Sive Morten
Special Consultant to the FPA
- Messages
- 18,760
Fundamentals
Gold prices edged up on Friday as U.S. equities slipped, but gains were limited after Federal Reserve Chair Janet Yellen said U.S. labor markets remain hampered by the effects of the Great Recession. For the week, gold lost about 2 percent, its biggest weekly loss in five, as speculation over an early interest rate hike following the latest Fed minutes earlier this week weighed heavily on the yellow metal.
In a speech at a central banking conference in Jackson Hole, Wyoming, Yellen said the U.S. central bank should move cautiously in determining when interest rates should rise, as economic disruption of the last five years has left millions of workers sidelined, discouraged, or stuck in part-time jobs.
Gold prices continued to hover just above a two-month low reached on Thursday. Bullion has dropped about 3 percent in the past five sessions, underperforming U.S. Treasury bonds, which are considered the preferred safe-haven investment, traders said.
"I see no reasons to own gold, which is likely to trend lower with rallies being sold. The Treasury yields at under 3 percent and crude oil prices showing signs of a recession are significant headwinds for precious metals," said Jonathan Jossen, COMEX gold options floor trader in New York.
U.S. crude oil futures fell on Friday for a fifth straight week of declines on worries about plentiful supplies. Oil prices have also dropped more than 4 percent in the last 10 sessions, while the S&P equities index fell after investors got few clues about the course of interest rates from Yellen.
Physical demand for gold in major consumers China and India remained weak. Analysts, however, expected buying from India to increase heading into the festival and wedding season, when it is traditionally considered auspicious to buy the metal.
CFTC data currently shows nothing interesting. Yes, we have shy decrease of net long position and simultaneous reducing of open interest. But what is really interesting is a downward trend on open interest, when open interest has decreased for 30% within a year.
Monthly
As we’ve mentioned previously price should pass solid distance to change situation drastically. it could change only if market will move above 1400 area. Recent rally that has started in July seems exhausted and looses pace fast. Even close shift in seasonal trend does not fascinate traders much. Physical demand stands weak, dollar strong, inflation weak and talks around rate hiking also does not add optimism to gold.
Since currently August mostly is an inside month for July our former analysis is still working. Although investors have not got hawkish hints from Fed and recent NFP data was slightly lower than analysts poll, major factors are still valid - good economy data, that right now is confirmed by US companies earning reports, weak physical demand – all these moments prevent gold appreciation. At the same time there are two factors that could support gold soon – seasonal trend, geopolitical tensions. Currently gold stands at very important level that at least theoretically could keep chances on upward rebound. If price will fail here – we probably will start to talk about bear trend again. Tendency could take shape of butterfly as I’ve drawn on the chart, especially because it agrees with bearish grabber target.
It is interesting that during recent rally market was not able to re-test Yearly Pivot and later has vanished our bullish weekly grabbers. This moments make difficult to count on upward reversal. At the same time somehow SPDR reports on shy but stable inflows, Soros fund increase investments in gold mining shares, why?
That’s being said, situation on the monthly chart does not suggest yet taking long-term positions on gold. Still, fundamental picture is moderately bearish in long-term. Possible sanctions from EU and US could hurt their own economies (especially EU). Many analysts already have started to talk about it. It means that economies will start to loose upside momentum and inflation will remain anemic. In such situations investors mostly invest in interest-bear assets, such as bonds. Approximately the same comments we see today from physical traders.
Weekly
As you can see situation drastically has changed here since previous week. On previous week we had bullish trend, price above MPP and three in a row bullish grabbers. And now all this stuff is gone. Trend has shifted bearish, price has closed below MPP and grabbers were vanished by recent candle. In fact, guys, on bullish side right now we have just seasonal trend (should start soon) and some “secret reasons” that support small physical demands as it shows recent rumors and statistics from SPDR fund and CFTC. All other factors point on bearish development.
