Gold GOLD PRO WEEKLY, December 16 - 20, 2019

Sive Morten

Special Consultant to the FPA
Messages
18,571
Fundamentals

Compares to other markets this week, especially FX, Gold mostly has just one driving factor - this is US/China Agreement. Other markets were under impact of Fed statement, statistics, UK election results, but gold was looking straightforward, right to the Sunday, when new tariffs should have to be imposed, or... agreement signing.

As we know now - the latter has happened. Yesterday in our FX report we have made great discussion on this subject and I just do not want to re-type the same here.

Gold extended gains on Wednesday, rising nearly 1%, after the U.S. Federal Reserve held interest rates steady and signaled borrowing costs are likely to remain unchanged indefinitely, sending the dollar and Treasury yields lower.

After cutting rates three times earlier this year, the Fed left its benchmark rate at the target range of between 1.50% and 1.75%, in a widely expected move.

“Gold is pushing to fresh highs above $1,475 per ounce as Jerome Powell sets a high hurdle to rate increases,” said Tai Wong, head of base and precious metals derivatives trading at BMO.

“Gold approaches $1,480 pivot which had been a durable bottom of the $1,480-$1,520 range from Aug to Oct; a move back higher combined with a bond rally could renew bullish interest which has dissipated somewhat over the past month.”

Fed Chair Powell said in order for the U.S. central bank to move rates up, it would have to see a significant, persistent rise in inflation.

In the wake of Powell’s comments, the dollar index slipped to a four-month low, while U.S. Treasury yields crept lower.

“If we continue to see dollar weakness for the rest of the year, we could see gold make a run back toward the $1,500 an ounce level,” said Edward Moya, a senior market analyst at OANDA, in a note.

Despite news on Agreement and that it should be signed in the beginning of the January - gold reaction was mixed. Initially it has dropped, but, by the end of the session mostly played back the loss.

Gold prices rose on Friday as investors remained cautious about the developments in the United States and China trade negotiations, while political uncertainties in
the world's biggest economy further boosted the metal's safe-haven appeal.

"Although there seems to be some progress, the lack of details is causing a lot of concern that we're not as far along in the trade deal as people would like and as a result we are getting a flight to safety," said Jeffrey Sica, founder of Circle Squared Alternative Investments.

Stocks swung between gains and losses, as investors were confused about signs of progress despite positive comments from both sides.

"The fact that gold is trading near $1,475 shows that there is still good interest in gold market... Although we have seen some risk appetite emerging on the back of phase one trade deal, other uncertainties continue to linger around U.S. political outlook," Standard Chartered Bank analyst Suki Cooper said.

A Democratic-controlled U.S. House of Representatives committee approved charges of abuse of power and obstruction against Republican President Donald Trump on Friday, making it almost certain he will become the third American president in history to be impeached.

Now guys, take a look at CFTC data - it doesn't show any sell off on gold market as we mentioned this previously:

1576401634780.png

Source: cftc.gov
Charting by Investing.com



SPDR Fund statistics shows action in a row with gold price - some decreasing in gold reserves but not dramatic:
1576401988454.png

Source: SPDR Fund, FPA calculations

As a bottom line, we could say that fundamental picture totally corresponds to technical one. Yes, gold shows some downside reaction on tensions' relief. At the same time, there are a lot of questions to US/China trading relations, as well as other as political as economical problems around the world, which support interest to gold as safe - haven asset.

Even on Friday, reaction on agreement was moderate. The fact that investors mostly keep long positions through the year change and do not hurry to sell them tells that common sense, in long-term perspective (I mean hedgers) dominates over emotions which are mostly presented by speculators. Our technical view mostly suggests the same. While in short-term perspective downside retracement could continue - we have no doubts on bullish long-term sentiment on the market, at least at current moment.

Besides, US/China precedent is just a beginning. Our long-term followers should remember that we already talked that once US will get everything from the China - they turn to Europe. We already know about car producers tariffs, although they were postponed and luxury goods tariffs that D. Trump imposed on French goods. Now we have more - D. Trump intends to intrude in Boeing vs. Airbus rivalry and impose tariffs on EU plane maker.

D. Trump do not forget about emerging markets as well. Last week, Donald Trump announced via Twitter the restoration of tariffs on Brazilian and Argentinian steel and aluminium imports. The commodities were subject to one of his early rounds of blanket tariffs, but Brazil and Argentina received an exemption. Now that the two countries have been “presiding over a massive devaluation of their currencies”, they are being restored.

It is really naive to suggest that US now leave everybody along and will be happy with things per se. Nope. US has huge negative trade balance and huge Budget deficit, national debt. Partially D. Trump is right as US gets loss on merchant when they theoretically should get profit. China freely uses technologies and patents free of charge and sell electronic made by these patent to US population, although this is actually american electronic, its just made in China. Anyway... this is off-topic a bit. The thing that I really want to say here is D. Trump doesn't intend to stop and continue to improve US statistic. He will twist hands to opponents by tariffs or whatever else, if needed.

Thus, from this point of view, demand for gold and keeping long-term bullish positions looks reasonable. Besides, it is too much to talk here, but we also see problems on stock market which could play its own role in new splash of demand to gold. If you want to know - you could read this article.

Technical
Monthly


December month is very small, barely impacts yet on overall picture. Technical situation is very interesting right now. Short-term price action looks bearish and shows strong downside swings, but all of them are not strong enough to break longer-term picture, which still stands bullish. That's what we've said above on difference between long-term and short-term situation. This is also confirmed by CFTC data. It means that although we've traded gold long first and short then - now is a moment when we have to be delicate and careful with any bearish position. Price comes to the limits and the edge where downside action starts directly confront with longer term bullish context.

On monthly chart situation mostly stands the same and gold keeps bullish context by far. MACD trend stands bullish and price action is forming tight flag consolidation right under resistance area. In general we keep 1530-1585 range as major monthly resistance here.

Butterfly pattern suggests at least 3/8 retracement, which seems solid pullback on lower time frames. It could look scaring but in reality this is normal technical reaction on achievement important target.

That's being said monthly chart keeps long term bullish tendency intact by far.

gold_m_16_12_19.png


Weekly

Weekly trend stands bearish. Although market has shown the reaction on Fib support and weekly Oversold area, that we could call as bullish "Stretch" pattern here, but price wasn't able to climb too high.

By taking a broader view on situation - we have two support areas. First one is hit already at 1447, next one is K-support area of 1377-1405. K-area is also the target suggested by monthly butterfly pattern. Taking in consideration the momentum, it seems that drop should continue, especially when it seems that upside bounce is over. Fundamental factors currently supports this direction - China agreement, flat Fed position and not bad US statistics could push gold slightly lower. Now we see that price is not at oversold any more.

Another, pure technical reason, is too small pullback from support/oversold area. Market can't move above 50% of weekly black candle, which keeps bearish context valid.

Here we keep going with AB-CD pattern. Its COP target already has been hit, upside reaction is over. Next target is OP @1419 level.

gold_w_16_12_19.png


Daily

Technically situation stands difficult. First is, we do not have any clear patterns second - market is clinched between two K-areas on both sides, which makes difficult to show any action. The only more or less sign that we have - a kind of bearish dynamic pressure. Trend has turned bullish long-term ago, but price action mostly stands flat. It brings some advantage to bearish scenario, but again - no clear context yet.

Thus, I would suggest that we should keep going with our last week tactic - watch for intraday patterns, take nearest targets. Longer-term positions could be open around strong levels. We see some similar signs on sideways retracement after "C" point drop and current retracement. They have almost equal shapes.

gold_d_16_12_19.png


Intraday

Meantime our tactic works nice. We've got three patterns last week and all of them has hit minimal targets, despite that sometimes context and following events were quite opposite to them. It seems that we could proceed next week with the pattern that we've started this week. Our minor reverse H&S pattern on 1H chart and started upside pullback. As you can see, potential short-entry at OP target has reached minimal target (3/8 retracement), despite that market continues upward action. Now we're coming to XOP - the target that we initially suggested for short entry.

We could treat XOP twofold. As you can see, this is also AB=CD (blue) target, which in broader view gives us "222" Sell pattern here. Once again - if you decide to trade it - focus on nearest target and move stop to breakeven when market hits 3/8 downside retracement level. The common algorithm is as follows - open position, once market hits minimal target - close 50%-100% of position, move stop to breakeven on 2nd 50% if you hold it.

gold_1h_16_12_19.png


Conclusion

Gold market behavior shows that investors stand caution and keep long-term longs, don't trusting too much in so called relief of US/China piking. And this is wise decision as after China - EU could follow and any other country, say Japan. Another driving factor that could become stronger in nearest weeks is D. Trump impeachment. Now it stands as Congress battle by far, but it becomes tougher with any new round. At least, last year attempt has finished in vain, but this year Democrats pour themselves into this subject. Technical view also doesn't suggest yet any bearish reversal on the market and keep bullish context.

In shorter-term combination of positive US statistics, dovish Fed and breakthrough in US/China tariffs war could lead to some relief and deeper downside action on a background of Christmas holidays sentiment.
 
Greetings everybody,

Gold market mostly stands in the same area where we've left it on Friday. On daily chart we do not see any crucial breakouts by far and keep following our strategy - trading of short-term intraday setups:
gold_d_17_12_19.png


On 4H chart gold has formed yesterday reversal candle, which accurately corresponds to our setup:
gold_4h_17_12_19.png


Our "XOP" entry point has worked perfect and 4H reversal action was due reaching of this target. Now we have large '222" Sell in progress and few smaller patterns. Now, as you can see gold is forming 2nd chance to go short based on minor "222" Sell, which is, in turn, the part of H&S pattern. Our primary downside target is 1472 Agreement area, next, ultimate target is Agreement around 1468.

gold_1h_17_12_19.png
 
Greetings everybody,

Gold stands in very tight range in recent three sessions, so we have no choice but to deal just with very small patterns on intraday charts. Yesterday, although with some tricks, but downside action has happened. As a result, on 4H chart we've got, as I call it - "2 bars" stop grabber, which still makes possible downside action:
gold_4h_18_12_19.png


On 1H chart now some kind of H&S pattern is forming, with another "222" Sell potential pattern. Still, we also have bullish hidden MACD divergence here. As market has not shown downside action due our XOP and reversal candle - risk of upside continuation exists now as well. If market will run above recent top, it means that it comes back to 1486 area. So, if you still decide to take short position here - move stop to breakeven as soon as possible and take nearest target, say OP around 1472 Agreement. Bulls have to wait upside breakout and erasing any chances on downside deeper retracement. If you do not want to be churned in this mess - just sit on the hands and wait for clear setup, when gold will leave this consolidation.
gold_1h_18_12_19.png
 
Lets look at bitcoin again.

Context;

-Weekly controlling XOP support
-Daily Wash and Rinse of weekly XOP node.

@BTCUSD (Daily) 2019_12_19 (9_21_16 AM).png


Short Term Trade Plan;

Daily unconfirmed up, 4hr is up and 1 hour is trusting. We will look to fade 30 min sell at good support.

@BTCUSD (30 Minute) 2019_12_19 (9_22_48 AM).png
 
Greetings everybody,

On gold market we have not much to consider today. Actually, on daily chart trading range stands extremely narrow. In fact, further direction depends on breakout of this narrow range:
gold_d_19_12_19.png


On 4H chart our grabber is done well, and now I'm interested with only one thing - inability of the market to keep upside tendency inside the channel. Now it seems that gold is failing to reach the top border of the daily flag, forming a kind of rounded top action. This, in turn, could be early signal that downside breakout is coming...
gold_4h_19_12_19.png


On 1H chart rounded action looks even better. Our "222" Sell has done perfect yesterday, but now unfortunately we do not have any new patterns by far. Still, it is possible to take short position on upside pullbacks, until market stands below "C" top. Breakout of "C" point will mean that we return back to 1490 - 1500 daily resistance area. While gold stands below "C" top - it should go step by step from one target to another. Thus, our minor OP at 1470 is done, next one XOP at 5/8 support, then COP of larger AB-CD pattern around 1465 etc. But, for truth sake, it is difficult to call as very attractive trading context... This is just what we have to deal with, as we do not have anything better by far.
gold_1h_19_12_19.png
 
Greetings everybody,

Guys, it is nothing to say about gold market today, so we take a look at GBP. In fact market is achieved predefined conditiions - dropped to strong daily K-support area and oversold. Despite, that in longer term perspective we expect downside continuaiton, first, some upside pullback should happen and we intend to trade it:
gbp_d_20_12_19.png


On 4H chart, as we've suggested reaction on XOP was really anemic and market dropped directly to daily area. Now, we have bearish reversal swing on 4H chart, which is potentially bearish. But, before this bearish potential will be realized, GBP should show moderate upside retracement. It seems that it has chances to reach 1.32-1.3250 area, at least:
gbp_4h_20_12_19.png


Thus, we have everything what we need to take position, except final thing - the pattern. We need clear bullish reversal pattern on 1H. Now, most obvious suggestion is reverse H&S pattern. Here you can see the 1.618 ratio between recent two bottoms, which is typical for H&S. Also we have bullish MACD divergence around. Thus, we think that we could focus on it. It means that our potential entry moment is a bottom of right arm around 1.3060 area...
gbp_1h_20_12_19.png
 
Lets look at bitcoin again.

Context;

-Weekly controlling XOP support
-Daily Wash and Rinse of weekly XOP node.

View attachment 49359

Short Term Trade Plan;

Daily unconfirmed up, 4hr is up and 1 hour is trusting. We will look to fade 30 min sell at good support.

View attachment 49358

UPDATE:

4hr sell is approaching... We need to get out if we loose 4hr up trend. Set stop loss to breakeven and take profit to 7650.

Regards,
 
Back
Top