GOLD PRO WEEKLY, December 07-11, 2015

[Sive Morten]

Fundamentals

Gold rose more than 2 percent to the highest in nearly three weeks on Friday after a U.S. non-farm payrolls report, seen as likely to pave the way for the U.S. Federal Reserve to raise interest rates this month, failed to aid the dollar's ascent.

Non-farm payrolls increased 211,000 in November, the Labor Department said. September and October data was revised to show 35,000 more jobs than previously reported.

"The second consecutive strong jobs report only briefly blunted the gold rally as renewed euro strength and U.S. dollar weakness has driven further short covering in gold," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York, adding this was despite the fact that a December rate hike was now more or less guaranteed.

"I'm not sure today's news was so surprising but more confirming," said Rob Haworth, senior investment strategist for U.S. Bank Wealth management in Seattle, adding that it led some holding short positions to book profits.

Bullion prices extended Thursday's bounce from a near-six-year low, buoyed then by monetary easing measures from the European Central Bank that fell short of expectations.

"Shorts were squeezed ... market got way too carried away and over positioned shorts," a London trader said.

"There were two contradicting factors today: NFP, OPEC...oil to zero, gold to the moon."

Brent oil futures lost more than 2 percent, falling below $43 a barrel.

The main focus for the gold market now remains the Fed's meeting on Dec. 15-16 when many expect an interest rate increase, which would be the first in nearly a decade. Higher rates tend to weigh on non-interest-paying gold by increasing the opportunity cost of holding it.

Investors have been positioning for such a move by pulling out of bullion funds. Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, are at their lowest since September 2008.

CFTC data mostly shows contraction of long position, but last data stands at Wed, so we do not know exactly how it has changed due Friday doom&gloom action. As it stands on Wed, net speculative long position was decreasing with simultaneous diminishing of open interest. It means that investors were closing long positions. Probably this was preparation as for NFP release as for Fed meeting. Now we need just wait and see what current rally is. If market will erase it within 2-3 sessions this will be one situation while if rally will be kept and expanded - this will be quite another tune.

Technicals
Monthly

So, Goldman expect bearish continuation to 1000$ area and we have to return back to medium-term bearish view as drop was really miserable within last 2 weeks. Today we will expand view down a bit, since mostly all our patterns have been completed.

We still think that currently gold should be mostly driven by geopolitics, rather than economics. This driving factor creates absolutely new scale of uncertainty and leads to very fast changes on Globe political situation. That's why we suspect that gold market hardly will fall dramatically, since we're just in the beginning of Middle East tensions. Currently we see clear signs that situation will become worse in nearest 2 months or so. If you would like to see relatively true picture - watch for "zero hedge fund" website materials as on policy as on economy. These guys know what they talk about.

As market gradually will start to come to the same conclusion as gradually situation on gold market will start to change in positive area. Still, 1000$ area is relatively close and these two events do not contradict to each other, just because they are of a bit different time scales.

Speaking on breakeven points between bullish and bearish sentiment - market should show significant upside action and form bullish reversal swing to destroy current bearish domination. It means that gold has to exceed 1310 area.

So, 1050 level has been hit. Minimum target of VOB pattern has been completed and we come to this moment 1-2 years. Also market has hit some other targets. Bearish dynamic pressure also has done well since market has created new low.

Still guys, we have to say that as VOB as pressure patterns are not necessary should stop at minor targets. Gold could continue move down to next ones. Market just has completed what was necessary. And if we will take a look over the horizon a bit, then we will see nice area around 850-890 level - Agreement around major Fib support, and monthly oversold.
If we recall dollar index chart and that it should continue move up, then it will be not a surprise to see gold drop lower.
Actually I see some artificial action in this gold weakness. I can't prove it, but something curious with this move down... it makes me feel uncomfortable.
Anyway, we'll see. Since all major targets have been hit - now it is a question of whether gold will hold below 1050 or not.
On coming week we will be watching for recent rally, how gold will deal with it, whether it will erase it or not.
In fact, guys, "must" bearish targets have been hit, other targets are the kind of "as you wish". So, gold could reach, but this will be some kind of freely action... If this will not happen, strategically we even could turn to "preparation for upside reversal" phase. To get this clarity we will need some time. That's why in nearest term, we mostly will be focus on tactical action.

Weekly

So, not as strong as expected NFP numbers have brought relief to bearish tension on gold market and has triggered bounce up.

At the same time some of our targets have not been reached yet. This is AB-CD, butterfly 1.618 extension. But this move for another 25$ should be treated as sub-product of major action to 1050$.

