Sive Morten
Special Consultant to the FPA
- Messages
- 18,767
Fundamentals
Gold shows good dynamic in few recent months and keeps positive mood. Shortly speaking a lot of factors support demand for the gold. Mostly they are the same that we've mentioned yesterday in EUR report - unrest in France and other countries, political problems in Germany, US-China tariffs piking, weak forecast of EU economy. Also we need to add such technical moments as long holidays and risk aversion that should appear around it.
Gold has shown decline on Friday due dollar strength, but this decline was totally anticipated and is a part of our trading plan. Major reason for decline was inner dollar strength but not some weakness of gold per se.
As Reuters reports - the dollar rose to a 19-month high after data showed U.S. consumer spending appeared to gather momentum while industrial production rebounded in November.
“The strength of the dollar has weighed across the complex. The key driver (of prices) in the next few sessions is going to be the markets’ expectations for the Fed,” said Suki Cooper, precious metals analyst at Standard Chartered Bank.
Markets are awaiting the Federal Open Market Committee (FOMC) meeting on Dec. 18-19, at which the U.S. central bank is widely expected to raise interest rates. The focus, however, would be on the outlook for 2019.
“With the Fed rate hike next week, any gold price rise will be hampered by expected dollar strength,” said Ronan Manly, a precious metals analyst at Singapore-based dealer BullionStar.
Gold prices rose to a five-month peak of $1,250.55 an ounce on Monday, but has given up all the gains as the dollar strengthened against a basket of major currencies.
“With China’s economy slowing, along with Germany and parts of the European Union, one would expect interest in the gold market,” Walter Pehowich, executive vice president of investment services at Dillon Gage Metals, wrote in a note. “But with the dollar being so strong ... it’s going to take a major news story to bring the price of gold back in favor with investors.”
Speaking on coming Fed meeting - it is not rate increase itself important, but what J. Powell will tell about US economy perspectives and future Fed policy. December rate change is already priced in.
Demand for physical gold was lacklustre in major Asian hubs this week as high prices dented bullion’s appeal going into the holiday season, with buying interest in second biggest consumer India likely to be subdued for the rest of the year.
“It’s very quiet ... the gold market is firmer, so people are hesitant to buy,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
Top consumer China saw premiums of $5-$6.50 per ounce being charged over the benchmark, down from last week’s $5-$7.4 range. In Hong Kong, premiums were unchanged at $0.60-$1.50 an ounce.
“Even with the festive season, if the prices are too high, buyers will not budge,” a Hong-Kong based dealer said.
“We could perhaps see gold (demand) coming back below the $1,220 (price level),” said Brian Lan, managing director at Singapore dealer GoldSilver Central. “If prices come down, we might see some buying because both the new year and the Chinese new year are coming up. Also, this is the wedding season, so these are times where people need to buy.”
Demand was subdued in India as well, with retail buying curtailed by a rally in domestic bullion prices to their highest level in seven weeks.
At the current price level, people are not interested in making purchases and are waiting for a correction, said Ashok Jain, proprietor of Mumbai-based wholesaler Chenaji Narsinghji.
“Even in the next one-month, retail demand will remain subdued due to ‘Khar Mass’,” Jain said, referring to a period in the Hindu calendar from Dec. 16 to Jan. 14 considered inauspicious, when people avoid weddings, buying gold or property.
Dealers in India were offering a discount of up to $4 an ounce over official domestic prices, versus a $1.5 discount in the previous week. The domestic price includes a 10 percent import tax.
Jewellers were not making big purchases as they expect weak demand in the next few weeks, said a Mumbai-based dealer with a bullion bank.
Despite flat situation on physical jewelry market, CFTC data shows big shift in sentiment supported by solid volume. Net speculative position has turned bullish with significant demand.:
While speculative position mostly has changed due short covering, hedgers added big amount of short positions, which means that they increase hedge against possible growth. This makes overall sentiment positive on the market:
Take a look that just within one week position has changed for 49K contracts. This is big jump:
Source:CFTC.gov
Charting by Investing.com
Technical
Monthly
Recent 4 months gold shows tight trading range. Currently we could recognize shape of flag consolidation, which, as a rule, becomes a continuation pattern. Now gold stands in the center of impact of different short-term and long-term factors. Long-term factors mostly are political and suggest changing of global political situation, breaking of Pax Americana global model. Avoiding too much talking on this subject we would say that so strong global shifts never could happen without big political events. This should provide big support to gold market. Now it is widely suggested that these processes should accelerate closer to 2020 year. For example, here is report by Fathom Consulting and their expectations to see world crisis around 2020.
In shorter-term perspective situation is unstable and subject to change. Just few weeks ago everybody thought that it is one more year of active Fed policy, so rate could be 3+% by the end of Fed cycle. Now situation has changed. Some factors appears, some changes and some are gone to passed. All these stuff put the shadow on gold price behavior. Inflation expectations have dropped significantly as in US as in EU now. If Fed will hold rate hike and stock market will keep head above the water - gold market remains under pressure. More aggressive interest rate policy and stock market collapse should provide support to gold.
As a result, downside target could change. Here, on the chart we have butterfly "Buy", but it also could be "222" Buy pattern. Trend stands bearish on monthly chart and vital area is 1380 top. We could talk about breaking of long-term downside tendency only when gold market break through this area.
Technically, it is more probable that downside action will continue, because market already has done to attempts to go higher and failed both times. On second attempt, by the way, upside action was slower and weaker. It means that deeper retracement should happen before next attempt. Recall, that we treat current upside action as retracement only on weekly chart...
Weekly
This time frame is most important now because it shows as short-term as long-term setups. In short-term we keep an eye on upside retracement. Initially it has started as reaction on reaching YPS1 and weekly oversold. So, it should had to be technical bounce. Indeed, price action is gradual, we do not see any signs of upside reversal. In fact, there are two major upside targets left untouched. First one is XOP of minor ab-cd pattern, and larger one AB=CD that creates Agreement area with 1286 major Fib level. Both patterns provide "222" Sell.
Longer-term view suggests downside continuation, because we have untouched OP target of large AB-CD pattern around 1113$ area. CD leg is very fast drop, thus chances that target will be hit looks solid:
Daily
So, daily and intraday charts could be used for day-by-day work with upside weekly retracement. Now we have temporal stop, as butterfly "sell" was completed, and market shows respect to this target.
Our trading plan for this week has worked perfect. Now we already should have long position as our entry point has been hit on Friday.
On daily we've got bullish grabber that turns equilibrium in favor of immediate upside continuation instead of deeper retracement.
Intraday
Here is our entry setup. Recall that we've agreed to go long here - at Agreement area of minor XOP target and 1235 Fib level. Our trading plan suggests two possible scenarios. Either gold will proceed higher immediately, or, it moves to 1243 area and turns down for second leg retracement, forming H&S pattern here. Both scenarios let us protect position with breakeven stop. In second scenario we should out at breakeven and wait next entry level, which should be 1227-1229 K-support.
But... we've got daily bullish grabber guys. It means that chances of first scenario are better for now. If you have missed long entry at predefined point - you could do this at small retracement of bullish engulfing pattern that we've got here. Next upside target is 1260-1265 area. Since this is weekly target as well - it's the first one where potentially downside reversal could happen.
Conclusion:
Gold market stands in the center of impact different global factors, political and economical. This makes extremely difficult process of forecasting for longer-term perspective.
Short-term sentiment stands positive on gold. It lets us keep our existing scenario with action to 1260-1265 (potentially to 1286) target. For truth sake this action is a retracement only and downside reversal has good chances to happen once retracement will be completed.
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 shows good dynamic in few recent months and keeps positive mood. Shortly speaking a lot of factors support demand for the gold. Mostly they are the same that we've mentioned yesterday in EUR report - unrest in France and other countries, political problems in Germany, US-China tariffs piking, weak forecast of EU economy. Also we need to add such technical moments as long holidays and risk aversion that should appear around it.
Gold has shown decline on Friday due dollar strength, but this decline was totally anticipated and is a part of our trading plan. Major reason for decline was inner dollar strength but not some weakness of gold per se.
As Reuters reports - the dollar rose to a 19-month high after data showed U.S. consumer spending appeared to gather momentum while industrial production rebounded in November.
“The strength of the dollar has weighed across the complex. The key driver (of prices) in the next few sessions is going to be the markets’ expectations for the Fed,” said Suki Cooper, precious metals analyst at Standard Chartered Bank.
Markets are awaiting the Federal Open Market Committee (FOMC) meeting on Dec. 18-19, at which the U.S. central bank is widely expected to raise interest rates. The focus, however, would be on the outlook for 2019.
“With the Fed rate hike next week, any gold price rise will be hampered by expected dollar strength,” said Ronan Manly, a precious metals analyst at Singapore-based dealer BullionStar.
Gold prices rose to a five-month peak of $1,250.55 an ounce on Monday, but has given up all the gains as the dollar strengthened against a basket of major currencies.
“With China’s economy slowing, along with Germany and parts of the European Union, one would expect interest in the gold market,” Walter Pehowich, executive vice president of investment services at Dillon Gage Metals, wrote in a note. “But with the dollar being so strong ... it’s going to take a major news story to bring the price of gold back in favor with investors.”
Speaking on coming Fed meeting - it is not rate increase itself important, but what J. Powell will tell about US economy perspectives and future Fed policy. December rate change is already priced in.
Demand for physical gold was lacklustre in major Asian hubs this week as high prices dented bullion’s appeal going into the holiday season, with buying interest in second biggest consumer India likely to be subdued for the rest of the year.
“It’s very quiet ... the gold market is firmer, so people are hesitant to buy,” said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.
Top consumer China saw premiums of $5-$6.50 per ounce being charged over the benchmark, down from last week’s $5-$7.4 range. In Hong Kong, premiums were unchanged at $0.60-$1.50 an ounce.
“Even with the festive season, if the prices are too high, buyers will not budge,” a Hong-Kong based dealer said.
“We could perhaps see gold (demand) coming back below the $1,220 (price level),” said Brian Lan, managing director at Singapore dealer GoldSilver Central. “If prices come down, we might see some buying because both the new year and the Chinese new year are coming up. Also, this is the wedding season, so these are times where people need to buy.”
Demand was subdued in India as well, with retail buying curtailed by a rally in domestic bullion prices to their highest level in seven weeks.
At the current price level, people are not interested in making purchases and are waiting for a correction, said Ashok Jain, proprietor of Mumbai-based wholesaler Chenaji Narsinghji.
“Even in the next one-month, retail demand will remain subdued due to ‘Khar Mass’,” Jain said, referring to a period in the Hindu calendar from Dec. 16 to Jan. 14 considered inauspicious, when people avoid weddings, buying gold or property.
Dealers in India were offering a discount of up to $4 an ounce over official domestic prices, versus a $1.5 discount in the previous week. The domestic price includes a 10 percent import tax.
Jewellers were not making big purchases as they expect weak demand in the next few weeks, said a Mumbai-based dealer with a bullion bank.
Despite flat situation on physical jewelry market, CFTC data shows big shift in sentiment supported by solid volume. Net speculative position has turned bullish with significant demand.:
While speculative position mostly has changed due short covering, hedgers added big amount of short positions, which means that they increase hedge against possible growth. This makes overall sentiment positive on the market:
Take a look that just within one week position has changed for 49K contracts. This is big jump:
Source:CFTC.gov
Charting by Investing.com
Technical
Monthly
Recent 4 months gold shows tight trading range. Currently we could recognize shape of flag consolidation, which, as a rule, becomes a continuation pattern. Now gold stands in the center of impact of different short-term and long-term factors. Long-term factors mostly are political and suggest changing of global political situation, breaking of Pax Americana global model. Avoiding too much talking on this subject we would say that so strong global shifts never could happen without big political events. This should provide big support to gold market. Now it is widely suggested that these processes should accelerate closer to 2020 year. For example, here is report by Fathom Consulting and their expectations to see world crisis around 2020.
In shorter-term perspective situation is unstable and subject to change. Just few weeks ago everybody thought that it is one more year of active Fed policy, so rate could be 3+% by the end of Fed cycle. Now situation has changed. Some factors appears, some changes and some are gone to passed. All these stuff put the shadow on gold price behavior. Inflation expectations have dropped significantly as in US as in EU now. If Fed will hold rate hike and stock market will keep head above the water - gold market remains under pressure. More aggressive interest rate policy and stock market collapse should provide support to gold.
As a result, downside target could change. Here, on the chart we have butterfly "Buy", but it also could be "222" Buy pattern. Trend stands bearish on monthly chart and vital area is 1380 top. We could talk about breaking of long-term downside tendency only when gold market break through this area.
Technically, it is more probable that downside action will continue, because market already has done to attempts to go higher and failed both times. On second attempt, by the way, upside action was slower and weaker. It means that deeper retracement should happen before next attempt. Recall, that we treat current upside action as retracement only on weekly chart...
Weekly
This time frame is most important now because it shows as short-term as long-term setups. In short-term we keep an eye on upside retracement. Initially it has started as reaction on reaching YPS1 and weekly oversold. So, it should had to be technical bounce. Indeed, price action is gradual, we do not see any signs of upside reversal. In fact, there are two major upside targets left untouched. First one is XOP of minor ab-cd pattern, and larger one AB=CD that creates Agreement area with 1286 major Fib level. Both patterns provide "222" Sell.
Longer-term view suggests downside continuation, because we have untouched OP target of large AB-CD pattern around 1113$ area. CD leg is very fast drop, thus chances that target will be hit looks solid:
Daily
So, daily and intraday charts could be used for day-by-day work with upside weekly retracement. Now we have temporal stop, as butterfly "sell" was completed, and market shows respect to this target.
Our trading plan for this week has worked perfect. Now we already should have long position as our entry point has been hit on Friday.
On daily we've got bullish grabber that turns equilibrium in favor of immediate upside continuation instead of deeper retracement.
Intraday
Here is our entry setup. Recall that we've agreed to go long here - at Agreement area of minor XOP target and 1235 Fib level. Our trading plan suggests two possible scenarios. Either gold will proceed higher immediately, or, it moves to 1243 area and turns down for second leg retracement, forming H&S pattern here. Both scenarios let us protect position with breakeven stop. In second scenario we should out at breakeven and wait next entry level, which should be 1227-1229 K-support.
But... we've got daily bullish grabber guys. It means that chances of first scenario are better for now. If you have missed long entry at predefined point - you could do this at small retracement of bullish engulfing pattern that we've got here. Next upside target is 1260-1265 area. Since this is weekly target as well - it's the first one where potentially downside reversal could happen.
Conclusion:
Gold market stands in the center of impact different global factors, political and economical. This makes extremely difficult process of forecasting for longer-term perspective.
Short-term sentiment stands positive on gold. It lets us keep our existing scenario with action to 1260-1265 (potentially to 1286) target. For truth sake this action is a retracement only and downside reversal has good chances to happen once retracement will be completed.
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.
