Gold GOLD PRO WEEKLY, December 21 - 25, 2020

Sive Morten

Special Consultant to the FPA
Messages
14,236
Fundamentals

All markets keep flowing in the same fairway of common driving factors - vaccination, stimulus, CV19 situation to name the major ones. In general each of these factors have some changes this week that supposedly should make impact on market performance in near term. It is difficult to suggest how strong activity will be on pre-Xmas week, but things that we've discussed yesterday mostly look positive for the gold market as well.

In general, Gold gained this week, driven by market expectations of additional monetary and fiscal stimulus as climbing COVID-19 cases prompted fresh global restrictions with focus also turning to the U.S. Federal Reserve's policy meeting.

"It is pretty dire in Europe, Asia, South Korea, Japan and the U.S., driving some stimulus expectations and giving (gold) a bit of push," Saxo Bank analyst Ole Hansen said.

"We're seeing liquidity start to dry up and that means any changes in the flow of news and data can have an oversized impact as the market winds down ahead of Christmas and New Year. Without a new aid package, the recovery of the U.S. economy is likely to falter." Commerzbank analyst Daniel Briesemann said in a note.


Surging coronavirus cases prompted lockdowns in the Netherlands, Germany, London and New York, underlining the economic impact of the pandemic. U.S. dollar held close to multi-year lows as investor hopes of a U.S. fiscal stimulus got a boost as President-elect Joe Biden won the Electoral College vote and U.S. lawmakers were positive about clinching a fiscal stimulus deal.

Fed Chair Jerome Powell said in a news conference the U.S. economy might take continued support from both fiscal, monetary policy for recovery.

"Powell managed to quell an initial market sell-off by reassuring that a very vigilant Fed would not hesitate to expand support if necessary," said Tai Wong, head of base and precious metals derivatives trading at BMO. Powell is quite bullish for H2'21 with the vaccines but remains quite concerned about the next four to five months. Gold in particular held key support under $1,850 and bulls will read the sharp bounce higher is a repudiation of the downside."

The Fed promised to keep funnelling cash into financial markets to fight the recession, even as policymakers' 2021 outlook improved following initial rollout of a coronavirus vaccine. Positive news on vaccines has lifted hopes over quick economic recovery. However, investors still remain concerned over surging coronavirus cases.

An unrelenting U.S. coronavirus surge pushed hospitals further to their limits as the United States pressed on with its immunization rollouts and prepared to ship nearly six million doses of a new vaccine on the cusp of winning regulatory approval. A panel of outside advisers to a U.S. regulator overwhelmingly endorsed emergency use of Moderna Inc's coronavirus vaccine.

Lawmakers in Congress were "closing in" on a $900 billion COVID-19 aid bill that would include $600 to $700 stimulus checks and extended unemployment benefits.

The U.S. Congress appeared poised to vote on Sunday on a $900 billion coronavirus aid package after senators struck a late-night compromise to clear one of the final hurdles, a dispute over Federal Reserve pandemic lending authorities. Senate Democratic Leader Chuck Schumer told reporters at the U.S. Capitol late on Saturday night: “If things continue on this path and nothing gets in the way, we’ll be able to vote tomorrow.”

Congressional leaders plan to attach the coronavirus aid package, which includes $600 direct payments to individuals and a $300 per week unemployment compensation supplement, to a $1.4 trillion spending bill funding government programs through September 2021.

With coronavirus infections roaring back to new record highs across the United States, pressure mounted on lawmakers to deliver more relief aid in time for a crucial Friday deadline.

"Gold has attached itself entirely to the negotiations on the stimulus package. ... The market will rally if there's positive momentum towards reaching a stimulus deal, and if there's any indication of a delay gold pulls back," said Jeffrey Sica, founder of Circle Squared Alternative Investments. Once stimulus gets approved in its entirety, I anticipate gold will rally substantially because it's a massive stimulus package."

The precious metal was still up about 2.2% for the week and on track for a third straight weekly gain. Banking on U.S. Federal Reserve's pledge to continue pouring
cash into financial markets and keep interest rates low until the U.S. economic recovery is secure, gold hit a peak since Nov. 16 on Thursday.

"The primary focus has been the expectations that we're going to get a stimulus deal," said Edward Moya, senior market analyst at OANDA. The Fed will remain accommodative, and the Congress is finally going to deliver some stimulus, and the current trajectory of the virus is going to warrant even more stimulus once the Biden administration takes over."

COT Report

This week, indeed, we also see the dry off the liquidity as investors coming on holidays. Take a look at activity on gold futures on COMEX - we see shy change in positions, that is not common for the gold market.

1608459819474.png


SPDR Fund statistics shows divergence with Gold prices. It could mean either fake trend or just retracement before next drop, or, tendency should turn north soon:
1608460127414.png


So, combining gold factors with those that we've discussed yesterday in our weekly FX research, makes us keep moderately bullish view on Gold in short-term. Fed sends clear signals on weak economy performance in nearest 6-8 months. No inflation and interest rates increasing is suggested by far, keeping positive background for the gold market. California sets additional limitation measures as CV19 situation worsened in golden state. As it takes ~10% of all working population and 15% of US GDP, it is highly likely that we will get NFP data below expectations as well as IVQ GDP numbers.

Speaking on vaccination, we already said, that we expect longer and tougher process as vaccines have "hidden" side effects, which have forced US health department to recommend Pfizer and Moderna vaccines for emergency use only. Laboratory efficiency of vaccine has to be discounted as well, because it also depends on the vaccine mix that is made in industrial production volume.

Most close standing factor is stimulus that could be provided as early as on Monday open is Congress positively votes today. In this case open gap is certain. In longer-term, more stimulus should come and we see corresponding rhetoric for that. Democratic President-elect Joe Biden’s incoming chief economic adviser said on Friday a coronavirus relief plan under negotiation in Congress should not include a provision that would restrict the ability of the Treasury Department and the Federal Reserve to fight economic crises. It means that they intend to delegate rights to issue own stimulus as to Treasury as to Fed, without tightening them together and independently from government stimulus pack.

All these things make us to keep positive mood on gold perspective in short-term, 1-2 months probably. And if even we stand in retracement now, it could continue to higher levels.

Also guys, minor add-on to conspiracy theory, those who likes this stuff. Information relates to D. Trump and his efforts to context results of elections. Everybody knows about his law of 2018, the major thing there is the President could set Marshall law and make re-elections under army control, if there will be facts of external intruding in elections and hazard to national security - this is actually where D. Trump's team try to lead the situation to. The necessary condition for this law to act is no disagreements between Council and Treasury secretary. And bingo, yesterday M. Pompeo and S. Mnuchin in tweeter acknowledge together that they do not have any contradictions and disagreements with each other. If this issue is still simmering, it also stands supportive to gold.


Technicals
Monthly


This week we need to pay attention to monthly chart, as gold has shown unexpected positive performance, as we initially thought action to 1900 only. But, as overall background is supportive and there are few things on the table suggest that gold could open with the gap up - on monthly chart we have to keep an eye on bullish grabber. It is few time till the end of the December. Appearing of the grabber mostly supports our fundamental view. For trading purposes it will mean drastic change and possible action above 2077 top.

gold_m_21_12_20.png


Weekly

Weekly trend stands bearish. The week before, as we've said, takes "indecision" shape as it results in doji action on weekly chart. Next direction here mostly depends on the breakout of this pattern. This week we see close above the top of the pattern, that points on positive mood. Market stands not at overbought and upward action could continue. But, with no monthly grabber by far and too small pullback - we still should treat this action as retracement by far. Mood is fragile right now, as we have only one short-term driver, which is stimulus pack. Congress failure to provide it could push gold down again. Other bullish factors are longer term and mostly have indirect impact, keeping under pressure key economical indicators. With the untouched OP here, we must be careful with any long position that we take.

gold_w_21_12_20.png


Daily

Daily trend stands bullish, but recently Gold has reached strong daily resistance area around 1900 level. Here we have clear AB=CD type of action with COP has been hit. But, the problem that the OP stands far above K-area and market somehow has to break it to reach the target. It could happen twofold - either we get Congress decision on 900Bln pack today or we're going with "normal" way, watching for technical pullback and whether gold will have enough power to challenge this level again later:

gold_d_21_12_20.png


Intraday

Situation mostly stands the same as on EUR currency that we've discussed yesterday. Bulls have two options that are not mutually exclusive. First is to watch support levels in a case of pullback. Second - consider using of Stop "Buy" order above daily K-resistance if Congress' dicey works. Currently technical picture supports direct upward continuation because of too choppy and slow downside action. IT is clear that market doesn't "want" to go down. But we should not forget that stimulus expectations were high on Friday. You can clearly see it by the price action on the 1H chart - this is not typical price shape when downside AB=CD pattern forms. Still if Congress fails, deeper retracement still could happen, and in this case we consider the same targets around 1870 and 1860 first:
gold_1h_21_12_20.png


Thus, bulls could as wait for pullback as use Stop "Buy" order around 1898-1900 area, while bears have to wait as no clear patterns are formed yet here.
 

Sive Morten

Special Consultant to the FPA
Messages
14,236
Morning guys,

So, yesterday we indeed have got the upside open but due absolutely different reason - air lockdown in UK. We think that hardly this factor exhausts fast and probably will have lasting action. Because the new type of virus definitely in EU already and sooner rather than later should be identified. Then everybody starts monitoring epidemic situation, so this is not fast story.

