GOLD PRO Weekly April 27-01, 2015

[Sive Morten]

Fundamentals

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

As Reuters reports Gold hit its lowest level in more than a month on Friday, falling for the third straight week as strength in global equities diverted interest from the precious metal, although uncertainty over the timing of a U.S. rate rise kept prices in a tight range.
Spot prices are down 2.2 percent this week, their biggest weekly loss in seven weeks.

World stocks hit all-time highs on Friday as corporate updates in Europe and a post-dotcom-boom peak for the U.S. Nasdaq stoked investor optimism.

"That takes investment demand away from gold," said Bill O'Neill, co-founder of commodities investment firm LOGIC Advisors in Upper Saddle River, New Jersey. O'Neill noted that significant funds were flowing toward European and Japanese equities as well, which he called the "flavor of the moment."

Attention is turning to the Fed's policy meeting next week for stronger clues on when the U.S. central bank will start increasing rates. That would raise the opportunity cost of holding non-yielding bullion, while boosting the dollar.

Weak data on U.S. jobless claims, manufacturing and home sales have hurt the dollar this week, boosting uncertainty over whether the Fed will conduct its first U.S. rate rise in nearly a decade in June or September.

"All the U.S. data up to the next policy meeting will be (scrutinised)," said LBBW analyst Thorsten Proettel.


Recent CFTC data shows very shy changes. Open interest shows slow growth and this growth mostly stands due similar increasing of long positions. Short positions after solid drop stand flat. Still recent increase in longs can’t be treated as sentiment change. This is too slow and lazy changes that mostly looks as some fluctuations rather than direct changes. Based on analysis of CFTC data we mostly could say that upside action was just a retracement, based on closing of short position. As soon as all shorts were closed – this trend has finished and last week gold has returned back to downward action. We’ve seen it many times previously.

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. We just could say that downward continuation has become visible again on monthly chart, as well as bearish dynamic pressure. 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 was positive but not as strong as investors have expected. 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 and kills inflation. Prices are fallen so no needs to hike rates. On coming week again – all investors will be watching for Fed decision.
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 still supports further gold decreasing in long term 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
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.
Previously 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. Grabber has started to work, and right now here we even could see the signs of bearish dynamic pressure, since gold moves lower while trend is bullish. CFTC data is still mostly flat. This points on high probability of taking out 1140-1130 lows and 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. So, currently we have no sense to change trading plan since our context is still valid. To destroy this setup gold needs at least erase the grabber.
All other targets stand significantly lower – 1080, 1050 and even 990$.

Daily
Finally here we’ve got clarification of the picture in short-term perspective. Both bearish grabbers have worked nice. Gold has moved below 1175 lows and erase upside AB-CD pattern. Thus, this pattern has reached only minor 0.618 extension. Price has moved below MPP. Also, take a look that MPR1 has held upside action in April and kept valid long term bearish trend.
Since we expect that downward action will continue, we need to wait some upside retracement when we will get chance to take short position, if of cause, you haven’t taken it last week on weekly grabber.
This retracement could happen very soon, since market is approaching 1170 Agreement area – combination of downward AB-CD pattern and Fib support level.

4-hour
Although daily AB-CD has not been completed yet, and market probably will move slightly lower, but idea will be the same as I’ve drawn here. As the target of possible bounce we will be looking at K-resistance. Now it stands at 1193-1196, but also could move a bit lower as soon as AB-CD pattern on daily will be completed. May be it even will appear around WPP…

Conclusion:
Long-term picture remains bearish and major patterns stand intact and even have become clearer last week. 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 and dynamic pressure, we mostly should prepare for taking short position. At the same time recent data was soft and investors have taken more balanced position and mostly wait for some driving factor that finally could clarify situation and at least short-term direction. May be coming Fed meeting will shed more light on situation.

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]

Gold Daily Update Tue 28, April 2015

Good morning,


Reuters reports Gold clung to sharp overnight gains on Tuesday, bolstered by a weaker dollar and short-covering on rising expectations the Federal Reserve would not hint at a June rate increase at its policy meeting this week.

The metal rose to its highest in a week at $1,207.01 on Monday on short-covering ahead of the Fed's two-day meeting, which kicks off on Tuesday. A statement will be released on Wednesday.

"Nobody thinks an interest rate hike is going to come in June because of weak economic data," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Expectations had centred on a rate rise in June, but after recent sluggish economic data, many now believe the U.S. central bank will probably not act until later in the year.

If the Fed continues to hold rates near rock-bottom levels, gold prices could be supported. Higher rates, however, could dent demand for bullion, a non-interest-paying asset.

A soft dollar was also helping gold on Tuesday. It fell to a three-week low against a basket of major currencies as the euro gained on hopes Greece was a step closer to securing fresh funding.

Options-related buying also buoyed prices on Monday as U.S. May options expired at the end of the day with relatively heavy open interest at the $1,200 strike price, traders said.

In the physical markets, demand eased on Tuesday as the price neared the key $1,200 level.

