GOLD PRO Weekly December 15-19, 2014

[Sive Morten]

Fundamentals
Weekly Gold Tading Report prepared by Sive Morten exclusively for ForexPeaceArmy.com
Reuters reports, Gold edged lower on Friday as some buyers cashed in recent gains, but the metal had its biggest weekly rise in two months as the dollar retreated and sliding oil prices hurt risk appetite.

Gold was up 2.5 percent this week after Tuesday's big rally. Falling stock markets have prompted some investors to buy the metal as an alternative asset, while a drop in the greenback made dollar-priced bullion cheaper for holders of other currencies.

"When the equity markets dropped quite sharply, precious metals soared, so there is definitely still the link between equities and gold in particular (due to) risk appetite among market players," Commerzbank analyst Daniel Briesemann said.

"Some of the equity markets had a decent run this year. We don't expect this to be continued to the same extent next year, so this might give some tailwind to gold prices."
The spot market briefly fell as much as 1 percent to $1,215.60 after a survey showed U.S. consumer sentiment rose in December to a new eight-year high.

"What we're looking at here is better retail sales," said Eli Tesfaye, senior market strategist for RJO Futures in Chicago.

"These better numbers basically are going to bolster the case for the Federal Reserve to be more hawkish going forward. That's never good news for gold."

European shares posted their biggest weekly loss since mid-2011, while U.S. stocks also fell, putting the benchmark S&P 500 on track for its first weekly decline in eight.

The improved sentiment toward gold showed in the holdings of the world's top bullion-backed exchange-traded fund, SPDR Gold Trust , which rose 0.13 percent to 725.75 tonnes on Thursday, up nearly 5 tonnes this week.

That marks the second straight week of inflows and the biggest weekly increase in its holdings since early July.

CFTC data gives us more confirmation of sentiment shifting on previous week. Thus, two week ago we’ve seen mass short covering, while on last week CFTC shows increasing in speculative long positions and shy growth of open interest. SPDR fund also reports on 5 tonnes of inflow. This is not tremendous inflow, but this is a bit more than just weekly fluctuations:

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Technicals
Monthly
As we’ve said two of our patterns have been completed - bearish grabber @ 1400 and recent dynamic pressure that have led market to 1180 lows and clear them out. Still we have another pattern in progress that is Volatility breakout (VOB). It suggests at least 0.618 AB-CD down. And this target is 1050$.
On previous week we’ve said monthly chart has lost its piquancy. Bullish grabber has not been formed. In December we could get either just trend shifting back to bullish, or bearish grabber that will suggest further downward action. Massive closing of short positions could mean that December might become quiet month. Investors have contracted their positions significantly, pointing that they do not believe in soon downward breakout but also do not fascinating with upside perspectives. Most probable explanation is reducing positions before year end, bonuses calculation and long holidays. This also makes us think that hardly Fed will make any drastical comments on December 17th. They probably will not shake market before holidays and postpone new rhetoric to 2015.
The major driving factor for Gold is inflation and particularly here US economy has problem. Although recent report has shown shy increase in wages, but inflation still stands flat. Accompanied by positive NFP numbers increasing chances on sooner rate hiking will be negative combination for gold. That’s why currently we do not see reasons yet to cancel our 1050$ target.
At the same time guys we see some structural shifts in market sentiment and just can’t ignore it. Hardly could we call mass short covering, increasing longs and SDPR storage just occasional. That’s why although we probably keep our long-term target at 1050$ for awhile, but in short-term perspective we do not exclude deeper retracement to 1265$ area.

Weekly
If you remember the major question of our discussion on previous week stand around “1210” level. We said if market will pass through it – it could be reason for deeper upside retracement. After CFTC and SPDR data we have more bullish signs from technical picture. Take a look that market has erased both bearish grabbers on weekly chart by closing above their tops. Also gold significantly overcomes MPR1 that could be sign of bullish power as well. At the same time, as you can see downward tendency is still valid as market continues to form lower lows and lower highs. That’s why theoretically our 1050 target still could be valid. To speak on changing of downward tendency we need at least to get reversal swing that will form higher top. But we do not have it yet. Right now upside action is held by Fib resistance and daily overbought.

Daily
Daily chart looks a bit poor and empty on first glance. But it contains all our reasons, why we think that gold market looks bullish in short-term. First of all, recall our first discussion of upside rally, it was not supported by real purchases on spot market. That’s why we’ve expected that gold market will drop as it was previously, especially as market has completed upside harmonic swing. And this indeed has happened at NFP release. But after that normal behavior of bearish market has ended. Due to outstanding short covering market has erased NFP plunge and completed AB-CD pattern. Also gold has completed intraday 1.618 AB-CD target and normal market mechanics suggests downward continuation. But instead of this gold has turned to coiling right below major resistance level and formed bullish flag there. Two days before breakout we’ve said that it smells like breakout is possible and this has happened.
Take a look that upside action is really fast. Now add here changing in CFTC, SPDR data, moving above MPR1. And finally, take a look at action on previous week – after solid breakout market has not returned right back down, so it was not W&R. Tight standing above broken tops keeps door open for upside action. And it seems that market has not moved higher previously due overbought. What I’m trying to say that recent market behavior looks mostly bullish, at least in short-term and when action up develops as fast as we have now – in most cases it leads to upside continuation. That’s why in short-term perspective we expect possible reaching of 1.618 daily AB=CD at 1260$ area.

4-hour
On this time frame we do not have many changes. Gold stands in upside channel and shows harmonic retracements. Theoretically, as daily overbought has been corrected and gold has re-tested broken top, upside action could be re-established at any moment. Market will open around WPP. Previous retracements take the shape of AB-CD, may be we will see it again, but it is difficult to say it definitely. Unfortunately we do not have clear reversal patterns as here as on hourly chart. Harmonic swing points on 1208 area as potential start of upside action again.

Conclusion:
Since market still keeps normal bearish tendency we should not refuse our 1050 target yet. Still we just can’t ignore changes that we see in market sentiment by CFTC and SPDR data. This makes us think that market could move to 1265 area in short-term perspective. But this action will not necessary cancel 1050 target.
In short-term perspective market shows bullish behavior, action on previous week definitely has character of retracement. But we do not have clear patterns that could help us better estimate potential start point of upside continuation. All that we have currently is harmonic swing that points at 1208$ area.



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 16, December 2014

Good morning,


According to Reuters news Gold edged higher on Tuesday, aided by a softer dollar, after falling more than 2 percent in the prior session in its deepest slide in over a year following a sustained slump in oil prices.

Apart from oil, investors are eyeing the Federal Reserve's two-day policy meeting which kicks off on Tuesday for clues on the timing of an increase in U.S. interest rates.

The U.S. economy has strengthened and jobs have been created at a faster-than-expected clip since the Fed's last meeting in October, when it reiterated that benchmark rates were unlikely to rise for a "considerable time".

Officials will have to decide whether to replace that phrase despite below-target U.S. inflation and economic weakness in Europe and Asia.

"You're likely to see a volatile market if they don't drop the 'considerable time' phrase," said Victor Thianpiriya, analyst at Australia and New Zealand Banking Group, who sees gold possibly heading to $1,180 by year-end.

The precious metal lost 2.5 percent on Monday - its sharpest fall in a day since Dec. 2, 2013 - giving up all of last week's gains as oil prices tumbled to fresh 5-1/2-year lows, cutting's gold's draw as a hedge against oil-fuelled inflation.

INTL FCStone analyst Edward Meir believes the Fed will keep the 'considerable time' phrase in its statement to be issued on Wednesday, saying policymakers may prefer to wait and see

"whether the U.S. economy will get caught in the undertow of slowing global growth".

"If we are correct in our assessment, we should see the dollar weaken from here and give commodities a slight lift, so we likely would want to stay long gold going into the release, perilous as the short-term looks for the moment," Meir said in a note.


As Meir believes that in short-term gold could raise a bit more, we also think that despite recent decline - nothing is lost yet. On daily chart recent sell-off looks not very pretty for bulls, but right now market has not done anything drastical - just retracement to major 3/8 Fib level and WPS1. Besides, recall what we've said on possible reverse H&S pattern. 1180 area is a bottom of potential right& left shoulders. Thus, this level is crucial, but it was not broken yet. If market will hold above it - chances on upside 1265 action exists. If it will break it down - we could get new long-term downside leg... And it seems that Fed will become a clue for short-term perspective...

On 4-hour chart market has broken our harmonic tendency and upside channel:

Hourly chart shows completion of 1.618 AB-CD that creates also Agreement with daily Fib support. Any normal bullish market should hold on this level. If this will not happen, then we should be ready for downward continuation...:

 

[Sive Morten]

Gold Daily Update Wed 17, December 2014

Good morning,


Reuters reports Gold steadied at just below $1,200 an ounce on Wednesday ahead of the outcome of the U.S. Federal Reserve's last policy meeting of the year, when it may signal how soon it will raise interest rates.

Investors will be watching whether the Federal Open Market Committee will remove the phrase "considerable time" in the statement it will release at 1900 GMT with regard to the timing of an interest rate hike.

Dropping that phrase would mean the Fed is preparing the market for a rate hike next year as the U.S. economy gathers strength, analysts say, which could weaken prices of non-interest bearing assets such as gold.

"I think the Fed will reaffirm that growth has indeed picked up and the data looks positive for the coming year," said Barnabas Gan, analyst at OCBC Bank.

While Gan said the Fed might keep the 'considerable time' phrase to avoid shaking markets, investors were still looking to a higher interest rate environment in 2015 amid a rosier global economy backed by the U.S. recovery.


So, as you can see Fed comes on first place on current week, there are no other significant events right now, thus investors will be closely watching over Fed statement.
Technically nothing drastical has happened. Gold has shown short-term splash on RRouble turmoil, but it has become easy as soon as it has started. As a result market has closed very close to open price and formed mostly inside session.
At the same time gold has confirmed what we've said - it is too early to tell that upside action is doomed. Until market holds around WPS1, Fib level and potential bottom of right shoulder - upside action still possible. This will be even more possible if Fed will change nothing in today's statement.:

In general, guys, situation is very similar to EUR, but with a bit different scale. As on EUR market could form H&S as here it is also possible. EUR is just has started to form right shoulder, while gold stands very close to it's bottom.
On 4-hour chart picture looks mostly bearish - market has broken through trend line, re-tested it and formed couple of bearish grabbers. But as price stands very close to current low this is not very important moment. Besides, here major level to watch for is 1180s, while market could complete grabbers and remain above it.
It means that all stands upon the Fed. It will set direction, no need to gamble right now.

At the same time, investors knew that Fed meeting will happen, they knew what Fed could change in statement, but still - they have closed shorts, as on EUR as on Gold... Hardly this has happened just occasionally. And it seems that chances on Fed flat statement are greater...

 

[Sive Morten]

Gold Daily Update Thu 18, December 2014

Good morning,


Reuters reports Gold climbed 1 percent to trade above $1,200 an ounce on Thursday after the U.S. Federal Reserve said it would take a "patient" approach in deciding when to raise interest rates even as the U.S. economy strengthens.

Fed Chair Janet Yellen said the Fed was unlikely to hike rates for "at least a couple of meetings", meaning April of next year at the earliest.

"The Fed statement does not imply an immediate rate hike. I think gold can stabilise between $1,180 and $1,200," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

Wing Fung's To believes the Fed is on course to hike rates in the middle of 2015, which he said could push gold to its recent low of around $1,130.

Economists at Wall Street's biggest banks remain convinced the Fed will raise interest rates by next June and most expect it to tighten policy more than once in 2015, a Reuters poll found after the U.S. central bank wrapped up a policy meeting on Wednesday.

Thirteen of 19 primary dealers, or the banks that deal directly with the Fed, expect the first rate hike by June, including one forecasting an increase as early as April.

A rebound in gold appetite by top consumers India and China next year should help provide some support to prices, analysts say.

"That puts demand on a better footing and that will offset a lot of the potentially negative sentiment as a result of the Fed raising interest rates," said Victor Thianpiriya, analyst at Australia and New Zealand Banking Group.


So, as we've suggested closing of short positions by investors was not occasional. Fed in fact has held rethoric untouched. It has said that it will not change rate within 2 nearest meetings, but it absolutely does not mean that it will on 3rd one, right?
That's why reaction on market was mild. At the same time Fed has given clear sign that rate will be raised sooner or later. This will keep gold under some pressure.
Following pure technical picture we could say that gold was able to keep chance on upside action and H&S pattern. As result, we have two targets. Fist one is 1265 as 1.618 of AB-CD and 1290-1300 as AB-CD based on H&S pattern:

Right now time will clarify everything. Market should not hold around current level too long. If it will not start upside action - this will look bearish and increase chance on failure of H&S...

 

[Sive Morten]

Gold Daily Update Fri 19, December 2014

Good morning,


According to Reuters news Gold edged up above $1,200 an ounce on Friday as buyers helped the metal hold up against rising equity markets, paring losses fueled by worries over a looming hike in U.S. interest rates.

A surge in gold prices to above $1,230 an ounce last week from around $1,140 a week earlier has spurred caution among investors, said Yuichi Ikemizu, branch manager at Standard Bank in Tokyo.

"People are not overly bearish anymore. They have learned their lesson when gold rallied sharply so they're not bold enough to go short around these levels," he said.

Spot gold was up 0.2 percent at $1,200.50 an ounce by 0711 GMT, after hitting a session high of $1,201.50. The gain helped cut bullion's weekly loss to 1.8 percent from more than 2 percent earlier in the day.

That fall was largely on account of Monday's 2.5-percent drop - its deepest this year - amid worries over rising U.S. interest rates in 2015.

The Fed, after wrapping up a two-day meeting on Wednesday, signalled it was on track to increase rates next year but said it was taking a patient stance, allowing gold to erase some of its losses.

Fed's no-rush stance to withdraw stimulus from the U.S. economy sent Asian shares to their best day in 15 months on Friday, taking their cue from a rally on Wall Street.

"Gold prices are currently capped by a stronger dollar and ongoing weak oil prices. Equity market gains further reduce the appeal of alternative assets like gold. Despite this, gold keeps challenging the $1,200/oz level," HSBC analysts said in a note.

In India, gold importers are offering a discount of $2 an ounce versus London prices for the first time in almost five months due to excess market supply.

Importers generally charge a premium over London prices but demand in the world's second-biggest gold consumer is expected to fall sharply this month after shipments surged in the past three months.


So, as you can see no big changes in investors' sentiment at the year end. People mostly start looking for holiday and finish active investments by far. Thus, gold has not shown any drastical action recently. Market is still coiling around very important area of 1180. This is edge point. While standing here market keeps chances on upside continuation to 1265 and next to 1290-1300 as will be kept possible H&S pattern here. Failure here will lead market 1130's first and then will be able drop to ultimate monthly 1050 target.

As we've said yesterday - if market will stand here for too long, this also will be negative sign, since H&S pattern suggests relatively fast turn to upside action at the bottom of right shoulder.
Intraday charts also do not show any clear patterns or any additional valuable information yet. May be CFTC and SPDR data will help us somehow. We will take a look at it tomorrow.