GOLD PRO Weekly August 10-14, 2015

[Sive Morten]

Fundamentals

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

Reuters reports Gold rose on Friday as investors assessed U.S. non-farm payrolls data that may indicate the Federal Reserve will delay an immediate interest rate hike, but was still on course for a weekly fall.

Nonfarm payrolls increased 215,000 last month as a pickup in construction and manufacturing employment offset further declines in the mining sector, the Labor Department said on Friday. The unemployment rate held at a seven-year low of 5.3 percent.
"The trade is still speculating that this is still going to be a more protracted process than had been anticipated," said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago, calling the report "not overly positive" for economic conditions and more on the neutral side.
Analysts continued to see gold's upside as temporary, due to strong prospects for the dollar as investors position themselves for an interest rate increase in the United States this year.

Higher interest rates would put non-yield-bearing gold under further pressure, increasing the opportunity cost of holding the metal.

A slew of upbeat U.S. economic data, including Thursday's positive weekly jobless claims, shows "there's not really much to stop the Fed from increasing rates", said Ric Spooner, chief market analyst at CMC Markets in Sydney.

"There's not a lot of natural reasons for investors to buy gold at the moment. The dollar is getting stronger and there's no real sign of inflation on the horizon with weaker oil prices and other commodities," Spooner said.

Guys we suggest you to read the fundamental part in our EUR research that was published yesterday, since gold has similar reaction on NFP data. From one point of view this could mean nothing but possible postponing of first rate hike on October or December as it was said above.
From other point of view (and we think it is closer to reality) markets could treat coming rate hike as “done thing” and start to look over horizon, beyond it. And at the end of the August seasonal trend will shift bullish (see chart below) and hardly we will get tightening rate cycle. Probably this will be isolated issue. This could be the reason why gold has risen despite NFP data mostly was positive.

Recent CFTC data does not bring us any clarity, since as open interest as investors positions barely has changed. Recent couple of months was really tough ones for gold market and it seems that investors have taken some pause to re-assess current situation. So, again we will have to rely on technical issues.

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Summary:

Technicals
Monthly
Last week market has closed just 1$ higher than on previous one. So picture on monthly chart has not changed. August candle is still very small to make any impact on overall picture.
So, now we have just one long-term pattern in progress that has not achieved it’s target yet. This is VOB pattern. It suggests at least 0.618 AB-CD down. And this target is 1050$.
We also have got completed pivot points framework target. Again it has confirmed its reliability. Once we’ve said that in the beginning of the year market showed solid upside action. Gold was able to exceed yearly pivot, passed half way to Yearly Pivot resistance 1 but right now has reversed down and closed below YPP. From technical point of view this is bearish sign and market has hit next destination point of this analysis –yearly pivot support 1 around 1083$.
Since long time frames has not changed significantly, our major task for coming week will be to understand what chances exist that market will drop lower. Or at least find something important that could give us early signs of possible downward breakout or vice versa – upside deeper retracement. All these stuff will be mostly tactical since it stand on daily and lower charts.

Weekly
Last week gold again has formed inside candle. Trend is bearish here. Weekly setup has worked at 100%. Market has hit 1080 target. Still this is just first destination of butterfly – 1.27 extension. As we see acceleration right this level, there are big chances that market will go to next one – 1.618 around 1025 area. Other bearish signs that we have – price stands below MPP and three weeks consolidation more and more reminds bearish pennant.
At the same time, as market right now stands at strong support, chances on short-term upside bounce still exist.

Daily
Daily chart again provides major information for short-term trading. 1080 level, as we’ve mentioned many times, was oversold, is butterfly and inner AB-CD 1.618 targets. Also this is YPS1. So, as a result we have impressive gathering of supports of different kind. We expect that gold could re-test previously broken important 1130 lows. As we’ve said recently we should watching for some DiNapoli directional pattern and shape of DRPO “Buy” is becoming brighter as time is passing by. Finally on Friday DRPO “Buy” pattern has been confirmed. This pattern is important for us by two reasons. First is, DRPO is isolated trading setup, pattern. Second – this is indicator. If it will fail and we will get DRPO “Failure”, that is also directional pattern, we will get clear sign of further downward continuation.
So, short-term conclusion – it is too early to go short, since market at strong support and oversold and we’ve got bullish directional pattern. If DRPO will not fail – gold probably will hit predefined 1126-1130 level. Speaking about the shape of DRPO, it is not perfect of cause. Bottom is flat, while we prefer to see clear two well-recognizable spikes down. They indicate inability of bears to continue move down, a kind of capitulation. But may be flat bottom was formed due strong support area. Anyway, let’s see what will happen with this DRPO. Finally we’ve got the major thing – the pattern, and soon should get the direction, depending on how market will work with DRPO.

4-hour
Now we need to combine other patterns that we have with daily DRPO pattern. Thus, on 4-hour chart trend is bullish and we have triangle pattern. On Monday probably the most important thing should happen, i.e. breakout, or – its failure. Gold right now stands around resistance trend line. Upside breakout will increase chances that DRPO will work.

1-hour
Hourly chart shows market reaction on NFP release. Since gold has hit trend line resistance, it already has shown 3/8 retracement. Here guys, we do not want to see too deep retracement down, because if market will break 5/8 Fib support it will increase hazard of closing below 3x3 on daily chart and DRPO failure. Here have bullish stop grabber that theoretically assumes upside breakout. So, if you’re thinking about long position on gold market, it makes sense to think on Fib levels. An area below 1089 Fib support, will be let’s call it “zone of risk” where chances of DRPO failure will increase. And if gold will drop there – do not take long position. Besides, in this case gold also will be below WPP.
That’s being said perfect bullish scenario suggests that gold will hold above WPP and grabber will work.

Conclusion:
Long-term picture remains bearish and we do not see any serious headwinds for further downward continuation. 1050 is probably nearest perspective that we could imagine, because gold really could drop even lower.
On short-term charts market stands at strong support that could launch short-term technical bounce to 1130 area. Daily traders should monitor daily DRPO “Buy” pattern.


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 11, August 2015

Good morning,


Reuters reports today Gold dropped on Tuesday as the dollar strengthened after China devalued its currency to prop up its economy, adding to the downward pressure on bullion from a looming increase in U.S. interest rates.

Beijing allowed the yuan to fall to its lowest level in nearly three years after a run of poor economic data, with the central bank describing the move as a "one-off depreciation" of nearly 2 percent.

"No one saw this coming and I think gold might suffer a fresh round of downward pressure from here," said Howie Lee, an analyst at Phillip Futures in Singapore.

Bullion climbed nearly 1 percent on Monday, its biggest gain since June 18, as the dollar retreated from its highest level since April against a basket of currencies on the view that Friday's lower-than-forecast U.S. nonfarm payrolls in July meant U.S. rates might not rise next month.

But Lee believed there was still a "60-40" chance of the Fed raising rates in September. "Overall it felt like a good jobs report because there were upward revisions to May and June and higher wage earnings," he said.

Atlanta Fed President Dennis Lockhart said on Monday that a decision to raise rates should come soon. He said he was "very disposed" to a rate increase at the September policy meeting, but stressed that subsequent increases should be gradual.

Gold has been hit by expectations that the Fed would lift rates this year for the first time since 2006. Investors have cut their exposure to non-interest-bearing bullion and raised their bets on the dollar.

The metal has struggled to recover above $1,100 since breaching that key support level in a July 20 rout that pushed bullion down to $1,077 on July 24, its cheapest since 2010.



So, Gold indeed has turned to fast climb as DRPO on daily chart has been confirmed and markets accross the board have reacted "unnaturally" on positive NFP data. Minimum daily target will be around 1135$ - 50% Fib resistance as it suggested by DRPO pattern, but probably it will not be hit today, since gold right now at overbought. Also it is naturally for gold to re-test broken lows. And 1131 is major low on gold market. Last week we almost dispeared to get this upside retracement but when we've got on Friday NFP reaction, the hope hasa risen again...:

Market right now has reached daily overbought and MPP, so some pullback is possible that could be used for long entry. Upside breakout of triangle already has happened, as well as re-testing of broken trend line:

 

[Sive Morten]

Gold Daily Update Wed 12, Aug 2015

Good morning,


Reuters reports Gold gained for a fifth session in a row on Wednesday to trade near a three-week high, benefiting from safe-haven demand as risky assets slid after China's devaluation of the yuan that stoked fears of a currency war.

China's surprise 2 percent devaluation of the yuan on Tuesday, seen as a move to bolster a flagging economy, was condemned by U.S. lawmakers as a grab for an unfair export advantage.

The move hit global equities, prompting some investors to seek safe-haven assets such as gold which has now recovered more than 3 percent from a 5-1/2-year low of $1,077 during a late July rout.

Asian stocks and emerging market currencies tumbled on Wednesday after Beijing allowed the yuan to fall sharply for a second day.

"The only reason gold may benefit will be purely from a safe-haven perspective," said OCBC Bank analyst Barnabas Gan.

But if China's action indeed spurs a currency war, every currency would depreciate and the dollar's strength continues, said Gan, which would eventually weaken gold.

Gan also said the weaker yuan would make it more expensive for China, the world's top consumer, to import gold, potentially extending weak Chinese demand that has been the case since 2014.

China's currency devaluation is unlikely to distract the U.S. Federal Reserve from a domestic economy that appears increasingly ready for higher interest rates, according to economists and Fed watchers.

That could limit gold's upside potential. A looming hike in U.S. interest rates had weighed on non-interest yielding bullion.

"We are still looking for a rate hike this year despite all that's happened," said Gan.



