Sive Morten
Special Consultant to the FPA
- Messages
- 18,639
Fundamentals
(Reuters) - Gold prices eased on Friday but notched a weekly gain as investors opted for the safe-haven qualities of bullion due to uncertainty about U.S. and European politics as well as the direction of stock markets.
Global equity markets lost momentum after setting record highs in the previous two sessions, partly due to disquiet about the policies of U.S. President Donald Trump.
"Gold is close to its recent multimonth high despite the strong dollar, due to an increase in volatility on the equity markets and more uneasiness on the political front, which is supporting the search for safe-haven assets," said Eugen Weinberg, head of commodity research at Commerzbank.
Spot gold was 0.14 percent lower at $1,237 per ounce by 2:44 p.m. EST (1944 GMT), while U.S. gold futures
ended the session down 0.2 percent at $1,239.10. Concern over Trump's policies, as well as elections in the
Netherlands, France and Germany this year, fueled gold's rise to a peak of $1,244.67 on Feb. 8, the strongest in nearly three months.
Gold, on track for a third week of gains, has risen nearly 8 percent in 2017. Early in the week, gold prices fell after Fed Chair Janet Yellen said U.S. interest rates may need to be raised in March.
"On balance, we still don't think that the Fed will raise interest rates at the March FOMC meeting, but the 0.6 percent month-on-month surge in consumer prices in January could prompt the Fed to move sooner than we anticipate," Capital Economics analysts said in a note.
Gold prices recovered by Wednesday after strong U.S. data showed U.S. inflation was picking up. Bullion is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding
bullion, while boosting the dollar, in which it is priced. The dollar index rose 0.5 percent to 100.93 on Friday, recovering from a one-week low of 100.41 the day before.
Holdings of SPDR Gold, the world's largest gold-backed exchange-traded fund (ETF), have risen 5.6 percent so far this month, the most since June 2016. "The market seems to be quite supported by investment
inflows into the ETFs and I think this will be the most important factor through the year as we expect investors to keep pouring money into gold ETFs," Weinberg added. Commerzbank expects gold to hit $1,300 by year end.
COT Report
Recent report shows that as market has reached 1235 resistance some new shorts were opened, as net long position has dropped slightly, while open interest has not changed. In general this doesn't change big picture, but could mean that some short-term speculators joined the market.
SDPR Fund stats shows that on Friday there was minor decrease for 1.5 tonnes, but since January 17 fund shows strong inflows of ~ 40 tonnes. Thus, sentiment analysis shows no bearish hints yet.
Now let's turn to some gepolictical events. As we continue to talk and repeat again and again - we see big shifts in global gepolitical balance. In a row with inflation - geopolicy is one of major driving factors for gold. In fact, now we see breaking of old global order that was established in 90's or even slightly earlier. The new order changes the role of EU, US and some other countries, makes impact on their relations. This leads to some measures and steps from different national governments that could be seen as unclear for people who do not understand what is going on.
Some of our readers accuse us that we're stand under obsession of theory of global conspiracy.
But we're far from misterious background of this subject. We look at facts and analyze them.
1-2 months ago we said that one of the steps of global geopolitical shifts will be leaving EU out from US external governing. This process has begun - EU creates it's own army:
"The European Parliament approved a resolution proposed by the ex Prime Minister of Belgium and is responsible for negotiating a “breccia” guy Verhofstadt, the growing centralization of the European Union and the creation of the post of Minister of Finance of the EU and a common European army, reports BBC.
Verhofstadt supported the federalization of the EU, in contrast, he says, nationalists and protectionists.
The resolution was voted 283 MEP with 269 votes against and 83 abstentions.
The approval of the European Parliament can mean the beginning of a fundamental reform of the EU Treaty.
Belgian politician believes that the EU should give priority to solving most of the countries, without waiting for the approval of all EU members on a particular issue."
So guys, we stand rather far from tales about global conspirancy but we try to follow facts, analyze them and make correct conclusions. Recent news in Middle East region:
"Adding further confusion to President Trump's emerging Middle East policy, the U.S. envoy to the United Nations said Thursday that United States "absolutely" supports creation of a Palestinian state. "We absolutely support a two-state solution," Ambassador Nikki Haley said at U.N. headquarters in New York. "That's never wavered."
US doesn't support Israel? US stands for 2-state solution? How this has happened, when? So, when you saw last time that US has not supported Israel policy in relation to Palestina (and grabing its territory against resolution of UN?)
U.S. Warns Israel to Stop Announcing New West Bank Settlements
And yes:
President Trump blasted the media as "the enemy of the American people" in a tweet Friday, calling out several outlets specifically.
"The FAKE NEWS media (failing @nytimes, @NBCNews, @ABC, @CBS, @CNN) is not my enemy, it is the enemy of the American People!" he wrote.
That's why many people do not understand a lot of ongoing processes, they just believe in virtual reality that was created by mass media, people treat different events and political persons as media wants they to, but not as they stand in reality, including D. Trump and his actions as US president.
So, global policy shows tectonical shifts. Here we bring just 2 most fresh examples, but there are a lot of them. Still, we're not a politicians and we're interested in ongoing processes only due their relation to financial markets. If we will be right on ongoing processes - gold should become one of best performances in 2017. Now let's go back to technical issues.
Technicals
Monthly
As gold shows no return back to 1100 lows - it keeps reversal moment of our H&S pattern pretty nice by far.
But here we come to most difficult moment. Mostly because fundamental background for gold market is very blur. D. Trump victory and uncertainty around its economy policy, massive political turmoil in Europe and foreign affairs do not let us to estimate clear fundamental picture by far. Although price behavior, short-term sentiment and commodities performance mostly supports idea of bullish reversal pattern here (at least now).
Right now we can make just some suggestions. As we've said technically recent upward action started in Dec 2015 is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Now this retracement stands in place. It is really big chance that gold stands in a stage of big trend changing from bearish into bullish. US economy shows inflation growing. As we've estimated last week, commodities across the board have turned to growth.
Besides, any Trump protection policy will be accompanied by big spending and expenses, this will lead to grow of inflationary expectations and could lead even to more hawkish Fed policy. Thus, we mostly gravitate to idea that gold now stands not in pause of bear trend, but on the eve of new bull trend. Also we expect big structural shifts in EU economy, diminishing Brussels governing role, taking direction on convergence with Russian economy, and through Russia economical infrastructure - with Middle East and Asia.
But our technical "deep" retracement still could be different. Currently, as market stands at the edge of 1170 Fib support, we could talk on H&S pattern. Besides the shape itself, some features here that in general typical for H&S. For example, relation between head and shoulders - 1.618. Butterfly... very often first part of H&S takes the shape of butterfly pattern...
That's being said gold stands at the area where the bottom of right shoulder should be formed. Thus, our first step on this long-term time frame has been completed - "we suggest further drop on gold, at least to 1160-1180 area."
As we've said almost month ago - we're coming to second step how we've specified it - "watch for validity of H&S pattern." Rally that we see right now is not bad, but it seems that it is lack of confidence a bit.
Here we come to idea of another reversal pattern. If retracement will be too deep, back to 1000$, gold still will keep chances to reverse up, but by another reversal pattern - Double Bottom.
So, as you can see here we've got big journey ahead while we will estimate what we really have - either H&S or Double Bottom. It means that we should be extra careful to patterns that will be formed on daily chart.
Weekly
Trend is bullish here, but gold is not at OB on weekly chart. Since gold has erased reversal candle 2 weeks ago and B&B "Sell" pattern, last week it has moved slightly higher and confirmed bullish sentiment. On a way up gold has re-tested 1251 lows and also has reached some intraday and daily targets and Fib levels. Last week was mostly inside one, that's why it has minor impact on overall picture.
Still in long-term weekly chart gold stands very well - channel has broken up and re-tested by 1.618 AB=CD target. Then gold has turned up again, erased reversal week and B&B and re-tested 1251 lows. This action looks very well from bullish point of view. Long-term bullish crucial point is 1130 lows. Logic is simple here. From perspective of H&S pattern - gold has completed all necessary targets to form right shoulder - downward AB-CD 1.618 extension has been completed and also price has reached 5/8 major Fib support. It means that if gold will drop below this level - it will mean that H&S has failed.
On coming week hardly we will be involved in big picture and big patterns. Mostly we will keep up with retracement that has started last week. Thus our major time frames will be daily and intraday charts. Two major levels to watch for are 1255 daily resistance and 1278 - weekly one.
Daily
In general guys, we're familiar with daily picture, since we discuss it almost every day. Right now market still stands in respect action to 1240 resistance area. Here we have two new issues. First is OB level - take a look that it stands slightly above 1255, but below 1278 weekly resistance. It means that 1278 is important target but is not interested for us yet, since it is hardly achievable on coming week.
Second, our AB=CD pattern creates an Agreement resistance of 1278 weekly level. This will be our next destination point after 1255 area:
Hourly
On Friday market mostly has confirmed our idea of possible deeper retracement down and appearing of butterfly "buy" pattern here. Right now we're watching on appearing of right wing. Usually butterfly shows deep retracement. Taking in consideration of inner AB-CD pattern - it creates Agreement support with 5/8 Fib level around 1226. This is most probable destination point, where upside action could be re-established. Anyway right now we have no signs of bullish reversal.
Retracement just to WPP and 3/8 Fib suport looks less probable, because gold aready has done deeper retracement to 1215 area but wasn't able to break 1243 top. In such circumstances minor retracement looks irrational and market needs more time and more enery to build and prepare for upside continuaiton. Besides, Friday's drop is rather fast...
That's being said, major action right now stands on intraday charts and mostly has no impact on large time frames as gold turns to retracement. Our trading plan suggests downward continuation to 1226 support as first step. Second - we will watch for bullish reversal patterns there.
Conclusion:
As market has completed first step of our long term analysis - dropped to 1170 area, now we're turning to second step - estimating of validity of monthly H&S pattern. Currently we still think that gold has fundamental background to start long-term bullish trend and two patterns could be formed. Either H&S or Double bottom. As Januray close was strong - gold keeps good chances to form H&S pattern still.
Although we try to keep maximum tolerancy and operate just with dry facts, we're sorry that we bring some political issues in our research, but we need to provide some examples to explain impact of geopolitical changes on gold market. This is one of the major driving factors and we just can't ignore it.
In shorter term perspective our trading plan is based on large hourly butterfly pattern, that could let gold to complete next 1255 target.
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.
(Reuters) - Gold prices eased on Friday but notched a weekly gain as investors opted for the safe-haven qualities of bullion due to uncertainty about U.S. and European politics as well as the direction of stock markets.
Global equity markets lost momentum after setting record highs in the previous two sessions, partly due to disquiet about the policies of U.S. President Donald Trump.
"Gold is close to its recent multimonth high despite the strong dollar, due to an increase in volatility on the equity markets and more uneasiness on the political front, which is supporting the search for safe-haven assets," said Eugen Weinberg, head of commodity research at Commerzbank.
Spot gold was 0.14 percent lower at $1,237 per ounce by 2:44 p.m. EST (1944 GMT), while U.S. gold futures
ended the session down 0.2 percent at $1,239.10. Concern over Trump's policies, as well as elections in the
Netherlands, France and Germany this year, fueled gold's rise to a peak of $1,244.67 on Feb. 8, the strongest in nearly three months.
Gold, on track for a third week of gains, has risen nearly 8 percent in 2017. Early in the week, gold prices fell after Fed Chair Janet Yellen said U.S. interest rates may need to be raised in March.
"On balance, we still don't think that the Fed will raise interest rates at the March FOMC meeting, but the 0.6 percent month-on-month surge in consumer prices in January could prompt the Fed to move sooner than we anticipate," Capital Economics analysts said in a note.
Gold prices recovered by Wednesday after strong U.S. data showed U.S. inflation was picking up. Bullion is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding
bullion, while boosting the dollar, in which it is priced. The dollar index rose 0.5 percent to 100.93 on Friday, recovering from a one-week low of 100.41 the day before.
Holdings of SPDR Gold, the world's largest gold-backed exchange-traded fund (ETF), have risen 5.6 percent so far this month, the most since June 2016. "The market seems to be quite supported by investment
inflows into the ETFs and I think this will be the most important factor through the year as we expect investors to keep pouring money into gold ETFs," Weinberg added. Commerzbank expects gold to hit $1,300 by year end.
COT Report
Recent report shows that as market has reached 1235 resistance some new shorts were opened, as net long position has dropped slightly, while open interest has not changed. In general this doesn't change big picture, but could mean that some short-term speculators joined the market.
SDPR Fund stats shows that on Friday there was minor decrease for 1.5 tonnes, but since January 17 fund shows strong inflows of ~ 40 tonnes. Thus, sentiment analysis shows no bearish hints yet.
Now let's turn to some gepolictical events. As we continue to talk and repeat again and again - we see big shifts in global gepolitical balance. In a row with inflation - geopolicy is one of major driving factors for gold. In fact, now we see breaking of old global order that was established in 90's or even slightly earlier. The new order changes the role of EU, US and some other countries, makes impact on their relations. This leads to some measures and steps from different national governments that could be seen as unclear for people who do not understand what is going on.
Some of our readers accuse us that we're stand under obsession of theory of global conspiracy.
But we're far from misterious background of this subject. We look at facts and analyze them.
1-2 months ago we said that one of the steps of global geopolitical shifts will be leaving EU out from US external governing. This process has begun - EU creates it's own army:
"The European Parliament approved a resolution proposed by the ex Prime Minister of Belgium and is responsible for negotiating a “breccia” guy Verhofstadt, the growing centralization of the European Union and the creation of the post of Minister of Finance of the EU and a common European army, reports BBC.
Verhofstadt supported the federalization of the EU, in contrast, he says, nationalists and protectionists.
The resolution was voted 283 MEP with 269 votes against and 83 abstentions.
The approval of the European Parliament can mean the beginning of a fundamental reform of the EU Treaty.
Belgian politician believes that the EU should give priority to solving most of the countries, without waiting for the approval of all EU members on a particular issue."
So guys, we stand rather far from tales about global conspirancy but we try to follow facts, analyze them and make correct conclusions. Recent news in Middle East region:
"Adding further confusion to President Trump's emerging Middle East policy, the U.S. envoy to the United Nations said Thursday that United States "absolutely" supports creation of a Palestinian state. "We absolutely support a two-state solution," Ambassador Nikki Haley said at U.N. headquarters in New York. "That's never wavered."
US doesn't support Israel? US stands for 2-state solution? How this has happened, when? So, when you saw last time that US has not supported Israel policy in relation to Palestina (and grabing its territory against resolution of UN?)
U.S. Warns Israel to Stop Announcing New West Bank Settlements
And yes:
President Trump blasted the media as "the enemy of the American people" in a tweet Friday, calling out several outlets specifically.
"The FAKE NEWS media (failing @nytimes, @NBCNews, @ABC, @CBS, @CNN) is not my enemy, it is the enemy of the American People!" he wrote.
That's why many people do not understand a lot of ongoing processes, they just believe in virtual reality that was created by mass media, people treat different events and political persons as media wants they to, but not as they stand in reality, including D. Trump and his actions as US president.
So, global policy shows tectonical shifts. Here we bring just 2 most fresh examples, but there are a lot of them. Still, we're not a politicians and we're interested in ongoing processes only due their relation to financial markets. If we will be right on ongoing processes - gold should become one of best performances in 2017. Now let's go back to technical issues.
Technicals
Monthly
As gold shows no return back to 1100 lows - it keeps reversal moment of our H&S pattern pretty nice by far.
But here we come to most difficult moment. Mostly because fundamental background for gold market is very blur. D. Trump victory and uncertainty around its economy policy, massive political turmoil in Europe and foreign affairs do not let us to estimate clear fundamental picture by far. Although price behavior, short-term sentiment and commodities performance mostly supports idea of bullish reversal pattern here (at least now).
Right now we can make just some suggestions. As we've said technically recent upward action started in Dec 2015 is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Now this retracement stands in place. It is really big chance that gold stands in a stage of big trend changing from bearish into bullish. US economy shows inflation growing. As we've estimated last week, commodities across the board have turned to growth.
Besides, any Trump protection policy will be accompanied by big spending and expenses, this will lead to grow of inflationary expectations and could lead even to more hawkish Fed policy. Thus, we mostly gravitate to idea that gold now stands not in pause of bear trend, but on the eve of new bull trend. Also we expect big structural shifts in EU economy, diminishing Brussels governing role, taking direction on convergence with Russian economy, and through Russia economical infrastructure - with Middle East and Asia.
But our technical "deep" retracement still could be different. Currently, as market stands at the edge of 1170 Fib support, we could talk on H&S pattern. Besides the shape itself, some features here that in general typical for H&S. For example, relation between head and shoulders - 1.618. Butterfly... very often first part of H&S takes the shape of butterfly pattern...
That's being said gold stands at the area where the bottom of right shoulder should be formed. Thus, our first step on this long-term time frame has been completed - "we suggest further drop on gold, at least to 1160-1180 area."
As we've said almost month ago - we're coming to second step how we've specified it - "watch for validity of H&S pattern." Rally that we see right now is not bad, but it seems that it is lack of confidence a bit.
Here we come to idea of another reversal pattern. If retracement will be too deep, back to 1000$, gold still will keep chances to reverse up, but by another reversal pattern - Double Bottom.
So, as you can see here we've got big journey ahead while we will estimate what we really have - either H&S or Double Bottom. It means that we should be extra careful to patterns that will be formed on daily chart.
Weekly
Trend is bullish here, but gold is not at OB on weekly chart. Since gold has erased reversal candle 2 weeks ago and B&B "Sell" pattern, last week it has moved slightly higher and confirmed bullish sentiment. On a way up gold has re-tested 1251 lows and also has reached some intraday and daily targets and Fib levels. Last week was mostly inside one, that's why it has minor impact on overall picture.
Still in long-term weekly chart gold stands very well - channel has broken up and re-tested by 1.618 AB=CD target. Then gold has turned up again, erased reversal week and B&B and re-tested 1251 lows. This action looks very well from bullish point of view. Long-term bullish crucial point is 1130 lows. Logic is simple here. From perspective of H&S pattern - gold has completed all necessary targets to form right shoulder - downward AB-CD 1.618 extension has been completed and also price has reached 5/8 major Fib support. It means that if gold will drop below this level - it will mean that H&S has failed.
On coming week hardly we will be involved in big picture and big patterns. Mostly we will keep up with retracement that has started last week. Thus our major time frames will be daily and intraday charts. Two major levels to watch for are 1255 daily resistance and 1278 - weekly one.
Daily
In general guys, we're familiar with daily picture, since we discuss it almost every day. Right now market still stands in respect action to 1240 resistance area. Here we have two new issues. First is OB level - take a look that it stands slightly above 1255, but below 1278 weekly resistance. It means that 1278 is important target but is not interested for us yet, since it is hardly achievable on coming week.
Second, our AB=CD pattern creates an Agreement resistance of 1278 weekly level. This will be our next destination point after 1255 area:
Hourly
On Friday market mostly has confirmed our idea of possible deeper retracement down and appearing of butterfly "buy" pattern here. Right now we're watching on appearing of right wing. Usually butterfly shows deep retracement. Taking in consideration of inner AB-CD pattern - it creates Agreement support with 5/8 Fib level around 1226. This is most probable destination point, where upside action could be re-established. Anyway right now we have no signs of bullish reversal.
Retracement just to WPP and 3/8 Fib suport looks less probable, because gold aready has done deeper retracement to 1215 area but wasn't able to break 1243 top. In such circumstances minor retracement looks irrational and market needs more time and more enery to build and prepare for upside continuaiton. Besides, Friday's drop is rather fast...
That's being said, major action right now stands on intraday charts and mostly has no impact on large time frames as gold turns to retracement. Our trading plan suggests downward continuation to 1226 support as first step. Second - we will watch for bullish reversal patterns there.
Conclusion:
As market has completed first step of our long term analysis - dropped to 1170 area, now we're turning to second step - estimating of validity of monthly H&S pattern. Currently we still think that gold has fundamental background to start long-term bullish trend and two patterns could be formed. Either H&S or Double bottom. As Januray close was strong - gold keeps good chances to form H&S pattern still.
Although we try to keep maximum tolerancy and operate just with dry facts, we're sorry that we bring some political issues in our research, but we need to provide some examples to explain impact of geopolitical changes on gold market. This is one of the major driving factors and we just can't ignore it.
In shorter term perspective our trading plan is based on large hourly butterfly pattern, that could let gold to complete next 1255 target.
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.
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