GOLD PRO Weekly February 16-20, 2014

[Sive Morten]

Fundamentals

Weekly Gold Tading Report prepared by Sive Morten exclusively for ForexPeaceArmy.com

Gold pared gains after rising one percent on Friday, on track for a small weekly loss, as the dollar steadied following weaker than expected U.S. economic data.

U.S. gold for April delivery edged up $6.40 to settle at $1,227.10 an ounce. The U.S. precious metals floor will shut on Monday for the Presidents Day holiday, when the Globex metals will close early at 1 p.m.

"We are in a holding pattern between $1,150 and $1,300 because there isn't enough clarity around when the Fed is going to be hiking interest rates and what is going to be happening with Greece," ING Bank senior strategist Hamza Khan said.

A weaker dollar supports gold by making the dollar-denominated asset cheaper for holders of other currencies.
But outlook for the dollar remained upbeat despite the current pause in its long-term rally, as many investors continued to price in an interest rate hike by the Federal Reserve some time this year.

Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could hurt demand for bullion, a non-interest-bearing asset.

"Gold short-covering continues as the cease fire seems to hold in the Ukraine," said George Gero, precious metals strategist for RBC Capital markets in New York, in a note.

"Short week next week and open interest (is) showing again too many bears so traders are re-purchasing previously sold positions."

Stock markets worldwide rose on stronger-than-expected German economic growth data and optimism that Greece could reach a deal with its creditors, while oil prices gained on signs that excess supply may ebb.

Holding in the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.23 percent to 771.51 tonnes on Thursday.

In the physical markets, Chinese buying remained stable ahead of the Lunar New Year holiday next week. Premiums on the Shanghai Gold Exchange traded unchanged on the day at $3-$4 an ounce on Friday.


Recent CFTC data shows contraction of positions as in terms of open interest as in terms of net long position. At the same time we have to say that long-to-total position ratio has dropped a bit but still stand around 82%. As we’ve expected this could become the reason for retracement and now we see it.
SPDR fund also reports on ~ 5 tonnes drop to 768 tonnes. But this is acceptable decrease compares to previous inflows and gold price change in last 2 weeks. That’s being said although recent data shows decrease but the value of decreasing suggests mostly retracement than real trend reversal.

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Technicals
Monthly
Here we still have last big pattern in progress that is Volatility breakout (VOB). It suggests at least 0.618 AB-CD down. And this target is 1050$. Still, this is really big setup and current move up could be treated as BC leg. If this leg will exceed ~1433 area then we will need to adjust current AB-CD and we will get closer final destination point – may be no 1050, but 1080 or even 1100…
Since the beginning of the year market shows solid upside action. Market was able to exceed yearly pivot, passed half way to Yearly Pivot resistance 1 but right now has turned to retracement and returned right back to Yearly Pivot Point... and take a look move below it. Still price stands very close to it and it is too early to speak on breakout. But if true breakout will come – this could be very significant moment and next logical destination will be yearly pivot support 1.
At the same time the major driving factor for Gold is inflation. Previous data has shown anemic pace of it or even decreasing. But last NFP data has value not just because of increasing of employment but increasing of cost of labor. Data has shown 12 cent growth and this is approximately 2,2% of annual inflation Currently this numbers have negative effect on gold, since they simultaneously increase chance of rate hike, but when rate will be increased and inflation will show gradual upside pace – this will be supportive factor for gold. Especially if this will be accompanied by reversal on crude oil. But this is future talks and currently we do not see reasons yet to cancel our 1050$ target or at least possible big AB-CD down.
Shortly speaking gold now will fluctuate in difficult period. If coming data will be gradual and supportive for rate hike – NFP will continue show upside trend, inflation will grow, GDP will keep high pace – gold will remain under pressure till first rate hike. After that inflation will be supportive factor for gold.
If data will be mixed as it was recently – then it could lead to local strength on gold market.
Still, if we will take into consideration geopolitical situation and risks that have appeared recently, it could happen that current upside action could become not just retracement but real reversal and changing in global sentiment and risk assessment. Because even technically we have reversal pattern at place on monthly chart – 1.27 Butterfly...Trend has turned bullish here. Recent CFTC and SPDR data support this opinion and geopolicy could overcome any economical issues.
That’s being said, economical data supports further gold decreasing but geopolicy could bring significant adjustment. Our short-term task is to watch for Yearly Pivot and its possible breakout.

Weekly
As a result of NFP data gold shows deep and fast retracement. Still it brings nothing drastical yet. Partially we’ve expected something of that sort, since even on previous week we’ve pointed on existence of DiNapoli “Stretch” pattern – combination of weekly overbought and Fib resistance.
Right now price shows mild break through YPP but 3/8 Fib support is done already. Action was rather fast. Breaking of this level will not be very good sign for bulls, of cause. Moving back below yearly pivot is not good sign. Still, we think that 1200 area has more importance. Gold likes to show deep retracements and now it comes down from overbought. 1200 is MPS1 and 5/8 Fib support. Until pivot support holds retracement – previous trend is valid and MACD confirms this by far. Also do not forget about big ratio of CFTC data that is supportive for retracement down. Conclusion here is as follows – we will be glad if gold will turn up again right from here. But we have to say that odds suggest deeper retracement right to 1200 area and this will be crucial area. I’ve marked two patterns by red arrows. They area different by have similar impact on short-term perspective. First one was bearish engulfing while recent one looks as evening star. Yes, we have to candles on top, but overall action has the same market mechanics. I’m telling this because you can take a look what has happened when engulfing pattern was formed and this was not at overbought. This situation significantly increases further downward action. Breaking through 1200 will suggest changing in weekly trend.

Daily
Price action on previous week was mostly anemic. Initially market has expected Minsk results, and when they have come just lightly positive gold just has stuck in our K-support that we’ve discussed on previous week. So, some chances on small upside retracement out from here still exist as on previous week, but downward action after that probably will continue.

4-hour
4-hour chart probably will be most interesting for us. We still will continue action around AB-CD pattern. As CD leg was rather fast – it hints on further downward action and 1.618 target stands right at 1200 area creating an Agreement with major Fib support level. On Friday we’ve expected another small butterfly and reaching of 1.27 AB-CD target around WPS1. But gold has found some power and completed small AB-CD retracement. If upside retracement will happen – then gold probably will reach an area between WPR1 and 1255 – previous lows. If market will fail to pass through WPP – then it will probably continue move down right to 1200.

Conclusion:
From technical point of view we have no reasons yet to abandon possible long-term downward AB-CD as VoB (Volatility breakout) development. Current upside action does not contradict to it and in fact could become “BC” leg of this pattern.
Taking into consideration the way how gold moves, CFTC data that shows different trend in positions we think that major factors are geopolitical and fundamental. Shortly speaking we suspect that current action could be not just retracement and indicates global shifts in sentiment of investors who start to feel some tension and growing risk. Gold right now enters in turbulence period. Speaking from economical point of view – further improvement in US economy – growth of GDP, employment, consumption and inflation will keep gold under pressure, since it increases chances on rate hike. But when first rate hike will happen and inflation will show solid trend – gold will get support. Any drawdown in positive US data could bring local rally on gold. Also geopolicy comes on lead position and could overcome any financial data.
In short-term perspective although chances on shy upside action still exists, but recent action mostly points on further drop to 1200 that will become moment of truth for weekly bullish trend.


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]

Gold Daily Update Tue 17, February 2015

Good morning,


Reuters reports Gold snapped a three-day rally on Tuesday as a stronger dollar offset gains from safe-haven bids prompted by a break down in talks between Greece and its creditors.
The dip comes on the last trading day before China heads for a week-long Lunar New Year holiday, after which prices could take a further hit as buying from the No.2 consumer tapers off.

"Some form of consolidation is expected to occur as Asian traders close out positions ahead of the long Chinese New Year holidays," said Howie Lee, analyst at Phillip Futures, adding that prices will range between $1,215 and $1,240.

Buying from China has been supportive of gold prices in the run up to the holiday, when the precious metal is bought widely for gift-giving. Premiums on the Shanghai Gold Exchange were firm at $3-$4 an ounce, indicative of robust demand.

"Demand in China has certainly been price responsive, but interest tends to taper off after the Lunar New Year, leaving

(gold) prices more exposed," Barclays analysts said in a note dated Monday.

Bullion had also been getting support from developments in Europe that triggered safe-haven bids.

Talks between Greece and euro zone finance ministers over the country's debt crisis broke down on Monday when Athens rejected a proposal to request a six-month extension of its international bailout package as "unacceptable".

The unexpectedly rapid collapse raised doubts about Greece's future in the euro zone after a new leftist-led government vowed to scrap the 240 billion euro ($272.4 billion) bailout, reverse austerity policies and end cooperation with EU/IMF inspectors.

Investors typically seek safety in bullion during economic uncertainties, and when riskier assets such as equities take a hit. Markets, however, are generally assuming that a compromise would eventually be reached given the potentially painful consequence of a Greek exit from the euro.

A stronger dollar also took a toll on bullion as it makes the greenback-denominated metal more expensive for holders of other currencies.


On Monday Gold has continued move down. We've discussed this in our weekly research. Daily bearish momentum was rather fast and in most cases this usually leads to downward continuation. As we've said our primary target here is 1200 level. IT will become crucial for medium-term perspectives of gold market. If Gold will drop below it - it could lead prices to 1130 lows first and then to new lows around 1050-1080 area. Still final break of current 1220 K-support area has not happened yet:

On 4-hour chart in general we see the same AB-CD that we've discussed yesterday. THe most important feature of this AB-CD is that it creates Agreement with major 1200 Fib support level. Yesterday we've talked that market could show upside retracement before will go to 1200. And yesterday's lazy downward action give me one thought:

If market somehow will stop around current area - theoretically we could get minor H&S pattern on hourly chart that could trigger retracement up. Although there are not many chances on this event.

 

[Sive Morten]

Gold Daily Update Wed 18, February 2015

Good morning,


Reuters reports Gold eased towards six-week lows on Wednesday, extending the previous day's 1.8 percent drop, as hopes for a successful resolution to Greece's debt talks boosted assets seen as higher risk, such as stocks.

The market is awaiting further direction from the minutes of the U.S. Federal Open Market Committee's (FOMC) policy meeting later, but looked vulnerable to further losses with the absence of Chinese buyers during the Lunar New Year break.

"Greece remains the joker, and from looking at all markets from stocks to bonds and the euro the market firmly believes that a solution will be found despite all the current obstacles," Saxo Bank's head of commodity strategy Ole Hansen said.

"Failure will attract buying of gold, but for now traders are reluctant to get involved. Main attention today should be the FOMC minutes, considering the continued dislocation between where the market and where the FOMC have indicted rates will go."

Gold has come under pressure from expectations the Fed will raise interest rates as early as June this year, potentially lifting the dollar and boosting the opportunity cost of holding non-yielding assets, such as bullion.

Greece's government confirmed it would ask on Wednesday for an extension to its loan agreement with the euro zone, which it distinguishes from its full bailout programme.

In Asia overnight, precious metals house MKS said in a note that gold trading volumes through Globex had been the smallest it had seen in months, as the Lunar New Year holidays commenced.

"The absence of China today certainly made an impact on turnover and price action and a quiet week is expected," it said. "Tomorrow and Friday, Hong Kong, Singapore and Malaysia will join them on holiday so things should slow down even further and liquidity will become even more scarce."


So, as we can see gold right now is mostly driven by technicals but not fundamental data. Now breaking news have been released recently and market remains very thin till the end of the week. So, we should not overestimate recent drop. Situation could change as soon as major players will return back to market and Greece situation will be resolved.
On daily chart the drop to 1200 area finally has happened and this was rather obvious that it should, because preceding sell-offs have created strong short-term bearish momentum. Besides, upward action from 1130 is first one after long period of bearish trend and retracement should be deep. Now we have to keep an eye what we will get around 1200. Although market has not quite reached it yet, but this is probably a question of time. In fact it is very good that 1200 is very strong support. This is not just major 5/8 Fib level. This is also MPS1 and Agreement. Downward breakout of this level will tell us that we should be ready for moving to previous 1130 lows:

If market will hold it - it will keep valid recent upside trend and push market higher. On 4-hour chart we see our major AB-CD pattern and it's 1.618 target that creates an Agreement with daily Fib support. Now we will be watching what will happen there:

 

[Sive Morten]

Gold Daily Update Thu 19, February 2015

Good morning,


Reuters reports Gold extended gains to a second straight session on Thursday as minutes of the Federal Reserve's meeting showed U.S. central bank officials were cautious about raising interest rates too soon, hurting the dollar.

Fed policymakers expressed concern last month that raising rates too soon could pour cold water on the U.S. economic recovery, and fretted over the impact of dropping "patient" from the central bank's rate guidance.

The minutes from the Fed's Jan. 27-28 policy-setting meeting, released on Wednesday, show officials grappling to square solid U.S. economic growth with the weakness in international markets, as well as worrying about falling inflation expectations in the United States.

"Bullion's move up after the FOMC minutes may be attributed to an easing of investors' rate hike concerns," said HSBC analyst James Steel, referring to the Fed's Federal Open Market Committee.

