GOLD PRO Weekly, December 04-08, 2017

[Sive Morten]

Fundamentals

(Reuters) - Gold jumped on Friday as the dollar and U.S. stocks fell on an ABC news report that former national security adviser Michael Flynn was prepared to tell investigators that Donald Trump directed him to make contact with Russians during last year's presidential election campaign.

Shares on Wall Street fell immediately after the report. Investors feared the political news could affect whether the Senate will pass a tax bill backed by Trump.

Within moments, however, gold came off its highs and U.S. stocks bounced off lows. Michael Matousek, head trader at U.S. Global Investors in San Antonio, noted that U.S. Senate Republican leader Mitch McConnell said there were enough votes to pass the tax bill in that chamber.

The report about Flynn "was a good catalyst for people who were anticipating buying gold. It sparked the fear trade," Matousek said. Reuters has not verified the ABC News report, which cited a Flynn confidant.

Spot gold was up 0.3 percent at $1,278.01 an ounce by 1:39 p.m. EST (1839 GMT), after peaking to $1,289.50. The yellow metal was poised to end the week 0.8 percent lower. U.S. gold futures for February delivery settled up $5.60, or 0.4 percent, at $1,282.3 per ounce.

"Tax reform would be negative for gold," said Commerzbank analyst Carsten Fritsch, "because this will lead to higher inflation and more Fed rate hikes." He said the recent weakness in gold could be attributed to
an ongoing rally in global equity markets, boosted by "economic optimism and hopes regarding tax reform".

U.S. stocks this week hit record highs on bets that U.S. tax reforms would go through. On Thursday, gold fell 0.7 percent to touch its lowest since Nov. 6 at $1,270.11. A lack of clear drivers has kept gold between $1,265 and $1,300 an ounce throughout November, its narrowest monthly range in 12 years.

Separately, federal prosecutors said Flynn pleaded guilty to lying to the Federal Bureau of Investigation and also admitted to speaking with a top member of the Trump transition team regarding his communications with Russia's ambassador to the United States.

COT Report

So, now we know that Senate approves tax reform. On gold sentiment charts information looks blur. On CFTC report data we see that traders have closed shorts and gold net long position has increased. At the same time, overall net position stands at record highs and gold has limited upside potential. Mostly all speculators stand long. But, as rule, right at these moments market turns in opposite direction.

Second, on SPDR fund we see that storages have increased slightly while price has dropped. Although average range of fluctuations as SPDR data as gold prices now looks mostly as just noise - price usually stands one step ahead of SPDR - just check historical part of the picture. Whether this Senate's decision will bring collapse for gold?
Here is what we've read above, in comments:
"Tax reform would be negative for gold," said Commerzbank analyst Carsten Fritsch, "because this will lead to higher inflation and more Fed rate hikes." He said the recent weakness in gold could be attributed to
an ongoing rally in global equity markets, boosted by "economic optimism and hopes regarding tax reform".

The problem here is that recent data stands just for 28th of November, when gold showed upside triangle breakout on daily chart... So, this data could not reflect all reality.
Thus, it seems that sentiment analysis points just on possible downside action because gold stands near extreme levels of net long position. But we do not know how recent events will impact on sentiment. All that we have is just comments from Commerzbank trader.

Technical
Monthly

Monthly chart barely was impact by recent activity. Mostly our analysis here stands the same and we really have some fears on gold market perspectives, especially in the light of approved tax reform.

Recent events, guys, make us take critical look at action on gold market. Key markets show hints on dollar strength that could last for 6-8 months. As we coming closer to 2018 and December Fed meeting, as stronger pressure of anticipating of dollar strength becomes.

Thus, last time we've shown long-term charts on 10-year Notes, Dollar Index. They are suggest strong growth of US Interest rates that will be supportive for dollar, but deadly for gold market. Currently we see temporal relief but we still treat it as preparation for reversal in favor of USD.

And now perspectives of upside action do not look as promising as it was 2-3 months ago.

Currently gold has formed "222" Sell pattern on monthly chart. When price has started up from 1050 lows - long-term bear trend line has been broken and re-tested later. But after that upside action has slowed significantly. Besides, this upside action has taken the shape of AB-CD pattern, that is typical for retracement.

This makes us doubt on upside continuation here and we suspect that this AB-CD action of "222" pattern mostly should be treated as retracement after drop out from 1380 area rather than new upside leg.