So Gold stands on the course as we've mentioned previously. Our short-term target is 1130-1135 area. Yesterday market ha hit overbought and was have to pause upside action, but today it again has turned to growth. DRPO pattern that was formed here is still valid:

Currently we can't say much new on gold. MArket again has met overobught. Hardly we will see any new high today. More reasonable is to expect some consolidation, until overbought will not be corrected. Retracement that we've expected yesterday to 1105 area has happened. Since overbought again is accompanied by MPP, immediate upside continuation is under question:

 

[Sive Morten]

Gold Daily Update Thu 13, August 2015

Good morning,


Reuters reports Gold edged lower on Thursday as the dollar firmed, but the metal remained near a three-week peak as a weaker Chinese yuan raised doubts about the pace of expected interest rate hikes by the U.S. central bank.

Investors have been betting that the Federal Reserve could raise interest rates at its next policy meeting in September amid a recovering U.S. economy and job market, but investors are factoring in the impact of China's surprise currency devaluation.

"There's a feeling that the devaluation of the yuan may have a tendency to make the Fed more cautious about its monetary tightening," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

"While it may not stop the first one, it may very well make them even more gradual in the pace at which they increase rates and that would be because of potentially lower inflation being transmitted by a weaker yuan to international markets."

China's yuan fell for a third day on Thursday but the central bank said there is no basis for further depreciation in the yuan currency given strong economic fundamentals.

Still, sources told Reuters that there was some support within the Chinese government for a devaluation of perhaps up to 10 percent to help struggling exporters.

An adjustment to China's currency is probably appropriate if the Chinese economy is weaker than authorities there expected, New York Fed President William Dudley said in the U.S. central bank's first public response to the devaluation of the yuan.

Gold demand hit a six-year low in the second quarter, a World Gold Council report showed, as sluggish prices and the prospect of better returns in equities curbed interest in the metal.

SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, said its holdings rose 0.6 percent to 21.6 million ounces on Wednesday, the first increase in days after falling to the lowest since September 2008.


On Gold market situation is very similar to EUR. Every day starts in the same manner - gold meets overbought and turns to retracement, so today is not exception. Trend is bullish on daily chart, we still watching for 1130-1135 area.
At the same time, we do not want to see bearish cross of 3x3 DMA that stands below 1095 or today. So any retracement will be OK, until market will hold above it:

On 4-hour chart we have 2 levels - 1110 and 1095:

It would be nice if gold will stop @ 1110 because this is lower border of upside channel:

If market will break it, then next destination will be around next Fib support.

 

[Sive Morten]

Gold Daily Update Fri 14, August 2015

Good morning,


Reuters reports Gold steadied away from a three-week high on Friday as China calmed jittery global markets, with upbeat U.S. retail sales refreshing expectations for a near-term increase in U.S. interest rates.

But bullion was still set to end a seven-week losing streak after China's yuan devaluation earlier this week pushed investors out of risky assets and into those deemed to be so-called safe havens.

Volatile markets were soothed as the yuan held steady after China's central bank said there was no reason for the currency to fall further given the country's strong economic fundamentals.

"A further decline in volatility may reverse some of bullion's recent 'safe-haven' inspired gains," said HSBC analyst James Steel.

As fears eased that China was looking at further depreciating its currency after Tuesday's shock devaluation, a rebound in U.S. retail sales in July renewed hopes that the Federal Reserve could raise interest rates soon.

The yuan devaluation had raised speculation that the Fed could delay the rate hike, which many analysts had predicted would happen as early as next month.

Gold "will be looking for support around $1,110, while$1,120-$1,125 should cap any moves higher unless we see further yuan depreciation," MKS Group trader Samuel Laughlin said in a note.

Asian buyers of physical gold were sidelined this week as prices recovered, steadying premiums in top consumers China and India.

China's gold demand this year is expected to at least hold steady with last year at just under 1,000 tonnes and will not likely be dented by the currency devaluation, the World Gold Council said.


As on other markets, on Gold we do not see any solid changes yet. Yesterday market has reached overbought and Fib level. This combination gives us DiNapoli bearish "Stretch" directional pattern. Although yesterday we've said that we do not want to get deep retracement and prefferably if market will hold above 3x3 DMA on daily chart, but currently we have to acknowledge that hardly retracement will be small.
At the same time, even deep retracement will not neccesary mean the failure of DRPO, it just means that upside action could change the shape and we probably will get compounded upside action:

On 4-hour chart we see that market has dropped below MPP, so next destination point will be around 1099 Fib support:

On hourly chart market has broken channel. Now we will have to watch for two possible moments. Re-testing of former support and drop lower will mean that market should reach 1096-1099 level.
If market will return back inside the channel, upside action probably will continue immediately, but chances that this will happen are small right now...:

That's being said we think that most probable scenario is appearing of big AB=CD pattern on 4-hour chart, where CD leg should start somewher around 1196 area.