Sive Morten
Special Consultant to the FPA
- Messages
- 18,639
Fundamentals
Gold mostly stands under impact of the same process as FX market. In our FX research we've posted our position on them and specify major driving factors for markets and global economy in nearest perspective. Mostly they stand around global trade and US import tariffs and US currency appreciation due rising of domestic yields and implied inflation.
Old and well-known geopolitical tensions around Syria chemical weapon incidents are also stand "warm" despite some relief and taking back seat temporary.
Gold market right now has no special direction and is very sensitive to any new issue that appears on global stage. In fact, there are too many inputs for gold that stands in contradiction. They just bring volatility without any stable direction.
For example, rising yields in US is bearish factor for gold, but it reflects rising inflation which is bullish one. Here is question - what will be faster - yields or inflation. Geopolitical tensions are supportive mostly as well as Turkey gold repatriation from US, but they are too short-term, and easily mitigated by any Fed action or tensions relief.
Here we could say just one thing. In long term period any uncertainty is supportive to gold. That's why demand for US Treasuries decreases, while demand for gold from governments and central bank slowly but stubbornly rises. The major question is when major breakout will blow. But in shorter term gold perspectives do look cloudless. It seems that within few months gold will be under pressure due US dollar and economy strength
As Reuters reports - gold edged higher on Friday after the dollar and U.S. Treasury yields backed off highs, but the prospect of a Korean denuclearisation deal eroded bullion's safe-haven appeal.
"The combination of the dollar retreating and the U.S. Treasury yields retreating below 3 percent is giving gold a boost," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.
"We bounced off the technical level 100-day moving average, which was $1,320 and we just moved above it, primary because the
rates in the U.S. moderated a little bit."
COT Report
Recent CFTC data doesn't bring a lot of clarity as well. It shows that open interest increases, but, net position mostly has not changed. It means that new positions are opened, but as shorts as longs are mostly equal, which just confirms idea of indecision:
Technical
Monthly
Last four months gold stands in rather tight range. This is range of January - all following months were spent inside its range. Overall picture holds bullish as well as MACD trend. here we have major AB-CD pattern. The fact, that market has not dropped after COP target completion but turned up is a sign that price sooner or later should proceed to OP around 1450$. At least while it stands above 1220$ lows.
Major resistance still stands at 1380-1391 that includes 2016 top, major Fib level and YPR1.
In fact, most important moment for long-term gold right now is ability to move higher. 1327 level is long-term COP target of AB-CD started at 1046$, in July 2015. First it was reached in July 2017. As we've said above, after logical minor bounce price returns back to it. But right now it should be an action higher, to next 1450 target, which is OP of the same AB-CD.
If gold will not be able to do it - strong drop is possible, because price will fail to proceed next extension leg, showing inability and lack of strength to do it. This could break whole AB-CD construction. Besides, this standing below "B" point also keep door open for downside butterfly. As longer gold will stand under resistance as weaker it position will be.
Thus, our trading range is January one by far.
Weekly
In precvious research we have made following conclusion: "Bullish setup probably will hold, but downside continuation looks more probable on coming week, until external driving factors will change this."
Indeed, gold has moved slightly lower, in the middle of flag range and given us another bearish grabber.
In general we suggest that bullish scenario stands valid while market holds above 3/8 Fib level. All in all this is just minor retracement, guys. And standing above "minor" retracement is a bullish sign.
At the same time, flag range is rather wide, even for daily trading. Previous attempt of breakout was not successful. Appearing of long tails every time when gold challenges 1370 area tells about solid resistance in this area. Last week it was 4th attempt to break it. As more attempts will happen as more tired market will be, and chances on deep pullback will increase.
In classical technical analysis this calls as "Bullish trap" and usually leads to opposite breakout, at least when gold is driven by only technical and economical factors. Now gold makes step in this direction.
Still, as a bottom line, we could say that while gold stands inside the flag and, correspondingly above 1304 Fib level - it keep bullish setup and is oriented on OP target around 1377$ that has not been reached.