September month has shown reversal shape and if it would have closed slightly lower, we could call it as "reversal candle".

October doesn't bring a lot of new inputs as trading range is rather small and mostly as September as October still stand in August range. November stands even smaller inside October range. this nested action indicates market's contraction and sooner or later will lead to fast breakout in one or other direction.

Besides, market stands at strong resistance area around 1330. It already has been tested once, but it is still valid. This is not just 3/8 major monthly Fib level. This is also Yearly Pivot Resistance 1.

Year is coming to an end and the fact that upside action was stopped by YPR1 tells that 2017 upside price action mostly a retracement of long-term bear trend.

Yes, we have bullish scenario as well. Next major target will stand around 50% Fib level and Agreement, as it coincides with upside AB=CD objective point as well. Market could take the shape of butterfly to get there, if our "222" pattern will fail. 1.27 extension also stands in the same area. But to keep this scenario valid price should not drop too deep. If gold will break 1205 lows, it will suggest deeper downside continuation and put butterfly and any upside continuation under question.

Right now we've got something, the new feature. It has not been totally formed yet, but it could appear. This is bullish grabber on monthly chart as MACDP line already has been tested. To be honest guys, I have real doubts on its count, as there are 3 weeks of action till the end of December and recent drop was really strong on gold market.
If miracle still will happen - this grabber could turn all situation from top to bottom.

Weekly

Here trend still stands bearish. Market stands in contraction phase as most recent swing is smaller than preceding one. In this kind of action price usually keeps valid opposite scenarios, and our case is not at exception.

If we will take careful look at the chart - we will see that here are possible as butterfly "Buy", as multiple "222" patterns as butterfly "sell".

Gold here also has completed harmonic retracement, after minor bounce up it showed deep retracement, but kept lows valid, and now shows upside action.

As on GBP, here price stands also near strong support area and forms triangle on daily chart.Thus, our task here is the same - watch for patterns and try to find safe way to trade it.

At first glance it might seem that we have bullish dynamic pressure as trend has turned bearish in early September, but price has not dropped any more. I suspect that this is not quite correct, as market is supported by strong K-support area. And particular this area but not some hidden bullish power keeps gold on surface.

So, as now as before we do not see on weekly gold any good setup for trading. Large '222" sell pattern has reached already "at least" target @ 3/8 Fib level. So, it could push price lower, but this is not an obligation any more. Thus, odds of this event are significantly lower

Daily

On daily chart situation also looks more bearish rather bullish. Take a look - market has failed to stay above broken triangle. Line already has been broken but price was not able to continue move higher and take out of 1305 top.

Trend has turned bearish here, and failure upside breakout now has become a "bullish trap" by classical technical analysis. It significantly increases opposite direction breakout.

As 1305 top is still valid - hence, our potential downside butterfly is valid as well. Gold also has dropped below MPP and Friday attempt to return back has failed.

Thus, currently it is very difficult to find some reasons to go long here.

Intraday

Here we see classical bearish behavior. Speaking on large AB-CD pattern - market was not able even to reach 1.0 extension and stopped at 0.618 by completion minor ab-cd inside the channel.

At the end channel was broken down and gold has formed bearish reversal swing. In fact, minor ab-cd was completed in mid November and recently target has been just re-tested. Gold has shown inability to continue move higher and formed W&R of previous top. After that collapse has happened.
Final confirmation of bearish reversal will be on a moment of "C" point breakout and erasing of large AB-CD pattern.

As soon as channel was broken and reversal swing been formed - gold has shown 5/8 upside retracement on Flynn Russian probe soap opera. As it was a point event and rally is not based on some strong background - it should go as fast as it has come.
As a result we have "222" Sell pattern at re-testing of broken channel line:

May be tax reform approving will bring some surprises on Monday, but by pure technical view - market has done all preparations for downside extension.

Conclusion

On longer term perspective now more factors have appeared that indicate more pressure on gold due coming USD strength. Now long term perspectives look even more blur, especially with tax reform approving.

In shorter-term perspective technical picture mostly looks bearish, as gold has done all preparations for downside continuation with daily butterfly 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.

 

[shahsavari]

Thank you very much

 

[Sive Morten]

Good morning,

(Reuters) - Gold prices held within a tight range in Asian trade on Tuesday, supported by a slightly weaker dollar as investors awaited the next steps over U.S. tax reform legislation for clues.

Spot gold was nearly unchanged at $1,275.24 an ounce by 0405 GMT. It shed 0.3 percent in the previous session. U.S. gold futures were steady at $1,277.90.

The dollar dipped on Tuesday, after climbing to 2-1/2-week high against the yen on Monday after the U.S. Senate approved a major tax reform bill, moving Republicans and President Donald Trump closer to their goal of slashing taxes for businesses.

"Gold is expected to trade in a narrow range between $1,260- $1,290 per ounce - with near term movements more towards the lower end of the range. The passage of the U.S. tax bill would likely boost equities and be detrimental to gold," said John Sharma, an economist with National Australia Bank.

However, an ongoing investigation into contacts between Trump's election campaign and Russia, after Michael Flynn, former national security adviser to the President, pleaded guilty to lying to the FBI, sparked concerns among lawmakers and weighed on market sentiment.

"Currently, gold is still supported by ongoing geopolitical tensions and controversies surrounding Michael Flynn," Sharma said.

Investors are also looking ahead to the upcoming U.S. non-farm payrolls report later this week which would be the last employment report before the Federal Reserve's monetary policy meeting next week.

"The latter will likely result in a rate rise and a modest downward pressure on gold, since the rate rise decision is largely priced in by markets," Sharma said.

The Fed is almost certain to raise interest rates later this month, according to a Reuters poll of economists, a majority of whom now expect three more rate rises next year compared with two when surveyed just weeks ago.

Higher interest rates tend to boost the dollar and push bond yields up, making greenback denominated, non-yielding gold more expensive for holders of other currencies.

Spot gold looks neutral in a narrow range of $1,272-$1,277 per ounce, Reuters technicals analyst Wang Tao said.

SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, said its holdings fell 0.14 percent to 846.93 tonnes on Monday.

On Gold market our suggestion on negative impact of tax reform approving seems to be correct, as gold has dropped on Monday. So, taking in consideration coming NFP report and Fed meeting next week - gold will remain under pressure. Yesterday SPDR has lost another 2 tonnes of storages. On daily chart we still keep our suggestion on possible butterfly appearing with 1245 first target:

For short-term perspective hourly chart is most important. Our "222" Sell has reached minimal target and now has no special meaning any more. What is really important is a long-ranged candle. Because in short-term perspective breakout direction will be a decisive moment. Any fluctuations inside of it will be not as important. Thus, right now market could form some kind of AB-CD up and try to close gap, as bullish grabber has been formed around...Becasue market will just wait for ADP and NFP reports.
Right now it seems that downside breakout looks more probable. So, here we will watch for bearish patterns inside this huge candle.

 

[Sive Morten]

Today we will take a look at GBP instead gold market. On gold everything develops according to our expectations by far as daily triangle has been broken down yesterday.

On GBP we have long-play scenario. According to our last weekly analysis, we're watching for bearish reversal patterns here and trying to estimate which one will become major pattern. Now we have second "222" Sell @1.618 target.

Although market has chances to reverse down, but as abscence of bearish reversal patterns as shape of price action mostly makes us treat it as retracement by far.

That's why, we think that first we could keep an eye on 4-hour "222" Buy pattern that should start around K-support area:

On hourly chart, we could get butterfly, that, in turn will finalize downward action and trigger "222" :

 

[Sive Morten]

Good morning,

(Reuters) - Gold prices were mostly steady on Thursday amid a firm dollar, trading within sight of a two-month low hit earlier this week.

Spot gold was nearly unchanged at $1,263.21 an ounce by 0406 GMT. It marked its lowest since Oct. 6 at $1,260.71 on Tuesday. U.S. gold futures were flat at $1,265.70.

The dollar inched up against its peers on Thursday, as optimism towards U.S. lawmakers making progress on tax legislation continued to grow. U.S. Senate Republicans agreed to talks with the House of Representatives on the tax legislation on Wednesday, amid early signs that lawmakers could bridge their differences and agree on a final bill ahead of a self-imposed Dec. 22 deadline.

Hopes that tax reforms would boost economic growth have dented demand for safe-haven assets such as gold. INTL FCStone analyst Edward Meir said gold could move slightly lower heading into next week's Federal Reserve meeting as investors would be jittery about the Fed's policy wording going forward.

Markets are widely anticipating an interest rate hike by the U.S. central bank next week and are waiting on the outlook for further rate hikes in 2018. Gold is highly-sensitive to rising interest rates, as these tend to boost the dollar, in which the metal is priced.

"Gold will continue to be under pressure in view of rate hikes, dollar gains and strong U.S. data," said Argonaut Securities analyst Helen Lau.

Spot gold is poised to break support at $1,262 per ounce, and fall to the next support level at $1,250, according to Reuters technicals analyst Wang Tao.

Meanwhile, global holdings in gold-backed exchange-traded funds (ETF) rose by 9.1 tonnes to 2,357 tonnes in November, with the net inflows coming entirely from Europe as the U.S. dollar fell, the World Gold Council said on Wednesday.

On Gold market our suggestion was mostly correct as gold has collapsed. On daily chart there are two important moments have happened - price has dropped below recent lows and it has broken major 5/8 support. Thus, our next destination here is 1248 butterfly target. It means that on intraday charts we need to search patterns for short entry:

On 4-hour chart market has completed AB=CD target around MPS1. It means that 1-2 sessions market could spend in upside retracement. And this is what we're watching for.

Our yesterday '222" Sell has worked nice. Now we have butterfly at the bottom as well. It seems that most probable retracement levels are 1263 and 1269. Both of them are K-areas. Previous swing mostly points on first one. But here it is all about the patterns. No matter what level will be - we will use those that will coincide with potential bearish pattern, "222" Sell, for instance.

That's being said, on gold market right now upside bounce is possible. As we have incompleted 1248 daily target, we will try to use this retracement for taking short position, if it will be confirmed by clear bearish pattern, such as '222" sell.

 

[Sive Morten]

Good morning,

(Reuters) - old edged up in early trade on Friday as investors resorted to bargain hunting after the yellow metal dropped below its recent trading range to hit the lowest in more than four months overnight.

Spot gold was up 0.2 percent at $1,248.86 an ounce, by 0328 GMT, after hitting its lowest since July 26 at $1,243.71 in the previous session.

The metal was down for a third straight week, headed for its biggest weekly decline since early May. U.S. gold futures were 0.2 percent lower at $1,250.70.

"Even as the dollar is firmer, there seems to be a bit of bargain hunting around. I do, however, think that the pressure is on the downside and rallies will still be sold," a Hong Kong-based trader said.

The dollar inched higher on Friday, as the passage of a bill to temporarily extend U.S. government funding raised investors' optimism that a tax reform bill would also pass. The greenback took a brief knock earlier this week on concerns over a government shutdown, and as U.S. President Donald Trump raised tensions in the Middle East after he recognised Jerusalem as the capital of Israel.

The Islamist group Hamas urged Palestinians on Thursday to abandon peace efforts and launch a new uprising against Israel in response to Trump's recognition of Jerusalem as its capital.

"Gold might have found some support in that but it seems to be just the dollar strength across the board now heading into the end of the year," the trader said. The number of Americans filing for unemployment benefits
unexpectedly fell last week, suggesting a rapid tightening of the labor market that bolsters expectations the Federal Reserve will raise benchmark interest rates next week.

Higher U.S. interest rates tend to boost the dollar, making greenback-denominated gold more expensive for holders in other currencies. Markets will be eyeing the U.S. non-farm payrolls report due later in the day, which will be last employment report before the Fed meeting next week.

"Market-watchers are likely positioning for a FOMC rate hike next week. Overnight, the improvement in risk appetite considering the postponing of the U.S. partial government shutdown and further progress in Brexit talks should buoy market sentiment into the next week," said OCBC analyst Barnabas Gan.

Meanwhile, Asian shares on Friday rallied for a second session as investors awaited major economic data, and cryptocurrency bitcoin shot above $16,600 to its highest ever.

Spot gold may drop more to $1,239 per ounce, according toReuters technicals analyst Wang Tao.

On gold market everything stands well, as price has reached our first target around 1245 area. But at the same time gold has met daily OS level. It means that currently it is not good position to go short, although overall situation stands bearish and gold should continue action, at least to 1230 level.

4-hour chart also shows that price has reached another important target - 0.618 of major AB-CD:

So, here we have just two possibilities. For daily traders - do nothing and wait for upside bounce, watch for bearish continuation patterns on intraday charts. For intraday scalp traders - hourly chart could be useful. For example, here we could get DRPO "Buy", in a shape of butterfly "Buy" pattern that could trigger upside bounce: