GOLD PRO WEEKLY, February 01-05, 2016

[Sive Morten]

Fundamentals

(Reuters) - Gold edged higher on Friday after U.S. data showed economic growth braked sharply in the fourth quarter and the price of the precious metal was on track for its biggest monthly rise in a year after global economic headwinds hit riskier assets.

The metal has risen more than 5 percent in January, underpinned by concerns over the world's growth outlook, especially China, which has raised questions about the pace of interest rate rises in the United States.

"Maybe things won't be this bad next month in the wider markets, so it is possible that if ETF flows are subsiding, prices will be lower too," Macquarie analyst Matthew Turner said.

"But one positive lesson we can learn from this month is that gold does still have a safe-haven role and that could stand it in good stead through a testing year to come."

Global equities jumped and the yen slumped after the Bank of Japan stunned markets by adopting negative interest rates, while hopes the U.S. Federal Reserve will slow the pace of future rate hikes also underpinned stock gains and supported gold prices.

"The probability, according to futures, of a Fed rate hike in March is less than 20 percent," said George Gero, precious metals strategist for RBC Capital Markets in New York, adding that the weak 10-year U.S. Treasury yield was also supportive to bullion prices.

Gold reached a 12-week high of $1,127.80 on Wednesday, after the Federal Reserve said it was closely watching the global economy and financial markets. This supported the view that U.S. policymakers may not be able to raise interest rates again as soon as March.

"On the upside, I would look for $1,150, while there seems to be some support at $1,100, especially after the more dovish tone of the Fed this week," MKS SA head of trading Afshin Nabavi said.

The market largely shrugged off comment by Dallas Fed President Robert Kaplan, who said the Fed will be patient about policy decisions.

The dollar's ascent accelerated after the release of the U.S. gross domestic product report, which was in line with economists' expectations, but showing a decline.


CFTC data shows normal bullish behavior - net long position rises, open interest has dropped last week, but in general it stands flat. This tells that traders gradually reverse their bearish positions to bullish ones. Last week open interest slightly dropped while net-long position has increased. Conclusion - recent upward action mostly was achieved due closing of shorts. Although we would like to see simultaneous increase of net long position and open interest, but even combination that we have right now is mostly bullish rather than bearish.

SPDR also shows not bad dynamic as well. Thus, storages have increased for 30 tonnes during the month.
That's being said, overall situation right now looks moderately bullish for gold market.

Technicals
Monthly

So New Year has started with upside action. Reasons could be different - geopolitics, investors' assets distribution in the beginning of the year. Upside action currently is too small to change situation on monthly chart but we will monitor how situation will change.

Changes come slow to monthly chart yet and it is mostly the same by far.

We still think that currently gold should be mostly driven by geopolitics, rather than economics. This driving factor creates absolutely new scale of uncertainty and leads to very fast changes on Globe political situation. That's why we suspect that gold market hardly will fall dramatically, since we're just in the beginning of Middle East tensions. Currently we see clear signs that situation will become worse in nearest time. The fact that gold drops on a background of Middle East turmoil looks a bit artificial and this situation could not stand forever. May be this could be explained as insufficient weight of geopolitics against current weight of Fed policy and statistics. But geopolitical tensions, despite its low weight still makes drop slower.

Not just Middle East stands in our focus. We see that fumes of this conflict spread over planet. Recall Paris terrorist attack, refugees tensions in EU, Brexit voting, a lot of contradiction inside EU as political as economical - North Stream-2, mutual sanctions, Ukraine membership voting in Netherlands, Montenegro NATO membership and a lot of others. China's financial turmoils is isolated theme for discussion. All these stuff is happening on a background of reducing population wealth and solvency. So, we see that entropy is growing.

As market gradually will start to come to the same conclusion as gradually situation on gold market will start to change in positive area. International banks purchase gold in big volumes, mostly PBoC and Russian Central Bank. Still, 1000$ area is relatively close and these two events do not contradict to each other, just because they are of a bit different time scales.

Speaking on breakeven points between bullish and bearish sentiment - market should show significant upside action and form bullish reversal swing to destroy current bearish domination. It means that gold has to exceed 1310 area.

Our 1050 level has been hit. Minimum target of VOB pattern has been completed and we come to this moment 1-2 years. Also market has hit some other targets. Bearish dynamic pressure also has done well since market has created new low.

Still guys, we have to say that as VOB as pressure patterns are not necessary should stop at minor targets. Gold could continue move down to next ones. Market just has completed what was necessary. And if we will take a look over the horizon a bit, then we will see nice area around 850-890 level - Agreement around major Fib support, and monthly oversold.

So, on long-term charts it could happen, that we will not see clear tendency and gold could turn to some wide range action. Because right now it is too many sources that could initiate impact on gold market. They will push market in one and other sides. Geopolitical situation in the World has reached very high degree of uncertainty and we believe that sooner rather than later it will become a dominating factor for gold market.

Anyway, gold's shift from downward action to flat one, even it will be wide - already will be significant moment.
Finally - monthly chart has turned bullish. This is not a big deal yet, but still, this is one of the bricks in the wall, right?

Weekly

So, we've estimated that 1050 area is rather strong support - monthly 50% Fib level, lower border of wedge pattern and inner large AB=CD target. The one of the patterns that we've discussed, should be bullish divergence and right now we have it confirmed. So, upside bounce has started. Last time, when similar divergence has been formed - Gold has shown AB-CD upside action.
Still, right possible target of upside retracement stands at 1150 area first, because there we have weekly overbought level and probably Fib level as well (we will check it on daily chart).
Take a look that market holds upside harmonic swings very well. Sometimes it doubles it, sometimes not.
But market right now stands very close to completion point of harmonic swing and it coincides with February MPR1 @ 1143.50
At the same time monthly PP has not been tested yet and it stands at 1102.50. So, it seems that retracement to this area looks logical, at least sometime in February.

Second moment that we've discussed is untouched targets around 1000-1050$ area. They are AB-CD and butterfly extension. Currently it is too early to say that market totally left them, since upside action still looks like upside retracement. As volatility could rise significantly soon - market still has chances to drop. Despite recent upside action Gold has not broken yet lower-top-lower bottom sequence and to do this gold has to move above 1200 area. Only in this case we could carefully speak on tendency changing.

Still, on coming week we mostly will deal with most recent upside action, probably. As market stands in the same range for 2nd week, most changes stand on daily and lower time frames.

Daily
This time frame brings very clear and interesting picture. After market has hit our first target - retracement has followed and we was ready to it. In general this retracement is sufficient and gold could continue move up. But if this retracement will be slightly deeper - this is not a tragedy at all. I'm talking on deeper retracement mostly due appearing of new MPP @ 1102.60 area.

Also take a look - around MPP stands MACD Predictor line and first Fib support level. It means that trend will remain bullish only until this area. It would be nice, if we will get, say, bullish grabber there.
Another good sign is existence of K-support area @ 1092-1096. It will work as level where we could hide our stop as indicator. If market will break it down - it will mean that short-term bullish setup is over.

But again - it is not the fact yet, that gold will reach it. It could continue move up right from current level as we've suggested last week. Since former tops have been successfully re-tested.

4-hour

On this picture we see 100% completion of our analysis by far. But this will not last forever. Currently, as you can see market has jumped out from 1106-1110 area, as we've expected. This was and is K-support area and former tops. Besides this is sufficient retracement to show respect daily 1.27 butterfly target.
Also take a look - market has broken the wedge to upside. That's being said, if you have taken long there - now it is time to move stops to breakeven.

Although, there are no many reasons to this, but we can't totally exclude possible 2-leg retracement down to 1102 area. Mostly because we have untouched Monthly Pivot. This retracement in general will be acceptable and will not be too deep. That' why, if you still have no bullish position here but want to take it - do not hurry. It would be better either to wait for this drop to MPP or to way upside breakout of 1125 area.

As we know, next short-term target is 1145 level.

Conclusion:
We think that fundamentally gold stands somewhere near bottom. But this bottom could be "extended", because the scale of this analysis is long-term. It means that market could drop lower, say to 1000$ , but pace of drop will be significantly slower, or will turn to some wide range fluctuations.

In short-term perspective market behaves perfect, as bullish market should. And keeps chances on upside continuation. Next short-term destination point is 1145 area - daily butterfly target, Fib resistance and MPR1.


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]

Good morning,

Gold edged to a three-month high on Tuesday as weak global manufacturing activity underscored the challenges for the world economy, pushing investors towards safe-haven assets.

Increased volatility in other assets has benefitted gold and it could see more gains as global central banks may be forced into easing monetary policy further this year to spur growth.

With rates close to zero, the "only option is to move either towards zero or negative rates as the Japanese and selected European countries are already doing in a desperate attempt to force banks to lend", INTL FCStone analyst Edward Meir wrote to clients.

"Whatever the case, this should be constructive for gold."

Spot gold touched $1,130.11 an ounce, its strongest since Nov. 3, and was trading down 0.3 percent at $1,125.36 by 0634 GMT.

A break above $1,136 could lift gold towards $1,157, a level reached in late October, said ScotiaMocatta technical analysts.

U.S. gold for April delivery was off 0.2 percent at $1,126 an ounce.

Reflecting growing confidence in gold, holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, rose to 21.9 million ounces on Monday, the most since Nov. 3.

Global manufacturing expansion accelerated slightly but remained weak at the start of 2016 as faster growth in developed markets failed to offset a contraction in emerging economies. In China, a gauge of factory activity fell to its lowest since mid-2012.

The U.S. economy could suffer if recent volatility in financial markets persists and signals a slowdown in the global economy, Federal Reserve Vice Chairman Stanley Fischer said

Gold is typically the asset of choice in times of uncertainty. It posted its best monthly jump in a year in January, and has gained 6 percent so far in 2016, after falling 10.4 percent last year.

The Fed's statement last week that it will closely monitor the global economy and financial markets lifted gold to near $1,130, as it underlined expectations that U.S. policymakers may take it slow in raising interest rates this year.

"Weaker macro numbers out of the U.S. are also increasing the odds that the Fed's December move could have been an outlier, forced onto a central bank that basically had to move after promising to do so for much of the last year," said Meir who sees only one U.S. rate hike this year.

So, market behaves very well with holding short-term bullish setup. Market has shown minor reaction on 1.27 butterfly target as we would like to. But right now we see very important nuance that should become a clue to undertsanding nearest perspective. What the reason for current minor retracement? Why it has started? Market mechanics does not suggest it, as gold has completed targets, retracement already has happened. As market has continued move up - it should move to next target. What the reason for this retracement?
If you undertsand this, you will get the clue what to expect.

Reason is - gold is preparing reversal pattern to trigger meaningful retracement from major 1140 resistance area, as soon as 1.618 butterfly will be completed at 5/8 Major fib resistance.
And current retracement indicates short-term exhausting of bullish potential. Here we could get say, wedge, butterfly, some kind of 3-drive:

So, tight stops guys and be ready for profit taking around 1140$.

 

[Sive Morten]

Good morning,

(Reuters) - Gold stabilised near a three-month top early on Wednesday, its safe-haven appeal kept intact by concerns over a wobbly global economy that has put share markets under pressure.

Holdings at the world's largest gold-backed exchange-traded fund (ETF) climbed to its highest since November, underlining growing interest in the metal.

Buying from China, the world's top gold consumer, ahead of next week's Lunar New Year holiday, also supported bullion, said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.

"There's not a lot of alternatives for China at the moment and funds are now moving to invest in gold," said Lan who sees gold sustaining its strength through the first quarter.

Among the best performing assets so far this year, gold has gained more than 6 percent after losing 10.4 percent in 2015.

U.S. gold for April delivery was up 0.2 percent at $1,128.90 an ounce.

There may be enough momentum for bullion to rise above $1,160 and test the $1,200 mark, said Lan. Gold last reached $1,200 in June last year.

"A weaker U.S. dollar, lower oil and fragile equity markets are in combination good for gold. We remain bullish as the economic trends do not argue for lower bullion in our view," HSBC analyst James Steel wrote to clients.

Oil stayed near multi-year lows on Wednesday and Asian stocks dropped again as worries over a slowing global economy kept investors away from risk assets.

Global interest rates are likely to go even lower before they rise as financial market volatility and the spectre of deflation raise fresh doubts about central banks' ability to fulfil their mandates, policymakers and economists said.

That should be supportive for gold, an asset that thrives on uncertainty.

Expectations that the Federal Reserve may also go easy on raising interest rates amid the global economic headwinds had helped gold rise the most in a year in January.

Top gold-backed ETF, SPDR Gold Trust , said its holdings increased to 22.04 million ounces on Tuesday from 21.9 million ounces on Monday.

On gold market we have minor changes today. It is still coiling around former top. Recently guys, I've heard on idea of Switzerland ang Germany to distribute funds for free among citizens. This is a dangerous precedent that show real value of paper money. With QE around the Globe - US, EU, Japan, it shows that paper money looses value very fast. And I wonder how it will impact commodities if this story will get continuation...
On daily chart we still wait for 1140-1145 area where we will think about taking scalp short, depending on how market will response on it.

On 4-hour chart we continue to watch for reversal patterns. Right now it seems that 3-Drive Sell is possible, and 2-3rd Drives could become a butterfly "Sell" as well:

 

[Sive Morten]

Good morning,

(Reuters) - Gold stayed near a three-month top on Thursday after marking its best day in two weeks, buoyed by expectations that global economic and financial headwinds could make it tough for the U.S. Federal Reserve to raise interest rates in the near term.

Uncertainty around the timing of the next U.S. rate hike has burnished gold's safe-haven draw that has been on full display since the year began as investors shunned risky assets.

William Dudley, president of the Federal Reserve Bank of New York, said financial conditions have tightened considerably and the weakening global outlook could have "significant consequences" to the U.S. economy

Those comments dragged down the dollar overnight, adding to market expectations that the Fed was unlikely to raise rates again in March. U.S. rates rose for the first time in nearly a decade in December.

BMI Research, part of ratings agency Fitch, said gold is now

increasingly likely to move between $1,000 and $1,200 instead of pushing below $1,000 this year as it had previously thought.

"The Federal Reserve will keep monetary policy looser than previously anticipated in the months ahead as global economic headwinds prompt officials to postpone their hiking plans until the second half of 2016," BMI told clients in a note.

Also cooling U.S. rate hike views, activity in the U.S. services sector slowed to a near two-year low in January.

Holdings of top gold-backed exchange-traded fund, SPDR Gold Trust , continued to rise, standing at 22.19 million ounces on Wednesday, the most since late October

Investor focus will soon turn to Friday's nonfarm payrolls and INTL FCStone analyst Edward Meir said a weak outcome could sustain the dollar selloff.

"If we get a stronger-than-expected reading, the pendulum might swing the other way, as the Fed 'hawks' recover lost ground in the debate," said Meir.

Economists polled by Reuters are looking for U.S. non-farm payrolls to increase by 190,000 in January, after rising by 292,000 in December.

So, gold has completed next target as well. Now it seems that gold gravitates to YPP at 1180 area. This will be also 1.618 extension of AB=CD daily pattern. Right now we see that gold is held by MPR1, since it already has exceeded as butterfly target as AB=CD and Fib level. Hence if gold will move above MPR1 - this will tell us that we are in new bull trend but not in retracement on bear trend.
The way how gold has hit our 1140-1145 targets makes us think that upward action will continue. Since gold is not at overobught - any retracement will not be significant, probably:

4-hour chart also suggests further upside action. Minor AB-CD shows that gold stands between 1.0 and 1618 targets. Also market turns to channel action which keeps harmonic retracements very well.
Thus, if retracement will happen, it probably should be shy - may be to 1130 area. And major event that we will be watching for is tommorow's NFP. They could become a cathalyst for upward action on gold, if they will be less than 190K as market expects:

 

[Sive Morten]

Good morning,

(Reuters) - Gold was trading near its highest since October on Friday, on track for its strongest weekly gain in a month as the dollar was pressured by growing doubts the Federal Reserve can stick to its interest rate hike campaign.

A shaky global economy has lifted buying interest in gold, making it among the best performing assets with a year-to-date gain of nearly 9 percent.

Other precious metals rode on gold's rally, with silver and platinum also at multi-month highs. Silver is eyeing its best week since May last year.

Focus is turning to the U.S. employment report due later in the day, with analysts saying a weaker-than-expected reading could stretch gold's rally.

Gold has gained more than 3 percent so far this week, on course for its biggest such increase since early January.

Bullion's upward momentum increased this week after a key Fed official said there was a need to consider tighter financial conditions and the weakening global outlook in framing U.S. monetary policy

That spurred gold bulls, thinking it would be tough for the Fed to raise interest rates again this year after hiking them in December for the first time in nearly a decade.

Non-interest bearing gold is quite sensitive to U.S. monetary policy. Its recent upturn has prompted some analysts to have a more positive price outlook on the metal many had thought was bound to fall below $1,000 an ounce as the U.S. lifts rates.

HSBC analyst James Steel said gold's rally appeared intact.

"We see no compelling reason for more than a normal retracement before bullion resumes an upward move. The rally is underpinned by risk-off sentiment, a weaker dollar and a shift in global monetary policy," Steel said.

Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, continued to rise, reaching 22.3 million ounces on Thursday, the most since late October.

But most physical gold buyers in Asia stayed off the market this week, widening discounts in India and leaving demand largely lethargic in China ahead of next week's Lunar New Year holiday.

Ahead of the U.S. employment report, economists polled by Reuters are looking for nonfarm payrolls to increase by 190,000 in January, after rising by 292,000 in December. The unemployment rate is forecast to remain at a 7-1/2-year low of 5 percent.

So on gold we do not see big shifts yet. Our next target is 1180, if NFP will be worse than expected, may be market will try it to reach even today, who knows...
All other short-term targets and levels have been broken, including major 5/8 Fib resistance:

On 4-hour we have relative confirmation to this suggestion. Take a look that gold has broken channel's harmony and continues move up. Usually it leads to doubling of harmonic swing and this, in turn, precisely 1180 area:

That's being said, if you keep longs - be prepared to NFP release - tight stops. If you what to go short - don't hurry and wait at least when YPP will be touched.