Currently we do not have clear signs of bearish reversal yet on weekly time frame. It means that any short positions could be taken, but all of them should be limited by daily/intraday targets and not been held for too long.
Daily
Daily trend stands bearish. On Friday we've mentioned nicely looking 3-Drive "Buy" pattern on hourly chart. Although personally I didn't trade it, but it still has worked and pushed gold slightly higher.
As a result, we see minor bounce up from triangle border and K-support area on daily chart.
Still guys, here we have wide AB-CD pattern and COP target already has been passed. OP, in turn, stands precisely around previous lows of 1302 area. Gold probably will gravitate to this target, at least while it keeps downside tendency on intraday charts.
It is rather difficult to make any forecasts here, because we try to catch chaotic swings of rather choppy action inside consolidation. By taking it all together - failure upside breakout of triangle, bearish trend, fast enough downside action, passing through COP target - all this stuff suggests action to OP.
But unfortunately we do not have clear patterns at all.
Intraday
Here is another reason, on 4H time frame, why we think that downside continuation is highly probable. CD leg of recent AB=CD pattern is rather fast and reaction on OP target was limited. Market already has dropped below it. Next logical destination point is XOP, which stands at the same area again - 1305.
Upward action in April was stopped by MPR1 and this also tells about retracement nature of upside action. Now gold stands below MPP. MPS1 is at 1300 area.
Even with our positive 3-Drive "Buy" pattern gold was not able to break "lower lows lower highs" tendency.
Still if you think about long position - keep eye on reverse H&S pattern and whether gold will hold 1319 lows. In this case higher retracement will be possible. Otherwise, if gold will drop below 1319 - chances on downside continuation in the scale of daily time frame will increase:
Conclusion
Gold market right now is driven by external political factors. Information that is available right now suggests that this should be medium-term lasting action, especially this relates to tariffs turmoil and geopolitical tensions. This fact let's us think that gold will be supported in long-term perspective.
In shorter term gold is a killing market. We try to forecast short lived swings in choppy consolidation. This is not very attractive for trading. Price behavior suggests that gold could move slightly lower, right to 1300-1305 support.
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.
Gold mostly stands under impact of the same process as FX market. In our FX research we've posted our position on them and specify major driving factors for markets and global economy in nearest perspective. Mostly they stand around global trade and US import tariffs and US currency appreciation due rising of domestic yields and implied inflation.
Old and well-known geopolitical tensions around Syria chemical weapon incidents are also stand "warm" despite some relief and taking back seat temporary.
Gold market right now has no special direction and is very sensitive to any new issue that appears on global stage. In fact, there are too many inputs for gold that stands in contradiction. They just bring volatility without any stable direction.
For example, rising yields in US is bearish factor for gold, but it reflects rising inflation which is bullish one. Here is question - what will be faster - yields or inflation. Geopolitical tensions are supportive mostly as well as Turkey gold repatriation from US, but they are too short-term, and easily mitigated by any Fed action or tensions relief.
Here we could say just one thing. In long term period any uncertainty is supportive to gold. That's why demand for US Treasuries decreases, while demand for gold from governments and central bank slowly but stubbornly rises. The major question is when major breakout will blow. But in shorter term gold perspectives do look cloudless. It seems that within few months gold will be under pressure due US dollar and economy strength
As Reuters reports - gold edged higher on Friday after the dollar and U.S. Treasury yields backed off highs, but the prospect of a Korean denuclearisation deal eroded bullion's safe-haven appeal.
"The combination of the dollar retreating and the U.S. Treasury yields retreating below 3 percent is giving gold a boost," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.
"We bounced off the technical level 100-day moving average, which was $1,320 and we just moved above it, primary because the
rates in the U.S. moderated a little bit."
COT Report
Recent CFTC data doesn't bring a lot of clarity as well. It shows that open interest increases, but, net position mostly has not changed. It means that new positions are opened, but as shorts as longs are mostly equal, which just confirms idea of indecision:
Technical
Monthly
Last four months gold stands in rather tight range. This is range of January - all following months were spent inside its range. Overall picture holds bullish as well as MACD trend. here we have major AB-CD pattern. The fact, that market has not dropped after COP target completion but turned up is a sign that price sooner or later should proceed to OP around 1450$. At least while it stands above 1220$ lows.
Major resistance still stands at 1380-1391 that includes 2016 top, major Fib level and YPR1.
In fact, most important moment for long-term gold right now is ability to move higher. 1327 level is long-term COP target of AB-CD started at 1046$, in July 2015. First it was reached in July 2017. As we've said above, after logical minor bounce price returns back to it. But right now it should be an action higher, to next 1450 target, which is OP of the same AB-CD.
If gold will not be able to do it - strong drop is possible, because price will fail to proceed next extension leg, showing inability and lack of strength to do it. This could break whole AB-CD construction. Besides, this standing below "B" point also keep door open for downside butterfly. As longer gold will stand under resistance as weaker it position will be.
Thus, our trading range is January one by far.
Weekly
In precvious research we have made following conclusion: "Bullish setup probably will hold, but downside continuation looks more probable on coming week, until external driving factors will change this."
Indeed, gold has moved slightly lower, in the middle of flag range and given us another bearish grabber.
In general we suggest that bullish scenario stands valid while market holds above 3/8 Fib level. All in all this is just minor retracement, guys. And standing above "minor" retracement is a bullish sign.
At the same time, flag range is rather wide, even for daily trading. Previous attempt of breakout was not successful. Appearing of long tails every time when gold challenges 1370 area tells about solid resistance in this area. Last week it was 4th attempt to break it. As more attempts will happen as more tired market will be, and chances on deep pullback will increase.
In classical technical analysis this calls as "Bullish trap" and usually leads to opposite breakout, at least when gold is driven by only technical and economical factors. Now gold makes step in this direction.
Still, as a bottom line, we could say that while gold stands inside the flag and, correspondingly above 1304 Fib level - it keep bullish setup and is oriented on OP target around 1377$ that has not been reached.
Currently we do not have clear signs of bearish reversal yet on weekly time frame. It means that any short positions could be taken, but all of them should be limited by daily/intraday targets and not been held for too long.
Daily
Daily trend stands bearish. On Friday we've mentioned nicely looking 3-Drive "Buy" pattern on hourly chart. Although personally I didn't trade it, but it still has worked and pushed gold slightly higher.
As a result, we see minor bounce up from triangle border and K-support area on daily chart.
Still guys, here we have wide AB-CD pattern and COP target already has been passed. OP, in turn, stands precisely around previous lows of 1302 area. Gold probably will gravitate to this target, at least while it keeps downside tendency on intraday charts.
It is rather difficult to make any forecasts here, because we try to catch chaotic swings of rather choppy action inside consolidation. By taking it all together - failure upside breakout of triangle, bearish trend, fast enough downside action, passing through COP target - all this stuff suggests action to OP.
But unfortunately we do not have clear patterns at all.
Intraday
Here is another reason, on 4H time frame, why we think that downside continuation is highly probable. CD leg of recent AB=CD pattern is rather fast and reaction on OP target was limited. Market already has dropped below it. Next logical destination point is XOP, which stands at the same area again - 1305.
Upward action in April was stopped by MPR1 and this also tells about retracement nature of upside action. Now gold stands below MPP. MPS1 is at 1300 area.
Even with our positive 3-Drive "Buy" pattern gold was not able to break "lower lows lower highs" tendency.
Still if you think about long position - keep eye on reverse H&S pattern and whether gold will hold 1319 lows. In this case higher retracement will be possible. Otherwise, if gold will drop below 1319 - chances on downside continuation in the scale of daily time frame will increase:
Conclusion
Gold market right now is driven by external political factors. Information that is available right now suggests that this should be medium-term lasting action, especially this relates to tariffs turmoil and geopolitical tensions. This fact let's us think that gold will be supported in long-term perspective.
In shorter term gold is a killing market. We try to forecast short lived swings in choppy consolidation. This is not very attractive for trading. Price behavior suggests that gold could move slightly lower, right to 1300-1305 support.
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.