In short term perspective we mostly speak about 1270 level as important, but on weekly chart crucial level will be 1240. Breaking through it will lead to solid consequences, such as – moving below MPS1, erasing of butterfly and solid confirmation of possible downward AB=CD pattern and in perspective monthly butterfly.
Following strictly to DiNapoli method we should search possibility to take short position, because we do not have bullish directional patterns here and trend as on monthly as on weekly stands bearish.
Daily
And here is why 1270 is important. Trend on daily is bearish as well. Right now market has accomplished as most recent AB-CD (purple line) as initial AB-CD (maroon line) right at 1280 Fib support and created Agreement. But not even this issue is significant but mostly the shape of a big pattern. Standing around 1270 gold keeps at least theoretical chances on reverse H&S pattern and right now market stands at pain or gain situation. Either it will start move up here or it will fail, and next destination will be head’s bottom around 1240... Here, guys, we do not have clear patterns to trade, except may be strong support level itself.
4-hour
Here, market also does not give us clear patterns. We see only shy bounce after strong plunge down. Yes, it could be setup for DRPO pattern, but we’re mostly interesting about true recovery out from 1270. And from that point of view we will keep an eye on different levels breakout. First we would like to see moving above WPP, then it would be perfect if market will pass through K-resistance and finally through WPR1. This will be at least something that let us to treat seariously possible upward action again. But right now we do not see what could be really done on gold market by far. In fact, market has retreated after unsuccess challenge to start upward trend and investors now just wait whether it will be another assault or not.
Conclusion:
Situation on gold market remains sophisticated. Due bearish moments, such as bullish USD sentiment, lack of physical demand, gold has re-established recently downward action. Now it reminds defeated challenge to start bull action and investors mostly wait whether it will be another attempt or not.
At the same time market still stands at level where this attempt is still possible. If gold will fail to hold above 1270, then we will start to speak about 1240 levels probably.
Right now gold is poor for trading setups – no patterns that could traded immediately. All that we have is potential DRPO “Buy” on 4-hour chart. Most part of the week we probably will be watch for resistance levels – WPP, K-resistance and WPR1. If market will break them up – this will be at least something that let us to look at possible move up seriously again. But right now picture mostly stands not in favor of upward action.
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 prices edged up on Friday as U.S. equities slipped, but gains were limited after Federal Reserve Chair Janet Yellen said U.S. labor markets remain hampered by the effects of the Great Recession. For the week, gold lost about 2 percent, its biggest weekly loss in five, as speculation over an early interest rate hike following the latest Fed minutes earlier this week weighed heavily on the yellow metal.
In a speech at a central banking conference in Jackson Hole, Wyoming, Yellen said the U.S. central bank should move cautiously in determining when interest rates should rise, as economic disruption of the last five years has left millions of workers sidelined, discouraged, or stuck in part-time jobs.
Gold prices continued to hover just above a two-month low reached on Thursday. Bullion has dropped about 3 percent in the past five sessions, underperforming U.S. Treasury bonds, which are considered the preferred safe-haven investment, traders said.
"I see no reasons to own gold, which is likely to trend lower with rallies being sold. The Treasury yields at under 3 percent and crude oil prices showing signs of a recession are significant headwinds for precious metals," said Jonathan Jossen, COMEX gold options floor trader in New York.
U.S. crude oil futures fell on Friday for a fifth straight week of declines on worries about plentiful supplies. Oil prices have also dropped more than 4 percent in the last 10 sessions, while the S&P equities index fell after investors got few clues about the course of interest rates from Yellen.
Physical demand for gold in major consumers China and India remained weak. Analysts, however, expected buying from India to increase heading into the festival and wedding season, when it is traditionally considered auspicious to buy the metal.
Monthly
As we’ve mentioned previously price should pass solid distance to change situation drastically. it could change only if market will move above 1400 area. Recent rally that has started in July seems exhausted and looses pace fast. Even close shift in seasonal trend does not fascinate traders much. Physical demand stands weak, dollar strong, inflation weak and talks around rate hiking also does not add optimism to gold.
Since currently August mostly is an inside month for July our former analysis is still working. Although investors have not got hawkish hints from Fed and recent NFP data was slightly lower than analysts poll, major factors are still valid - good economy data, that right now is confirmed by US companies earning reports, weak physical demand – all these moments prevent gold appreciation. At the same time there are two factors that could support gold soon – seasonal trend, geopolitical tensions. Currently gold stands at very important level that at least theoretically could keep chances on upward rebound. If price will fail here – we probably will start to talk about bear trend again. Tendency could take shape of butterfly as I’ve drawn on the chart, especially because it agrees with bearish grabber target.
It is interesting that during recent rally market was not able to re-test Yearly Pivot and later has vanished our bullish weekly grabbers. This moments make difficult to count on upward reversal. At the same time somehow SPDR reports on shy but stable inflows, Soros fund increase investments in gold mining shares, why?
That’s being said, situation on the monthly chart does not suggest yet taking long-term positions on gold. Still, fundamental picture is moderately bearish in long-term. Possible sanctions from EU and US could hurt their own economies (especially EU). Many analysts already have started to talk about it. It means that economies will start to loose upside momentum and inflation will remain anemic. In such situations investors mostly invest in interest-bear assets, such as bonds. Approximately the same comments we see today from physical traders.
Weekly
As you can see situation drastically has changed here since previous week. On previous week we had bullish trend, price above MPP and three in a row bullish grabbers. And now all this stuff is gone. Trend has shifted bearish, price has closed below MPP and grabbers were vanished by recent candle. In fact, guys, on bullish side right now we have just seasonal trend (should start soon) and some “secret reasons” that support small physical demands as it shows recent rumors and statistics from SPDR fund and CFTC. All other factors point on bearish development.
In short term perspective we mostly speak about 1270 level as important, but on weekly chart crucial level will be 1240. Breaking through it will lead to solid consequences, such as – moving below MPS1, erasing of butterfly and solid confirmation of possible downward AB=CD pattern and in perspective monthly butterfly.
Following strictly to DiNapoli method we should search possibility to take short position, because we do not have bullish directional patterns here and trend as on monthly as on weekly stands bearish.
Daily
And here is why 1270 is important. Trend on daily is bearish as well. Right now market has accomplished as most recent AB-CD (purple line) as initial AB-CD (maroon line) right at 1280 Fib support and created Agreement. But not even this issue is significant but mostly the shape of a big pattern. Standing around 1270 gold keeps at least theoretical chances on reverse H&S pattern and right now market stands at pain or gain situation. Either it will start move up here or it will fail, and next destination will be head’s bottom around 1240... Here, guys, we do not have clear patterns to trade, except may be strong support level itself.
4-hour
Here, market also does not give us clear patterns. We see only shy bounce after strong plunge down. Yes, it could be setup for DRPO pattern, but we’re mostly interesting about true recovery out from 1270. And from that point of view we will keep an eye on different levels breakout. First we would like to see moving above WPP, then it would be perfect if market will pass through K-resistance and finally through WPR1. This will be at least something that let us to treat seariously possible upward action again. But right now we do not see what could be really done on gold market by far. In fact, market has retreated after unsuccess challenge to start upward trend and investors now just wait whether it will be another assault or not.
Conclusion:
Situation on gold market remains sophisticated. Due bearish moments, such as bullish USD sentiment, lack of physical demand, gold has re-established recently downward action. Now it reminds defeated challenge to start bull action and investors mostly wait whether it will be another attempt or not.
At the same time market still stands at level where this attempt is still possible. If gold will fail to hold above 1270, then we will start to speak about 1240 levels probably.
Right now gold is poor for trading setups – no patterns that could traded immediately. All that we have is potential DRPO “Buy” on 4-hour chart. Most part of the week we probably will be watch for resistance levels – WPP, K-resistance and WPR1. If market will break them up – this will be at least something that let us to look at possible move up seriously again. But right now picture mostly stands not in favor of upward action.
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.
