Sive Morten
Special Consultant to the FPA
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- 18,648
Fundamentals
Last week there were no big changes in sentiment on gold market. Most fluctuations were due changes in value of USD on a background of US-Sino relations and rising worries on global political situation. Gold trading range was relatively narrow.
As Reuters reports - Gold rose on Friday as a gloomy global economic outlook dented risk appetite, but a firm dollar stemmed bullion’s advance and kept the metal on track for its first weekly decline in three.
“With equities a little lower here, we’re getting some flight to safety in gold,” said Bob Haberkorn, senior market strategist at RJO Futures.
“The fact that the U.S. economy is not seeing weak data like the euro zone is supportive of the dollar. If the dollar was a little weaker today, gold would probably be up $7 or $8, instead of $3.”
Stocks fell worldwide for a third straight day on worries about a global slowdown and the lack of any sign of a resolution to a U.S.-China trade row.
U.S. President Donald Trump said on Thursday he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline set by the world’s two largest economies for a deal.
However, while bullion has risen about 13 percent from 1-1/2-year lows touched in August, mostly because of volatile stock markets and a dovish U.S. Federal Reserve, a strong dollar has driven gold down about 0.3 percent so far this week.
The greenback held firm versus a basket of other currencies , on track for its best week in six months.
Playing on investors’ minds, the European Commission cut its forecasts for euro zone economic growth, while in Washington a logjam continued over plans for a border wall with Mexico.
Gold is considered a safe store of value during economic and political uncertainty.
However, holdings in the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, have fallen more than 1 percent for the week.
“We see no reason for the outflows in view of the falling stock markets and declining bond yields .... we believe gold should be in good demand as an attractive alternative investment and a safe haven, partly because there are after all numerous political risks,” Commerzbank said in a note.
Indeed, if we take a look at SPDR holdings, we see gradual drop from almost 824 tonnes by the end of the January to current 802 tonnes. This week fund has lost 10 tonnes. This is not dramatic outflow, previously we saw significantly greater flows just in one week, but still, it could suggest that market a bit tired on upside action and purchasing power exhausts.
Still, it doesn't mean reversal. Market needs just some rest to take a breath.
COT data also shows that net long position has dropped a bit:
Source: CFTC.gov
Charting by Investing.com
This situation with long position on gold coincides with approaching to our major 1330 target, which also suggests retracement.
Still, currently we treat this weakness as temporal effect. Global economy problems and political unrest are far from resolving and this provides support to gold market in a long term, as we've talked about it in our FX report yesterday.
Technical
Monthly
This week action has little impact on large time frames, such as monthly.
As we've said earlier, we're watching for our so called "symmetrical" model. As we've identified clear symmetry in market action, we have suggested that future action could be a reflection of previous downside action shape. Last week, market has moved more above the trend line, which was a crucial level for long-term technical picture.
Gold shows good performance in December- January, which could lay the foundation of new long-term upside trend. We still keep our harmonic technical model on monthly chart as primary tool of analysis.
Fundamental reasons for gold rising mostly relate to changing of global political and economical situation. 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, or even in second half of 2019. For example, here is report by Fathom Consulting and their expectations to see world crisis around 2020.
Here is explanation of our "symmetrical" model and scenario. Recent action on gold market reminds reverse H&S shape but very choppy and extended it time. Important COP target has been hit and upside action has started. In fact we have mirror action to the right and to the left from COP point. Market forms approximately equal lows on both sides. The speed is also similar. Is it possible that reversal is forming? Why not.
On monthly chart we keep watching whether gold will be able to hold above trend line. Now price stands above YPP as well, but it has not been tested yet by price. So,as soon as any meaningful retracement will happen here - YPP could work as nearest destination point. For example, it could happen right after completion of our 1330 target.
Weekly
Trend stands bullish here, market is not at Overbought, at least on weekly chart. Here we do not need to make many comments. Gold has no fib levels ahead, just XOP target, which is coincides with MPR1 around 1330-1340 area.
We suggest reaching of this target before any other action, such as retracement that we've mentioned above.
Daily
So, on daily chart harmonic retracement is completed and market could jump right to 1330 target from current levels, or, as we've said, after re-testing of rectangle consolidation. Here we already see first signs of retracement - bearish divergence with MACD, but, as we've said we expect possible reversal only after completion of 1330 target.
Intraday
Here in the beginning of the week we will keep an eye on "C" point. In our videos through the week we've mentioned possible AB=CD retracement as gold could re-test previous consolidation.
But, on Friday market has turned up and has not completed OP target. If "C" point will be broken up, this action erases AB-CD pattern and could mean that upside action is re-established. In this case we appear in final leg to 1330.
Conversely, with '222" Sell pattern on the back, downside action should lead gold to OP target. It means that if you're watching for long entry - wait for one of these two issues either "C" point upside breakout or drop to 1295-1300 support and AB-CD completion.
Conclusion:
As we're coming to major 1330 target and sentiment analysis shows that gold market a bit tired from unstoppable rally, retracement could be right around the corner.
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.
Last week there were no big changes in sentiment on gold market. Most fluctuations were due changes in value of USD on a background of US-Sino relations and rising worries on global political situation. Gold trading range was relatively narrow.
As Reuters reports - Gold rose on Friday as a gloomy global economic outlook dented risk appetite, but a firm dollar stemmed bullion’s advance and kept the metal on track for its first weekly decline in three.
“With equities a little lower here, we’re getting some flight to safety in gold,” said Bob Haberkorn, senior market strategist at RJO Futures.
“The fact that the U.S. economy is not seeing weak data like the euro zone is supportive of the dollar. If the dollar was a little weaker today, gold would probably be up $7 or $8, instead of $3.”
Stocks fell worldwide for a third straight day on worries about a global slowdown and the lack of any sign of a resolution to a U.S.-China trade row.
U.S. President Donald Trump said on Thursday he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline set by the world’s two largest economies for a deal.
However, while bullion has risen about 13 percent from 1-1/2-year lows touched in August, mostly because of volatile stock markets and a dovish U.S. Federal Reserve, a strong dollar has driven gold down about 0.3 percent so far this week.
The greenback held firm versus a basket of other currencies , on track for its best week in six months.
Playing on investors’ minds, the European Commission cut its forecasts for euro zone economic growth, while in Washington a logjam continued over plans for a border wall with Mexico.
Gold is considered a safe store of value during economic and political uncertainty.
However, holdings in the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, have fallen more than 1 percent for the week.
“We see no reason for the outflows in view of the falling stock markets and declining bond yields .... we believe gold should be in good demand as an attractive alternative investment and a safe haven, partly because there are after all numerous political risks,” Commerzbank said in a note.
Indeed, if we take a look at SPDR holdings, we see gradual drop from almost 824 tonnes by the end of the January to current 802 tonnes. This week fund has lost 10 tonnes. This is not dramatic outflow, previously we saw significantly greater flows just in one week, but still, it could suggest that market a bit tired on upside action and purchasing power exhausts.
Still, it doesn't mean reversal. Market needs just some rest to take a breath.
COT data also shows that net long position has dropped a bit:
Source: CFTC.gov
Charting by Investing.com
This situation with long position on gold coincides with approaching to our major 1330 target, which also suggests retracement.
Still, currently we treat this weakness as temporal effect. Global economy problems and political unrest are far from resolving and this provides support to gold market in a long term, as we've talked about it in our FX report yesterday.
Technical
Monthly
This week action has little impact on large time frames, such as monthly.
As we've said earlier, we're watching for our so called "symmetrical" model. As we've identified clear symmetry in market action, we have suggested that future action could be a reflection of previous downside action shape. Last week, market has moved more above the trend line, which was a crucial level for long-term technical picture.
Gold shows good performance in December- January, which could lay the foundation of new long-term upside trend. We still keep our harmonic technical model on monthly chart as primary tool of analysis.
Fundamental reasons for gold rising mostly relate to changing of global political and economical situation. 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, or even in second half of 2019. For example, here is report by Fathom Consulting and their expectations to see world crisis around 2020.
Here is explanation of our "symmetrical" model and scenario. Recent action on gold market reminds reverse H&S shape but very choppy and extended it time. Important COP target has been hit and upside action has started. In fact we have mirror action to the right and to the left from COP point. Market forms approximately equal lows on both sides. The speed is also similar. Is it possible that reversal is forming? Why not.
On monthly chart we keep watching whether gold will be able to hold above trend line. Now price stands above YPP as well, but it has not been tested yet by price. So,as soon as any meaningful retracement will happen here - YPP could work as nearest destination point. For example, it could happen right after completion of our 1330 target.
Weekly
Trend stands bullish here, market is not at Overbought, at least on weekly chart. Here we do not need to make many comments. Gold has no fib levels ahead, just XOP target, which is coincides with MPR1 around 1330-1340 area.
We suggest reaching of this target before any other action, such as retracement that we've mentioned above.
Daily
So, on daily chart harmonic retracement is completed and market could jump right to 1330 target from current levels, or, as we've said, after re-testing of rectangle consolidation. Here we already see first signs of retracement - bearish divergence with MACD, but, as we've said we expect possible reversal only after completion of 1330 target.
Intraday
Here in the beginning of the week we will keep an eye on "C" point. In our videos through the week we've mentioned possible AB=CD retracement as gold could re-test previous consolidation.
But, on Friday market has turned up and has not completed OP target. If "C" point will be broken up, this action erases AB-CD pattern and could mean that upside action is re-established. In this case we appear in final leg to 1330.
Conversely, with '222" Sell pattern on the back, downside action should lead gold to OP target. It means that if you're watching for long entry - wait for one of these two issues either "C" point upside breakout or drop to 1295-1300 support and AB-CD completion.
Conclusion:
As we're coming to major 1330 target and sentiment analysis shows that gold market a bit tired from unstoppable rally, retracement could be right around the corner.
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.