Gold had come under pressure in recent months from expectations the Fed will raise interest rates as early as June, potentially lifting the dollar and hurting non-interest-yielding assets like bullion.

"While an eventual rate hike is bearish for gold, the decision by the Fed to remain patient provided some relief to the bullion market," said Steel.

Global equity markets advanced while the dollar pulled back following the release of the Fed minutes.

Gold's failure to hold losses below $1,200 could mean some consolidation was in the offing, said some chart analysts.

Traders were also keeping an eye on developments in Europe, where Greece is negotiating with its creditors to resolve a debt crisis.

Greece is expected to ask on Thursday for an extension to its "loan agreement" with the euro zone as it faces running out of cash within weeks, but it must overcome resistance from sceptical partners led by Germany.

With Greece's bailout programme due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late next month.

A failure to reach an agreement could see Greece exiting the euro zone, potentially triggering safe-haven bids for gold, although markets believe a last-minute agreement will be negotiated.

Liquidity is likely to be thin in Asia as several markets are closed for the Lunar New Year holiday.



So, Gold finally has come to 1200 and bounced up from it after first touch. There is really high stake stands around this level since it is a clue to medium-term trend on gold. Failure here will lead gold to former 1130 lows and next bearish targets, while holding above 1200 will open road to 1340 initially and later to higher levels. That's why this level is so important.

On 4-hour chart market has completed AB-CD and creates Agreement with strong daily support level. While we wait for strategical solution that will be made here - we could try to ride on upside bounce on intraday charts. Our setup suggests taking scalp long position with target around 1240 K-resistance and stops somewhere around 1193 area:

Hourly chart shows 1206 Fib support level and we will try to use it for long entry.

 

[Sive Morten]

Gold Daily Update Fri 20, February 2015

Good morning,


Reuters reports Gold was little changed on Friday as investors eyed talks over Greek debt, but the metal was headed for its fourth straight weekly dip as a last-minute deal was expected to break the impasse over the Mediterranean country's bailout programme.

Spot gold was steady at $1,207.60 an ounce by 0736 GMT, after dropping 0.5 percent in the previous session. The metal has lost 1.8 percent for the week so far, also dipping below the key $1,200 level briefly on Wednesday.

Gold had initially seen some safe-haven bids as the uncertainty over the Greek crisis dragged on, but market concerns eased on hopes that a deal would be patched together.

"The market appears to be dismissing the Greece impasse with little safe haven buying evident," said ANZ analyst Victor Thianpiriya.

Germany rejected a Greek proposal for a six-month extension to its eurozone loan agreement on Thursday, saying it was "not a substantial solution".

Berlin's stance set the scene for tough talks at a crucial meeting of eurozone finance ministers on Friday, but some officials in other capitals saw the German response as tactical and forecast agreement by the weekend.

Adding pressure was the U.S. dollar, which held firm after gaining against major currencies on Thursday, with traders still looking for the U.S. Federal Reserve to hike interest rates by June despite caution evident in the minutes from the latest Fed policy meeting.

That view was supported by strong economic data on Thursday showing the number of Americans filing new claims for unemployment benefits fell more than expected last week, signs the labour market was gathering steam.

A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies, while higher interest rates would also dent the appeal of non-interest-bearing gold.

Liquidity was thin in Asia as No.2 consumer China and several other Asian countries were shut for the Lunar New Year holiday.

Gold prices had received some support from Chinese buying ahead of the holiday, when gold is bought for gift-giving.

"A lot hinges on the return of China next Wednesday as many participants are expecting them to be on the bid following their New Year festivities," said Jason Cerisola, a precious metal trader at MKS Group.

"If this fails to be the case, the complex would likely continue its slide lower."




So, guys, it seems that next driving factor for Gold will be Greece. Currently we do not need much update on daily picture, since gold still stands around major 1200 Support area:

On 4-hour chart we see the same AB-CD pattern, but gold has not quite touched it's ultimate 1.618 extension. That's why if you would like to take long position here - place stop below the target. Existence of untouched target could lead to appearing of, say, double bottom pattern on hourly chart and W&R of previous lows:

On hourly chart we see that market has reached our 1206 Fib support that we've chosen for long entry. It is very probable that any action will happen fast and suddenly because news on Greece will be breaking ones. That's why currently it is difficult to say how definitely bounce up will happen and what pattern will be formed. Thus, you can try to take position here, of wait for double bottom as we've said above. Despite what scenario you will choose - your stop should be below 4-hour 1.618 AB-CD target: