Gold GOLD PRO WEEKLY, December 26 - 30, 2022

Sive Morten

Special Consultant to the FPA

Yesterday, in FX report we've taken a look at recent data - GDP revision, consumption and some others. Indeed it has made proper impact on gold market as well. For example, upside GDP revision to 3.2% supported dollar, suggesting that Fed could be more stubborn with rate increasing and pushed gold prices down. But, there were few other events that mostly remained in a shadow. Although we think that in long term that could play significant role for global markets and gold market in particular. I would say that gold market could get effect of these factors among the first.

Market overview

Gold prices climbed more than 1% to their highest levels in a week on Tuesday and other precious metals also rallied on the back of a sliding dollar, as markets remained focused on the Federal Reserve's interest rate strategy. The yen surged to a four-month peak against the dollar after the Bank of Japan stunned markets by deciding to review its yield-curve control policy.

Weaker housing data lead to flight-to-safety buying in the precious metals, which along with the decision from the Bank of Japan, was the "perfect storm", said Bob Haberkorn, senior market strategist at RJO Futures. Bullion has shed more than $260 an ounce since its March peak as central banks stepped up efforts to fight soaring inflation, but is enjoying its best quarter since early 2020, up 9.4% so far.


The real estate market in the United States is noticeably sagging. This is no longer a random fluctuation, but a steady trend. The secondary real estate market is in a "total collapse" mode. From January 2022 to November 2022, home sales on the secondary market collapsed from 6.5 million per year to 4.09 million per year (-37%) with a steady momentum to update the minimum of the COVID crisis (about 4 million sales in mid-2020).

Sales of new single-family houses (apartment buildings in large cities are not taken into account) have averaged 590-600 thousand houses per year over the past 6 months (this is the level of 2017-2018), which is 36% lower than the maximum of 2021.

In monetary terms, the current sales volume is approximately 320-330 billion dollars per year compared to 530-550 billion in 2021 (volumes are falling and prices are falling). Almost 200 billion in revenue cut-offs and only for one segment (new single-family homes).


This statistic is important because it shows the potential of the multiplier in the real estate market. Many industries are tied to this segment (construction services, machinery, equipment, building materials and components, utilities, etc.)

The number of residential buildings started for construction in the United States fell less intensively due to the effect of inertia and unrealized demand at the time of the boom in the market in 2021. The drop averages 20-25% on a 6-month moving average from the highs of 2021. There is a lag effect of 6-9 months, so the worst will happen in 2023.

The real estate market index has collapsed to covid lows, repeating the dynamics of sales in the secondary market – this is generally a leading indicator that takes into account the conditions in the real estate market and current trends.According to a combination of factors, the real estate market in the United States is entering its worst crisis since 2007.


Fed Chair Jerome Powell last week said the U.S. central bank will deliver more rate hikes next year even as the economy slips towards a possible recession.

"I see that it's going to be a dark shadow on the gold market, but I still think we're headed for an upside," said Jeffrey Sica, chief executive officer of Circle Squared Alternative Investments, referring to the prospect of the Fed continuing to raise rates.

US consumer confidence rose by more than forecast to the highest since April as inflation eased and gasoline prices dropped. The Conference Board’s index increased to 108.3 this month from an upwardly revised 101.4 reading in November, data out Wednesday showed.

Traders were looking to a slew of US economic data due Thursday and Friday, including the Fed’s favored gauge of inflation. Central banks’ aggressive monetary tightening this year has lifted Treasury yields and the greenback, which has sent bullion down more than 11% from its March peak. As we've mentioned above, data was moderately positive that has pushed gold market down.

And here is few things that we've warned about through the year -

The Federal Reserve's ongoing efforts to shrink its balance sheet may end earlier than once thought, even as the U.S. central bank charts a more aggressive path of interest rate rises. Fed watchers reckon it will most likely have to stop in some form its current shedding of Treasury bonds and mortgage-backed securities (MBS) next year due to rising shortfalls of financial sector liquidity that may already be happening. Such shortfalls could threaten the central bank's control over its overnight interest rate target, which is why it may have to react.

When it comes to officials' comments on the balance sheet outlook, "it seems like they're oddly silent about this whole thing at the moment," said Derek Tang, economist with forecasting firm LH Meyer. He believes the Fed will start seeing signs of liquidity issues in the spring of 2023 (totally agrees with our suggestion) and take action by June to start throttling the drawdown of its holdings.

Joseph Wang, chief investment officer at Monetary Macro, believes a process most refer to as quantitative tightening, or QT, will be changed in the third quarter of 2023. The shift, when it comes, "could be due to deteriorating Treasury market liquidity or continued decline in bank reserves," he said.

Analysts at investment bank Nomura see the Fed ending the balance sheet run-off in September of next year. A New York survey conducted ahead of the November policy meeting found major banks are predicting the run-off to end in the final quarter of next year.

Goldman Sachs, however, forecasts the run-off will likely spill into late 2024 or even 2025 before the Fed changes gear, highlighting the uncertainty that still haunts this part of the central bank outlook.

From the spring of that year, the Fed moved its holdings from $4.2 trillion to a peak of just shy of $9 trillion by April of this year, fueled by aggressive purchases of Treasury and mortgage bonds. The Fed began to raise rates in March and it started in June to allow a set number of bonds it owned to mature and not be replaced.

This process swung into full gear in September when the Fed said it would permit up to $60 billion a month in Treasury debt and $35 billion per month in MBS to fall off its balance sheet. As of Dec. 14, Fed holdings stood at about $8.6 trillion.


Nomura said the U.S. central bank will likely get its balance sheet down to around $7 trillion, well above the pre-pandemic level. Among analysts, there's considerable debate about exactly how it might go about ending the drawdown.

Reductions in the Fed balance sheet withdraw bank reserves from the system, in a regime that's dominated by many moving parts, swirling around each other unpredictably. But even with all that, a dearth of reserves makes short-term rates unstable, which means the Fed can't reliably set its policy rate target.

It's something the Fed faced in September 2019, when it was in its latest chapter of balance sheet contraction. At that time, it unexpectedly hit a shortage of reserves, unmooring the federal funds rate and forcing the central bank to start adding liquidity back into the system.

The Fed does not want a repeat of that experience and, as such, it is unlikely to test how far it can run down reserves.


On Nov. 30, Fed Chair Jerome Powell said he didn't believe the banking system was running short on reserves, but he also suggested the central bank will manage its holdings in a way that could cause the drawdown to end sooner than once expected.

"Demand for reserves, it's not stable, it can move up and down very substantially. So we want to stop at a place that's safe," he said. "It's really a public benefit to have plenty of reserves, plenty of liquidity in the markets and in the banking system, in the financial system generally."

Few non-financial but not less important events

The main news is the announcement of the creation of a joint Russian-Indian independent tanker fleet. Existed fleet of both countries, supposedly will be merged. The emergence of such a structure, independent of international insurers and relying on its own infrastructure, means a fundamental step away from the global dollar (Bretton Woods) system. In fact, whether it was an occasional coincidence or not, but JP Morgan releases extended podcast on a topic of de-globalization. The decades-long trend of globalization has come to an end and the fracturing of geopolitics will have huge implications for capital markets and investing in 2023, according to strategists at JPMorgan Chase & Co. Jared Gross.

Of course, the result of this initiative is still unknown, but the foreign policy of the West makes it almost inevitable: there is a big necessity for this initiative, and it is impossible to prevent already. It was just a matter of the initiative and it happened now. It should be noted that over time there will be more and more such "self-fulfilling" initiatives to create alternative economic institutions to the Bretton Woods.

Second big geopolitical issue that somehow remained almost unsigned this week is a creation of big Russia-Iran new transport corridor from the eastern edge of Europe to the Indian Ocean, 3,000 km long, inaccessible to any foreign intervention. The Russian Federation and Iran intend to accelerate the delivery of goods by river and rail that connect the countries: Moscow intends to establish a year—round water connection between the Azov and Caspian Seas, and Tehran is expanding the railway network to the Iranian port of Chabahar on the coast of the Gulf of Oman

The goal of the development of a new transcontinental transport corridor is to protect trade ties from Western interference and to develop profitable relations with rapidly developing giants in Asia. The transport corridor being created will allow Russia and Iran to reduce thousands of kilometers from existing routes, and the Russian Federation to compensate for the decrease in trade with the EU

The West is very concerned about the inaccessibility of this transport corridor for any foreign intervention and the significant benefits that both countries receive from its development

Another step towards destroying the credibility of the dollar was the last-minute commitment in the US budget to confiscate Russian assets seized under sanctions (contrary to international law and the Bretton Woods Principles). Actually, no one had any illusions about this, but the inclusion of the relevant clause in US law means that the "security" of the global dollar system has even officially become a fiction. The consequences of this event will manifest themselves for many more years and it is no longer possible to return the trust back.