On daily chart we have high wave pattern by far. Technically it tells about indecision, and further direction, as a rule, depends on breakout.
gold_d_22_12_20.png


Price action on intraday charts stands in favor of slightly deeper retracement now as price action around COP has signs of W&R. It means that we still could get drop to 1850 support, or even lower:
gold_4h_22_12_20.png


On 1H chart price has been formed bearish reversal swing, that also hints on continuation. Still here we have a lot of different options for trading as it is unclear yet what shape price will take. The most conservative approach is just wait either for deeper drop to predefined levels or rally above the "A" top, where again we could use Stop "Buy" order.

For more active traders, take a look - we could get "222" Buy right now, then "222" Sell of a larger scale if another downside swing happens. Alternatively, around "A" top, we could get reverse H&S before upward continuation. This is just few patterns to consider and you need to choose what you like more. (I have tried to draw it at single chart ). Day by day, we have more clarity on price shape, so the amount of potential pattern should narrow.
gold_1h_22_12_20.png
 

PassPP

Private, 1st Class
Messages
26
Morning guys,

So, yesterday we indeed have got the upside open but due absolutely different reason - air lockdown in UK. We think that hardly this factor exhausts fast and probably will have lasting action. Because the new type of virus definitely in EU already and sooner rather than later should be identified. Then everybody starts monitoring epidemic situation, so this is not fast story.

On daily chart we have high wave pattern by far. Technically it tells about indecision, and further direction, as a rule, depends on breakout.
View attachment 60468

Price action on intraday charts stands in favor of slightly deeper retracement now as price action around COP has signs of W&R. It means that we still could get drop to 1850 support, or even lower:
View attachment 60469

On 1H chart price has been formed bearish reversal swing, that also hints on continuation. Still here we have a lot of different options for trading as it is unclear yet what shape price will take. The most conservative approach is just wait either for deeper drop to predefined levels or rally above the "A" top, where again we could use Stop "Buy" order.

For more active traders, take a look - we could get "222" Buy right now, then "222" Sell of a larger scale if another downside swing happens. Alternatively, around "A" top, we could get reverse H&S before upward continuation. This is just few patterns to consider and you need to choose what you like more. (I have tried to draw it at single chart ). Day by day, we have more clarity on price shape, so the amount of potential pattern should narrow.
View attachment 60470
Thank you Sive,i closed my long end of last week then the news on the Weekend thought catapult gold , i m happy it didn t.
 

Sive Morten

Special Consultant to the FPA
Messages
14,236
Greetings everybody,

So, situation on Gold market becomes more bearish today. Yesterday we said that High wave pattern points the direction, depending on breakout out of it. And gold has moved closer to the lows of the pattern:
gold_d_23_12_20.png


On 4H chart in addition to bearish divergence and bearish reversal swing that we have mentioned yesterday, we've got bearish action on 1H chart as well.
gold_4h_23_12_20.png


Although our "222" Buy has worked, but reaction was just to the minimal 3/8 target and then market dropped, erasing other patterns that we've discussed. Now we could see that downside actions stand with acceleration, while any upward action is very small, choppy and heavy. It makes us think that chances on downside breakout are greater and gold could take the shape of butterfly pattern, with 1st target around 1846 that agrees with 4H K-area. Next one is around 1830.
gold_1h_23_12_20.png


Using harmonic swings here, it seems that downside action could start again somewhere from 1870. If not - market keeps scenario valid until it stands below "C" point. Otherwise butterfly will be cancelled.
 

Sive Morten

Special Consultant to the FPA
Messages
14,236
Greetings everybody,

So, activity is fading as we're coming closer to holidays. Actually, we have three inside sessions recently. So, of update we mostly need on 1H chart.

Yesterday we've discussed possible targets, nearest one stands around 1848. Currently we do not have good bullish context, so, the only thing that we could discuss today is how to go short. Here, on 1H chart price stands in triangle consolidation and has two options of continuation - either directly out from pennant, or with first completion of OP target around 1888:
gold_1h_24_12_20.png


In both cases, despite how you intend to take position, initially stop is better to place above OP and Agreement area. Consequently, you could either wait for OP completion and appearing of "222" Sell around 1888, or taking position inside the pennant, as it might be butterfly as well (that we've discussed yesterday). Or - combine both these scenarios. The major point here is to place initial stop above OP. Because if butterfly will be cancelled - it doesn't mean yet the destruction of bearish context yet. Only upside action above OP and Agreement resistance is a negative sign and means that sentiment is changing.
 
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