.
Keeping in mind bullish grabber, it is really could mean that upside action will be continued on Monday. May be this is some kind of prediction of France elections result, who knows... We've warned about surprises, but what kind of surprises there will be?
Conclusion:
In long-term perspective we think that bullish factors overhelm headwind of possible rate hike by Fed. Still this probably will lead to turmoil and excessive volatility, but we hope that this will happen with upside direction.
In shorter-term perspective as gold has formed bullish grabber on daily chart, upside action could start immediately on Monday. May be this action will be political background of France elections
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.