Not necessary that this has to happen tomorrow, probably this action will be postpone for some time. But existing of untouched targets makes overall situation tricky.

From tactical point of view gold has reached some other targets - 1.618 of First butterfly, 1.0 extension of purple AB-CD (on chart it is purple line), lower border of the wedge. As a result we've got bullish engulfing. This makes situation relatively simple for 1-2 weeks. Market should either drop and erase this pattern by moving below its lows. Or, we will get 2-leg upside retracement on daily chart.

Daily

Daily picture looks really promising and assumes at least 2-3 patterns that could be formed on coming week. First of all we could get some DiNapoli directional pattern - either B&B "Sell" or DRPO "Buy". B&B probably will be the first one that we will be watch for. But it has not been formed yet, since gold has not reached Fib level. So if it will do it on Monday-Tue, then B&B will become reality.
Another chance is DRPO "Buy", if B&B will not be formed and gold will drop without testing 3/8 Fib level.

Both of these patterns agree with weekly engulfing. If we suggest that engulfing will work, then B&B could become the pattern that will form BC leg of possible upside AB-CD. Most probable target of this upside action is 1120-1130.
DRPO, could become the one that will trigger upside action, and it has approximately the same target - 50% Fib resistance.

So, gold already has done initial steps, not let's keep watching what particular patterns we will get:

4-hour

Here we do not have something special. Yes, breakout has happened as soon as market has formed butterfly. Now we're mostly interested in chances on slightly higher action and appearing of B&B on daily chart. If we will treat recent action here as double bottom, then, target stands slightly higher and market could creep a bit more. May be market will form some butterfly "Sell" pattern. It would be perfect, probably.

Hourly

For example, if market will show retracement to WPP first and then turn to forming of butterfly - it's target will stand precisely at daily Fib resistance.
Now market has completed minor 1. 618 AB-CD pattern and retracement to WPP is really possible.

So, today intraday charts show just some possible scenarios. May be we will get some other patterns, but this is not as important. Whatever we will get - we will be able to trade it and get clarity on recent rally and it's durability.

Conclusion:
We think that market participants gradually will start to understand that situation in World is changing, Globe uncertainty is growing and this will lead to re-assessment of gold value. But this is long-term process. In general, gold already has hit "must" long-term targets. Moving lower is possible but it is not necessary from technical point of view. Right now the key factor is gold behavior around recent rally - either it will erase it or keep it.
In short-term perspective we should get multiple patterns on daily chart and will try to trade them.


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]

Good morning,

(Reuters) - Gold struggled to recover from overnight losses on Tuesday on expectations of a Federal Reserve rate hike next week and a robust dollar.

The metal was also hurt by a slide in commodity prices, particularly crude oil which was near 7-year lows as OPEC continues to pump near record oil to defend market share

"Plunging commodity prices and a stronger dollar set the stage for a retreat in gold prices," HSBC analyst James Steel said.

"Prices may stay on the defensive but further losses (are seen being) limited."

Further weakness in oil prices could trigger fears of deflation, a bearish factor for gold that is often seen as an inflation-hedge.

A stronger dollar on the other hand makes greenback-denominated gold more expensive for holders of other currencies.

The dollar clung to gains from a two-day rally on Tuesday, after Friday's strong U.S. nonfarm payrolls data supported widely held market views that the Fed would hike interest rates for the first time in nearly a decade later this month.

Higher rates tend to drag on non-interest-paying gold by increasing the opportunity cost of holding it, while boosting the dollar.

Bullion has lost about 9.5 percent for the year, its third straight annual decline, on expectations of the rate hike.

Investor sentiment has been downbeat. Assets in SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, tumbled 0.65 percent to 634.63 tonnes on Monday, the lowest since September 2008.

Speculators held a record high short position in COMEX gold futures and options in the week to Dec. 1, recent data showed.

Elsewhere, China's gold reserves rose by nearly 21 tonnes last month, the biggest purchase since it began disclosing monthly data on the stockpile earlier this year, central bank data showed on Tuesday.

Among other precious metals, silver steadied following a 2 percent drop overnight. Platinum edged up after a 3 percent drop on Monday, while palladium extended losses.

So, on gold market we have similar situation as on EUR - first thurst o Friday after long bearish drop. The major question that we've discussed in weekly research is - what pattern will be formed that trigger downward retracement? On daily chart we see that gold has not quite reached 3/8 Fib resistance and is not at overbought. It means that we have neither B&B "Sell" nor Stretch pattern.
Hence, we could get only DRPO "Buy" or...nothing, just downward continuation. While gold will form DRPO "Buy" - it could reach finally 1038 lows by second bottom of the pattern. This is very often happens, when second bottom of DRPO stands slightly lower than the first one.

Meantime, on 4-hour chart gold has dropped below WPP. Our plan suggested retracement to just WPP that could keep chance to form , say Butterfly "Sell" and lead gold to B&B "Sell" on daily chart. But gold has dropped lower and currently it seems that some AB=CD down looks more probable that upside reversal:

 

[Billy Whiz]

Hi Sive, You use a lot of abreviations such as DRPO and B&B. Where can I find a glossary of all the abreviations so I can research them. Thanks Bill

 

[Sive Morten]

Hi Bill,
Detailed explanation you could find in DiNapoli book "Trading with DiNapoli levels". It is easy to find it for free in the net.
Also you could Search in my thread. There are a lot of times when we've traded these patterns, so here should be a lot of videos and posts with explanation.

 

[stelore]

Hi Bill,
here are some old bookmarks about DRPO and B&B I saved in the past to learn how they work.



http://youtube.googleapis.com/v/BmzgYURC8oM

https://www.forexpeacearmy.com/fore...35018-usd-cad-daily-video-july-10-2014-a.html



I hope it will help
Stefano

 

[Sive Morten]

Good morning,

Reuters) - Gold extended gains on Wednesday, supported by softness in the dollar, but the metal's upside was limited as investors anticipated a Federal Reserve rate hike next week.

Bullion traders are not optimistic of a sustained rally in prices as the U.S. central bank is widely expected to raise interest rates for the first time in nearly a decade at its next policy meet on Dec. 15-16.

Higher rates are expected to dent demand for non-interest-paying gold, which has already lost 9 percent of its value this year in anticipation of the rate hike.

"Gold will consolidate in the $1,065 to $1,085 range ahead of the Fed meeting," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers Ltd in Hong Kong.

Bullion is tracking the dollar for now, he said.

The dollar slipped for a second day against other major currencies on Wednesday, after climbing to a 12-1/2-year high last week on expectations of the rate hike.

Gold traders chose to cover their shorts on the dollar weakness. Speculators' net short positions in COMEX gold futures and options were at a record high in the week to Dec. 1, according to the most recent data.

Investors have been boosting bets that gold will soon drop to $1,000 an ounce, options data show, ahead of next week's Fed meeting.

The slide in commodity prices, particularly crude oil, is also weighing on gold. Crude has fallen to its lowest in nearly seven years as OPEC continues to pump near-record amounts of oil to defend market share. [O/R]

Weakness in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation.

Here is difficult to add something really new. It is really possible that market could remain quiet until Fed meeting next week, and, may be Friday's Retail Sales could move it a bit. As we've said yesterday, as gold has not continued move up - it should show leg down, but the depth of this move could be different. Speaking from perspectives of DiNapoli patterns - market could form DRPO "Buy" pattern. In this case it should reach previous lows or even complete finally, our AB-CD pattern.
Another scenario here - market could just continue move lower, this is also possible.

On 4-hour chart we see that gold market looks heavy and shows inability to move higher. Current upward action is very choppy, has no signs of thrust and confirms that this is just respect on reaching WPP and Fib support area. That's why currently some form of AB-CD action down is possible:

 

[Sive Morten]

(Reuters) - Gold was treading water on Thursday as investors stuck to the sidelines ahead of a widely anticipated U.S. interest rate hike next week, with even a slump in the dollar failing to trigger interest in the metal.

Bullion investors are cautious as the U.S. central bank is expected to raise rates for the first time in nearly a decade at its next policy meeting on Dec. 15-16.

Higher rates should dent demand for non-interest-paying gold, which has already lost 9 percent of its value this year and is on track for its third year of losses.

"Gold remains locked in a fairly tight range as investors are either sitting on the sidelines or are set in their positions already leading into next week's FOMC meeting," ANZ said in a note published Thursday, referring to the Federal Open Market Committee of the U.S. Federal Reserve.

Spot gold was steady at $1,073.58 an ounce by 0642 GMT, after closing down 0.1 percent in the previous session.

The metal last week slid to $1,045.85, its lowest since February 2010, but has recovered modestly on short covering.

The technical picture for gold looks neutral at $1,064-$1,084, but the bias is towards the downside, Reuters technical analyst Wang Tao said:
The range is formed by the 7 percent and the 14.6 percent Fibonacci retracements on the fall from the Jan. 22 high of$1,306.20 to the Dec. 3 low of $1,045.85. A break above $1,084 could lead to a gain to the 23.6 percent level at $1,107, while a break below $1,064 could cause a loss to $1,046.