You know, it is the same like in Dubai. When you buy or rent some property, in any document it is a minor remark, telling that despite you're buying or rent something, all this stuff belongs to Dubai emir and could be confiscated at any time without any special warning. Now the same signing we have to add on US Dollar - "this is property of US government and could be confiscated at any moment without any special decision". It promises nothing good to the US investments and explains that investors should not wait for something good when you're dealing with the US currency in any way. Now it is officially stated, in a way of legal act, that inviolability of private property doesn't exist anymore in the US.

Moreover, the adoption of such a decision means that the tactical problems of the US financial system begin to prevail over the task of maintaining the stability of the global dollar system. The corresponding signals have been there for a long time, but after the decision it became obvious. And this means that not so much the "dead earnest of the United States to punish the aggressor", but an obvious process of increasing serious problems.

The initiative against Russia, is understandable, it is not a surprise, but the US now do the same with their own citizens. I'm talking about two recent legal acts. First is, Capitol attack Committee decision, accusing D. Trump in all sins. Actually this was the major purpose of this Committee. Second is, passed the Presidential Law on Transparency of Tax Returns and Audit 222-201, which requires annual audits of the president's tax returns "POTUS". But somehow this law affects only D. Trump but not other former presidents and J. Biden, where, I'm sure a lot of interesting stuff to find. So, the US runs out of democracy with the seven-miles steps. This is without mentioning of numerous elections frauds that we cover in our Telegram channel. The US political system is tightened as externally as internally.

So, guys, I wouldn't surprise too much, if in near term, US business start to save money somewhere else and flow out everything earned to 3rd countries. At least those people who are under risk of political repression and who goes against the System and Deep State.

The Bottom Line:

What conclusions could be made from all this stuff, guys? First is, based on our recent economical analysis, we suspect that US statistics is manipulated, not in a way of fake numbers directly but via methodology of calculation that is built so to minimize and hide negative effect and show positive numbers as long as possible. Second, many analysts start to talk publicly the same things that we do - Fed can't hold so rapid QT and rate hike and will capitulate sooner rather than later. Now, forecasts are differ, but Nomura, for example agrees with our view that hardly Fed will make it all the way to 2023. They expect capitulation in April. And they also appeal to Fed's reserves that are melting fast now.

Geopolitical events increase entropy in the world, breaking the foundation of Bretton Woods system. This is long-lasting process, but the first stone has been put in foundation, and I suggest that this is epic event. For the first time in the modern world, the functionality of crude oil market absolutely doesn't depend from US Dollar and western companies. I'm about Russia-India agreement. What is more important, that Russia could make an oil delivery to India on a territory of just two countries - Russia and Iran. And this delivery will be extremely fast.

This could trigger the geopolitical snowball guys. Big shifts usually lead to big mess. And gold in long term should remain the safe haven. So we keep calling to invest in physical gold for a long term.


Monthly picture barely has changed again. As we've said, we have few important moments. First is, we have to recall YPP around 1821$ that has been broken down. Now it becomes a resistance. Second - our 1650 support area and YPS1 has worked perfect. Since it is the end of the year, December, the fact that YPS1 has held downside action tells that this is just a retracement of long-term bull trend. This is important. Third is - we have "222" Buy pattern now, started at the same $1650 area

Speaking about B&B, as we've said - we do not have here minimum required 8 bars in downside thrust but action was rather straightforward and I suspect that we have a B&B "Sell" Look-alike pattern. We have similar patterns on other markets as well. Since market comes to 3/8 resistance and YPP, which potentially could become a starting area for B&B - we should be careful to any bearish signs on lower time frames.

MACDP also comes in play within 1-2 months. Appearing of bearish grabber here is two-edged sword. From the first side - bears get better background, but from the other - it suggests that gold should drop below the lows.



Here we have first stop after impressive rally. Gold is not at overbought, compares, to DXY and EUR, but it also stands in wide K-resistance area of 1790-1850$. High wave pattern, that we've got this week, mostly is useful indicator that could either confirm or deny our suggestion of B&B "Sell" starting point. Gold has to drop down the lows of the pattern to confirm it. But take a look, guys how carefully gold keeps the extreme points of the pattern this week - price action remains inside of its range, keeping "indecision" situation for a bit longer:


Here we have important action down guys, on a background of GDP revision, lower than expected PCE numbers and positive consumer spendings in November. This action fits well to our trading plan. As a result, we also have got two stop grabbers on the top, suggesting drop below the recent lows. With cross market view on DXY, overall bearish context is becoming stronger and more reliable:


4H chart performance shows the shape of the bearish flag, while on 30-min chart market perfectly completed upside retracement target around 1800 Agreement resistance level. Minor grabber has been formed here as well. If you haven't taken position at OP, as we've discussed, here is the second chance:


Sive Morten

Special Consultant to the FPA
Greetings everybody,

So, gold has opened up slightly but it is just searching the balance after the holidays. Daily context remains bearish with the grabbers on top:

On 4H chart market is still forming bearish flag consolidation. As we've said on Friday - price has formed lower top, but now we need to see the lower low as well, to break upside tendency totally:

As a result, it seems 1808 area is suitable for short entry. Besides, we have unfilled gap around 1800, so chances are high that gold will try to close it. Thus, at least 8-10$ drop looks very probable, which is more than enough to move stops to breakeven. But, 1H picture suggests that downside action might be even stronger with the "222" Sell pattern.

Sive Morten

Special Consultant to the FPA
Greetings everybody,

China has crushed our trading plan yesterday with decision to cancel all CV 19 limitations, that has triggered spike on gold market. As a result, we've got W&R of the top and another bearish grabber, but we already saw it before and now it is tricky to rely on it, at least on daily and higher time frames:

On 4H chart, HH-HL tendency has not been broken yet. Yes, it is slowing down, yesterday's action takes the shape of butterfly (although 1.27 extension has not been reached), but for position taking it would be better to wait for something more valuable than just a grabber. As we've said - at least the downside breakout:

Still, for intraday traders, it is possible to consider short-term setup, based on daily grabber. Market mostly has erased recent upside action, so, downside action could continue a bit more, at least. So, the pullback to one of the Fib levels could be considered for short-term trading setup:

Sive Morten

Special Consultant to the FPA
Greetings everybody,

Situation mostly has changed only on intraday charts. On the daily chart our grabber stands in place. As we've said in today's FX report and video - there are more and more signs that recent top (or bottom) probably becomes the starting point of monthly B&B trades across the board. So, gold hardly escapes it as well:

Still, as we've agreed yesterday, for traders on daily time frame and higher ones, it makes sense to wait for more bearish signs - at least for the downside breakout of wedge consolidation here.

Meantime intraday traders could follow the grabber, as we've said yesterday. Within few hours we could get the grabber on 4H chart as well:

Once market stands near Agreement resistance on 1H chart as well - it makes not bad background for scalp short trade, that potentially could turn to something bigger:

Sive Morten

Special Consultant to the FPA
Greetings everybody,

On daily chart situation barely has change. As we've agreed yesterday, it makes sense to stay aside for awhile for taking any position, just because Gold shows no clear bearish patterns and behavior on intraday charts, despite that we have the grabber here:

At least, as we've said, it makes sense to wait for wedge downside breakout, because on daily chart above, price behavior also could be treated as bullish dynamic pressure. Price is moving higher, while MACD is bearish.

At the same time, on 1H chart we have another one setup for scalp trading. Yesterday, despite minor downside action happened, later gold has turned up and keep going higher. Now it hits another strong resistance area - Agreement of XOP and 1822 Fib level. So, 1820-1823 is another level that might be considered for potential bearish trade. Here you also could see minor butterfly on top. It could not lead to strong collapse, but chances on some downside continuation, at least, look not bad.