"Buyers don't want to commit too much for physical gold at these prices," said Leung.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.44 percent to 739.07 tonnes on Monday, the first decline in two weeks.


As we've correctly suggested in weekly research - the only bullish driving factor for gold right now is short covering. This has happened again. Upside action has started a bit surprisingly, since we've expected retracement up but from a bit lower, 1170-1173 Agreement support. This action has weak reliability as market has not completed AB=CD target and it is really could happen that it will drop back as soon as short positions will be re-established. But right now it depends on what Fed will say tomorrow:

So, as we've said our trading plan was not materialized since gold has not reached predefined 1170 support area. Personally I try to avoid trading "surprising" markets because it this case you can't anticipate what will happen next. As upside action is not suported by investors' money it is a bit risky to take long position here. While you also can't enter short by far - upside action was too fast. Although gold right now is holding by 1205 Fib resistace and trend line cross - nobody will guarantee that gold will not go up further.
After Fed any action will be strong, probably. And it seems that to wait results of Fed now looks like not bad choice.

 

[Sive Morten]

Gold Daily Update Wed 29, April 2015

Good morning,


Reuters reports Gold retained gains from a two-day rally on Wednesday to trade near its highest in three weeks as more soft U.S. economic data hurt the dollar and lowered expectations for a Federal Reserve rate hike in June.

Bullion has been boosted in recent days after a string of data, including U.S. consumer confidence data released on Tuesday, hinted at slowing momentum in the U.S. economy.

The data, ahead of a statement from the Federal Open Market Committee (FOMC) due on Wednesday after its two-day policy meet, sparked expectations the U.S. central bank would delay an interest rate hike to later this year.

"The statement is expected to be dovish," ANZ analysts said in a note. "Since the FOMC last met in mid-March, U.S. data have been mostly soft, confirming the weak start to the year."

Gold could see greater volatility ahead of the statement, the analysts said.

Investors will also get an early read of how the U.S. economy fared in the first quarter with GDP data due to be released just hours before the Fed statement.

A dovish statement is likely to hurt the dollar further and would be another boost for gold.

"We think that the dollar sell-off has more room to go, especially as this week's slew of numbers get rolled out, showing a marked slowdown in recent economic activity," said INTL FCStone analyst Edward Meir.

A soft dollar along with technical buying and lingering short-covering will push gold prices higher, Meir said.

The dollar was wallowing at two-month lows against a basket of major currencies on Wednesday.

A softer dollar increases bullion's appeal as a haven, while lower rates also lend support to non-interest-paying gold.

The higher prices, however, have dampened physical demand.

In China, the second biggest gold consumer, premiums eased to about $1 an ounce on Wednesday over the global benchmark, from $2-$3 in the previous session.

Other data this week on China have also not been encouraging.

China's gold imports from Hong Kong dipped to their lowest level in seven months in March. Weak demand for jewellery, coins and bars in the key Chinese market helped drive a 9 percent fall in global physical gold buying in the first quarter, an industry report showed.



So nothing really special in news stream today, till GDP and Fed releases probably. Technically, we have significant changes on daily picture. First is - trend has turned bullish, but most important is that gold has erased donward AB-CD pattern, since C point has been taking out. As a result, we could suggest appearing of upside butterfly with 1.27 level around 1235$, if of cause as GDP as Fed will match dovish expectations of investors:

On 4-hour chart trend is bullish as well, gold has moved above crossing of trend line, WPR1 and 5/8 support. This confirms bullishness of gold:

At the same time market has formed reversal swing - when gold has broken the tendency of lower lows and lower highs. Usually, as soon, as reversal swing has been formed, market could show compounded AB-CD shape retracement down. Based on hourly chart retracement could reach 1200 K-support area or even 1990.

For those trades who search chance for long entry - may be this will be not bad choice.

If you're bearish - just wait for GDP and Fed results. The point is that if they will be dollar supportive - it is a lot of room till 1130-1140 and you will have a lot of time for short entry.

 

[Sive Morten]

Gold Daily Update Thu 30, April 2015

Good morning,


Reuters reports today Gold retained losses from overnight on Thursday, as the Federal Reserve characterised a recent slowdown in the U.S. economy as transitory, not ruling out an interest rate hike this year.

The Fed downgraded its view of the U.S. labour market and economy after its two-day policy meet and said the poor performance was in part due to transitory factors.

But the Fed's guidance differed little from its last meeting, and the central bank did not effectively rule out hiking rates at its next meeting.

"The FOMC statement may have been interpreted as slightly hawkish by the gold markets," said HSBC analyst James Steel, referring to the Fed's policy-setting Federal Open Market Committee.

Investors believe higher rates could dent demand for bullion, a non-interest-paying asset.

Bullion traders now believe gold could see further downside as it has failed to hold on to the three-week high.

"(The $1,215 level) is forming considerable resistance and should have been tested overnight with the plummeting greenback, but sizable offers at this level continue to cap the market," said MKS Group trader Jason Cerisola.

The dollar fell to a nine-week low on Wednesday after data showed the U.S. economy grew 0.2 percent in the first quarter, down sharply from the fourth quarter's 2.2 percent and below market expectations for 1.0 percent growth.

Though the dollar trimmed losses after the Fed statement, traders said gold should have gotten a boost given the sharp losses in the greenback and its failure to do so hints at more declines for the yellow metal.

Traders would now be watching more U.S. data to gauge how it would affect the Fed's timing regarding rates.

Also in focus was the Greek debt crisis, which could boost safe-haven demand for gold.

Euro zone officials sought to wring policy concessions from Greece on Wednesday to unlock urgently needed aid after Athens said it would present a list of reforms for legislation.

Failure to strike a deal would result in Greece defaulting on payments and exiting the euro zone.

Physical bullion demand in Asia has quietened in recent days as gold held above $1,200 an ounce. A significant pick-up in demand would support global prices.



Compares to EUR gold has not shown any additional reaction on Fed statement. Most upside action has happened on GDP report. Here we see interesting thought above:
"The FOMC statement may have been interpreted as slightly hawkish by the gold markets," said HSBC analyst James Steel, referring to the Fed's policy-setting Federal Open Market Committee.
Because traders probably have expected more dovish comments. Now all eyes will be on NFP release.
Currently guys, market probably could reach some close upside target. And right now it makes sense to keep an eye on either 1235 or 1250 - 1.27 and 1.618 extensions of butterfly. Both of them stand around 1244 Fib resistance and the latter coincides also with AB=CD pattern target:

Invalidation point is the low around 1175 area. So, while market stands inside recent swing - butterfly will be valid.
Stil, it would be nice if we could get deep retracement o minimize potential risk. 4-hour chart shows primary support @ 1200 - K-area and Agreement with 1.618 AB-CD. Here is better to apply the same tactics as we usually do. Take position and when market will show respect to this area - move stop to breakeven and watch what will happen. If market will drop futher - we will decide what to do around 1190... That's probably all that we could do right now...

 

[Sive Morten]

Gold Daily Update Fri 01, May 2015

Good morning,


Reuters reports Gold edged down towards key chart support on Friday after its biggest one-day loss in eight weeks, as disappointment at its failure to maintain a push this week above $1,200 an ounce undermined investor confidence.

Prices held above support at $1,180 an ounce and remained on track to end the week marginally firmer as the dollar remained under pressure against the euro, but it failed to attract fresh interest after Thursday's 1.7 percent fall.

"Gold did try to push up to $1,215 briefly, but it really struggled to get any new longs into the market," Societe Generale analyst Robin Bhar said. "If it can't breach top of range resistance, common sense dictates the path of least resistance is lower."

"Today's run of data should be key," he added. "The dollar is relatively weak, which is supporting gold for the moment, but if gold can't rally when the dollar's as soft as this, it's not a good omen."

Gold has traded in a narrow range over the last month on uncertainty over the timing of the Federal Reserve's first interest rate rise in nearly a decade, despite weakness in the dollar, which suffered its worst month in four years in April.
Markets are now awaiting U.S. ISM manufacturing numbers and University of Michigan sentiment data at 1400 GMT.

Strong data could shore up expectations the Fed is still on track to raise rates this year, which would lift the opportunity cost of holding non-yielding bullion while boosting the dollar.

Major European markets, with the exception of London, were closed for the May Day holiday on Friday.

From a chart perspective, gold is supported at $1,180 an ounce. A weekly close below that level could by the catalyst for a further pull-back, analysts said.

"Technical signals are biased to further downside and are showing signs of acceleration," said Scotia Mocatta in a note.

"We remain bearish and look to a closing break of $1,180, with a focus on further weakness toward the mid-March lows under $1,150."

In Asia, physical demand was light, with China and Singapore were closed for holidays.



So, just we've thought on possible long entry - gold has miserably dropped driven by fundamental data and inability to utilize soft dollar situation. Gold right now is a hostage of fundamental data as no changes in sentiment stands. Again - our suspicious about fragile growth has been confirmed. This is 3rd or even 4th time in last year when we've seen strong growth on gold that was not supported by real money. All of them have failed, and the last on is not an exception...

On daily chart situation has not changed significantly since yesterday. Our major level to watch here is 1175 lows. Moving through it will vanish even potential bullish setup and will open road to 1130 lows. Market is not at oversold, so this is very probable. In fact, this scenario has great chances to happen since market was dropping even on bad US data and soft Fed comments. Now as positive data was released - gold has shown miserable plunge...
Our yesterday setup on long entry was not confirmed, since market has dropped through our level as stone. Thus, now we will wait for breakout through 1175.

Still I put here scenario for daredevil traders and real gamblers. In advance I tell you that I will not take it, but it might be interesting.
So, technically, despite recent drop, potentially upside butterfly is still valid. But there is only one thing that could make it attractive - the price. Such butterfly should be chip. And this is particular the case - market stands just above its invalidation point. Although risk of taking a loss is very high - reward, if upward action will happen is also...
That's the sort of trade that I usually call as "pain or gain". Real gamble. But some traders like it, so I put it there... Besides, EU, China gold markets are closed today....