The bias could be towards the downside, as gold failed twice to break $1,084, indicating the bounce from $1,045.85 could be too weak to extend to $1,107. Most likely, the metal could consolidate in the range for one or two days.

Gold failed to log gains despite a 1.1 percent drop in the dollar index on Wednesday to its lowest in a month.

A softer dollar makes greenback-denominated gold cheaper for holders of other currencies, and typically sends gold prices higher. But the looming U.S. rate hike is keeping a lid on prices.

A slide in the oil price to a seven-year low, along with a dip in the broader commodity markets, added pressure to gold.

Weakness in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation.

In the physical markets, gold premiums in India fell this week as a modest rebound in prices from multi-year lows prompted consumers to postpone purchases, but buying interest in China remained strong ahead of the spring festival early next year.

Gold market looks a bit heavy, compares to FX. If, on FX major are created new highs after Friday's rally, Gold market is still stuck in it's range. Daily picture shows that market has failed to break 1085 resistance and still stands below MPP and this is bearish sign. It is difficult to say definitely what particularly holds market from upside action - either future Fed meeting, or, technically, existing of 1038 target... But as market has failed multiple attempts to move above MPP - this increases chances of downward action:

On 4-hour chart theoretically, we could suggest, say, appearing of butterfly "Sell" pattern, until 1066 lows are valid. But recent action hints that this is mostly shadow possibility. Recent drop has formed some kind of bearish grabber that increases chances on AB-CD action that we've discussed yesterday:

That's being said, mostly we look for the same - either some kind of reversal pattern with double bottoms, may be DRPO "Buy"... Or, just downward continuation. Current AB=CD on 4-hour chart represents just minimal downward action, in reality it could be stronger, right to the bottom...

 

[Sive Morten]

Good morning,

(Reuters) - Gold drifted lower on Friday and was headed for the seventh weekly drop in eight weeks as investors positioned for a likely U.S. rate hike.

A strong U.S. nonfarm payrolls report last week cemented expectations of a rate hike at the Federal Reserve's policy meeting on Dec. 15-16.

The expected hike would be the first in nearly a decade and will dent demand for gold, a non-interest paying asset.

Spot gold fell 0.2 percent to $1,069.50 an ounce by 0646 GMT, after closing flat over the last two sessions. For the week, bullion fell 1.6 percent.

"The path of the euro-dollar may be the most visible influence on gold, at least until the Fed meeting," said HSBC analyst James Steel.

"If the Fed raises rates, gold may be in for a knee-jerk reaction lower," said Steel, adding that the metal will be range bound until next week's meeting.

A robust dollar was limiting interest in gold. The greenback rose for a second session on Friday, extending a rebound from a one-month low on expectations of a rate hike.

A higher dollar makes greenback-denominated gold more expensive for holders of other currencies.

Weakness in oil was also hurting bullion prices. A slide in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation.

U.S. crude prices remained near 2009 lows in early Asian trading on Friday as oil output in the Middle East continued to rise despite an existing global glut.

outlook for gold looked bearish.

Short positions in COMEX gold futures and options are at record highs, while assets in SPDR Gold Trust, the top bullion exchange traded fund, are at their lowest since Sept. 2008.

Investors have boosted bets that the gold price will soon drop to $1,000 an ounce, options data show.

Gold, on track for a third straight annual decline, has lost 9.8 percent of its value this year.

The technical picture for gold looks neutral in the $1,064-$1,084 range, but a break below $1,064 could take the metal to a near-six-year low of $1,045.85, according to Reuters technical analyst Wang Tao.

So, guys, on gold market we haven't got any significant progress - just next inside session. As we've said yesterday, picture mostly looks bearish due inability of market to break through 1085 resistance and MPP. Standing below pivot confirms bearish sentiment. It seems that hardly any strong action will happen till Fed meeting:

On 4-hour chart market totally has completed our expectations. Yesterday we've suggested that gold has ghost chances on upside action and although theoretically it could form butterfly - we have solid doubts on this sub. Besides, yesterday we've discussed 2-period bearish grabber.
Right now, as you can see - grabber has hit target and washed out previous lows. Simultaneously it means destruction of butterfly, even theoretically.
Hence, right now market probably will work out minor bullish engulfing that has appeared recently, and after that will continue action with our AB=CD pattern to 1062 support area: