GOLD PRO WEEKLY, February 22-26, 2016

[Sive Morten]

Fundamentals

(Reuters) - Gold eased on Friday as investors cashed in some of the previous day's 2 percent gains, though expectations that rock-bottom interest rates would persist served to keep prices above $1,225 an ounce.

Prices remain up nearly 16 percent so far this year, with turmoil in the wider financial markets fuelling interest in the metal as a store of value while reducing the likelihood of further interest rate rises by the U.S. Federal Reserve.

That is continuing to underpin gold as it consolidates below last week's one-year high of $1,260.60.

"Momentum is strong. Yesterday gold moved up even when the dollar was stronger, so for me that signals that it is mainly central bank-policy driven," ABN Amro analyst Georgette Boele said.

Gold tends to benefit from lower interest rates, which cut the opportunity cost of holding non-yielding assets.

"It just continues to build a base well above $1,200," said James Steel, chief metals analyst for HSBC Securities in New York.

"It's been quite impressive. It's actually ignored some bearish developments."

Rising rents and healthcare costs lifted underlying U.S. inflation in January by the most in nearly 4-1/2 years, signs of a pick-up in price pressures that could allow the Federal Reserve to gradually raise interest rates this year.

"Gold moved up pretty sharply and a period of reflection and sideways trading would seem appropriate," said Simon Weeks, head of precious metals at the Bank of Nova Scotia.

Global equity markets retreated but were off earlier lows as oil prices weakened, while short-dated U.S. bond prices rose after economic data raised the possibility of a U.S. rate hike this year.

Bullion has been supported by inflows into gold-backed exchange-traded funds (ETFs), holdings of which have already risen this year by more than they fell in the whole of 2015.

In the physical markets, Asian gold demand slowed this week with discounts in key consumer India at a record high.

The value of gold compared with silver reached its highest in more than seven years on Friday, with an ounce of gold worth 80 ounces of silver.


CFTC data also shows good and supportive bullish picture. Net long positions is growing in a row with open interest:

So guys from fundamental and technical view everything looks fine and retracement down seems logical. But today, briefing Syria new I've found interesting article:
B1 Lancer Bombers Leave Syria What this could mean? Actually I'm worry that chances of Turkey invasion has increased significantly and US forces just put out their planes awaring of possible big war turmoil. Now just think what will happen to gold... And how really valuable will be our today's analysis?

Technicals
Monthly

So since New Year gold stands in upside action. Reasons could be different - geopolitics, investors' assets distribution in the beginning of the year. Upside action currently is not sufficient yet to change situation on monthly chart but we will monitor how situation will change.

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 was dropping recently on a background of Middle East turmoil looks a bit artificial and this situation already is changing. Now we see that this situation is starting to change. Thus, recently gold has risen even on strong NFP data, compares to other assets. Demand on safe haven assets starts to increase - just take a look at JPY, CHF and gold.

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 starts to come to the same conclusion as gradually situation on gold market starts to change in positive area. International banks purchase gold in big volumes, mostly PBoC and Russian Central Bank.

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 1380 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. Currently this subject is not very interesting since gold stands on upside march. But it has not cancelled yet bearish scenario totally. Gold needs to move above 1380 to do this.

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 and already it's becoming.

Anyway, gold's shift from downward action to flat one, even it will be wide - already will be significant moment.
Monthly chart trend has turned bullish.

As you can see upside action has started right after butterfly "Buy" has been completed. Currently market has reached 5/8 resistance of butterfly 's swing. Gold has exceeded Yearly Pivot and this points on existing bullish trend on monthly chart. As gold is not at overbought here - next logical destination is 1314 area of Yearly PR1.

Weekly
On weekly chart we do not have a lot of subjects to discuss. Trend is bullish here. Market strongly overbought around 5/8 Fib resistance. Most important here is breakout of 1200 area. This was really strong resistance, including upper border of long-term consolidation. This is very important breakout also because gold has created upside reversal swing and broken downward tendency.
Despite of overbought (and, guys, we also have bearish "Stretch" pattern here, right?), gold holds very well - although it has moved down, but returned right back up and close as above broken trend as above 1200 level. This tells that bullishness of gold market is still here.

It is difficult to make any forecast with such geopolitical situation as we have, guys, but base on technical picture purely, we should get some AB=CD retracement down. 1200 area already has been re-tested, but gold still returned back to overbought condition. If 2nd leg of retracement will happen, then we could reach even 1167 area (as we will see on daily picture). But, guys, this is based purely on technical picture, what really will happen in the World on next week, this is big concern...

Daily
Action on Friday was not very significant, that's why our previous daily and intraday analysis mostly is still valid. On daily chart market has formed 2 bullish grabbers that suggest taking out of recent top. Still overbought condition will press on gold and if nothing awful will happen - we could expect W&R of the top as max. This daily picture is a mirror to JPY that we've talked in weekly research. Retracement could take different shapes - AB-CD, DRPO "Sell" or even butterfly. We will deal with these scenarios one by one and start from AB-CD, if it will fail - turn to DRPO or Double Top and the last one will be Butterfly. Just because to start next one, market should destroy previous one.

4-hour

Two scenarios I have drawn here. They are simple AB=CD and butterfly "Sell'. Trend is bullish here. First we will be watching for AB=CD, at least until gold stands below 1240 area. Red circles are crucial points for these scenarios. If market will break 1240 - then AB-CD will be cancelled and we will have just 2 rest - DRPO or Buttefly.
Conversely if gold will drop below 1190, butterfly will be cancelled and we could watch for AB=CD target that creates an Agreement with daily 5/8 Fib support around 1167:

Actually guys, we do not care how definitely this retracement will happen. The major desire is to get entry point as lower as better. And 1167 area looks just perfect for this purpose...

Hourly
Here we see just minor details. On Friday we've explained why current level is suitable for downward continuation within retracement. First is - B&B "Buy" has completed here. Also this is Agreement resistance of AB-CD target and Fib level. Gold also has formed butterfly "Sell", although it's target was exceeded slightly because market was gravitating to 1.618 AB-CD point.
By the way - on JPY this target has not been met yet...
Current action looks so that downward CD leg really could start here. That's being said, first we will be watching for our current scenario of AB=CD down. If it will fail we will turn to another one - DRPO and Butterfly:

Conclusion:
We think that fundamentally gold stands somewhere near bottom and situation is starting to change. 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 has completed first stage of upward action, let's call it initial swing. Some moderate retracement probably should come. But with current pressure of geopolitical factors it is very difficult to say definitely when it will happen and how deep retracement will be.
On coming week we will watch for 1167 Fib support level as a target of this retracement.


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.

 

[Hisham Hassan]

Daily
Action on Friday was not very significant, that's why our previous daily and intraday analysis mostly is still valid. On daily chart market has formed 2 bullish grabbers that suggest taking out of recent top. Still overbought condition will press on gold and if nothing awful will happen - we could expect W&R of the top as max. This daily picture is a mirror to JPY that we've talked in weekly research. Retracement could take different shapes - AB-CD, DRPO "Sell" or even butterfly. We will deal with these scenarios one by one and start from AB-CD, if it will fail - turn to DRPO or Double Top and the last one will be Butterfly. Just because to start next one, market should destroy previous one.

1 st thanks 4 u
2nd i'm new dealer & i can,t undrestand good

 

[Sive Morten]

Good morning,

(Reuters) - Gold rose on Tuesday as Asian shares reversed gains and the dollar slipped, with the metal also supported by big inflows into bullion funds.

Asian shares turned negative after rising to a seven-week high as the oil price rally that boosted global equity markets reversed. The dollar index fell from a three-week top.

Bullion could be vulnerable to more corrections if stock markets strengthen, analysts said.

"Prices may stay under pressure at least in the near term," said HSBC analyst James Steel. "Greater investor risk appetite erodes demand for gold, while increased scrap adds to supply as major consumers are shying away from physical purchases."

Top consumers China and India have turned sellers of gold as prices rally. Discounts in India have hit a record high, while prices in China have also turned cheaper relative to the global benchmark, in a sign of waning demand.

Gold has gained this year largely on the back of turmoil in stock markets and concerns over the global economy. But the metal has given back some of those gains as markets have stabilised.

The volatility index <.VIX>, which measures implied volatility of stock options and is often seen as an investor fear gauge, fell below 20 percent this week, hitting the lowest closing level since early January.

HSBC's Steel said the recent decline in gold prices doesn't mean the rally is over, adding that demand for bullion exchange traded funds and possible weakening of the dollar could support the metal.

Assets in SPDR Gold Trust , the top gold-backed exchange-traded fund, rose 2.64 percent to 752.29 tonnes on Monday, the highest since March 2015.

The 19.33-tonne inflow matches Friday's increase, which was the fund's biggest single-day inflow since August 2011.

The fund's inflows since the beginning of the year have already surpassed outflows for the whole of 2015.

So, guys, as we've said, despite at some pause - we still have bullish view on gold market and sentiment on gold is also stands bullish as it is confirmed by CFTC data and SPDR Fund statistics.

As we've estimated in weekly research our major target right now is tactical one - retracement. Since this is a key point to get good entry.
We've come to conclusion that retracement could take 3 possible shapes - simple AB=CD, DRPO "Sell" and Butterfly "Sell".
On daily chart we do not have any DRPO yet - no second close below 3x3 DMA yet and if even we have it - this is not the shape of DRPO. It has too big difference between the tops. Some another upside attempt should happen before 2nd close of 3x3...
Currently shape mostly reminds bullish pennant. But if gold will break it down then AB-CD will lead us to 1167 Agreement area:

Let's go further... butterfly. Currently market behaves well - it has re-tested trend line that we've mentioned. But, following action is not impressive, it's definitely does not look like upside continuation yet. Still, as butterfly low still holds - this scenario is still valid:

At the same time hourly picture shows that it is rather fragile. Once we've suggested that gold could drop down from 1265 area due strong resistance there. This has happened. Right now market has completed AB-CD 1.618 target and current upward action is just AB-CD retracement up - reaction on downward pattern completion point. Here we have big risk of shifting to bigger downward AB-CD. Gold still can't break through WPP, this is also bearish sign now.
First moment that we should watch here is breaking recent low. This will not be failure of butterfly yet, but market will break higher-bottom tendency and will form bearish reversal swing. This will significantly increase chances on deeper downward retracement and bearish breakout of daily pennant. So, do not hurry to go long yet...

 

[Sive Morten]

Good morning,

(Reuters) - Gold retained sharp overnight gains on Wednesday, bolstered along with other safe-haven assets as risk-aversion in the market sent equities tumbling.

Asian shares fell as a nascent recovery in crude prices lost momentum after Saudi Arabia's oil minister effectively ruled out production cuts by major producers anytime soon. The yen gained against key peers such as the dollar and euro.

Spot gold eased slightly to $1,225.60 an ounce by 0659 GMT, after gaining about 1.5 percent in the previous session.

"Bullion's ability to hold above $1,200 is impressive. The longer it does so, the stronger a base it will build," said HSBC analyst James Steel. "As long as gold-ETF demand holds up, we believe the gold rally can be sustained."

Investors have been channelling money into bullion, as shown by flows into exchange-traded funds.

Assets in SPDR Gold Trust , the top gold-backed ETF, are at their highest since March 2015. The fund's inflows since the beginning of the year have already surpassed outflows for the whole of 2015.

The inflows so far have been able to offset the lack of interest from key Asian buyers, who have taken advantage of the gold rally to sell bullion and take profits.

Discounts in India are at a record of about $50 an ounce to the global benchmark, while in China they are at about $1.

Gold has gained 16 percent so far this year, making it one of the best performing assets of the year, on the back of concerns over the global economy and the sell-off in stocks.

Technically, gold looks set to test recent highs at $1,240 and then a one-year top of $1,260, MKS Group trader Jason Cerisola said.

The metal has also been helped by speculation that the Federal Reserve may not raise U.S. interest rates this year, after the first rate hike in nearly a decade in December.

Signs of a slowdown in the global economy and volatile financial markets have led investors to bet against rate hikes any time soon. Prices for U.S. fed funds futures suggest investors see little chance of any increases this year.

The Fed may need to keep U.S. interest rates unchanged for an "extended period" to give inflation time to rise back to the central bank's 2-percent target, Dallas Fed chief Robert Kaplan said on Tuesday.

However, Kansas City Fed President Esther George said the U.S. central bank should consider raising interest rates at its next policy meeting in March

So, despite recent rally, overall picture has not changed significantly and gold keeps chances for different ways of retracement - AB-CD, DRPO or even butterfly "Sell":

on 4-hour chart as AB-CD as butterfly are possible, since gold has not erased their invalidation points. Also it is obviously pennant is forming here. Current upward action currently looks too lazy to treat it as thrust, that's why here we can't definitely say what scenario is more preffereble:

But hourly chart tells that upside chances are greater. First, since CD leg of AB=CD pattern has started - market shows too strong upside retracement after 1st downward swing. Second - gold has moved above WPP. That's why currently it seems that we will get either action to 1250 or to 1280, but anyway it will be upside. Chances on getting AB-CD down are melting fast, although it's invalidaiton point still holds.
At the same time action to 1250 or 1280 does not mean that we will not get downward bounce - it just could start differently and by some other pattern. Ease Fire in Syria starts from 27th of Feb, may be gold will get some relief by the end of the week either:

 

[IanN]

Hello Sive

your Butterfly completed very nice, good job!

Could you take a look at this chart and tell if this now needs one more close below the 3x3 to become a valid Double RePo? I think I have thought about everything this time, there was enough thrust and I think the Tops are still within reasonable distance to one another

Thanks much and be safe

Ian

 

[Sive Morten]

Could you take a look at this chart and tell if this now needs one more close below the 3x3 to become a valid Double RePo? I think I have thought about everything this time, there was enough thrust and I think the Tops are still within reasonable distance to one another

Hi Ian. Yes, indeed. This is our second possible scenario - how downward retracement could start. But it will be not quite pure DRPO, since Gold has touched 3/8 Fib support on 1st close below 3x3. So we probably will call it as Look-alike pattern.

 

[Sive Morten]

Good morning,

(Reuters) - Gold reversed early losses on Thursday as volatility in stock markets stoked safe-haven demand, with bullion funds seeing fresh buying from investors.

Asian shares slipped as crude oil prices seesawed and Chinese shares dived rekindling anxiety about the impact of high market volatility on the global economy.

On Wednesday, gold had climbed 2.1 percent to $1,252.91 as lower oil prices dragged down stocks. But the metal gave up most of its gains as crude turned higher, lifting stocks.

"The volatility in oil prices and stock markets, and

'Brexit' fears are all contributing to the rising risk averse sentiment in the market," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

Sterling was near a seven-year low against the dollar and a 2-1/2 year low versus the yen on Thursday on worries Britain may exit the European Union after Prime Minister David Cameron's announcement of a June 23 referendum on Britain's membership of the EU.

"I think there will be a stronger momentum for gold in the coming few weeks," To said.

Gold's 16-percent rally this year has been fuelled by safe-haven bids as global equities tumbled on lower oil prices and fears of an economic slowdown. The metal hit a one-year top of $1,260.60 two weeks ago.

An increase in assets of bullion-backed exchange traded funds (ETF) has also supported the rally.

Inflows into SPDR Gold Trust , the top gold ETF, since the beginning of the year have already surpassed outflows for the whole of 2015. The increase in assets so far is also the highest since 2010.

On Wednesday, holdings of the fund rose further to 760.32 tonnes, the highest since March 2015.

"The ETFs are a good indicator that money is definitely flowing into gold," said a Hong Kong-based bullion trader.

"More money will start to flow in if we hold above $1,250 convincingly."

Gold could gain more as it is on the cusp of a key technical level called the 'golden cross,' when the 50-day moving average moves above than the 200-day moving average.

The gap was less than 50 cents on Thursday.

If the 'golden cross' occurs, it would be the first such formation in almost two years and would be a bullish buy signal for technical traders and momentum-driven investors.

Here, guys, we continue watching on shape of retracement. Yesterday, our suggestion on possible upside leg has been confirmed and gold indeed has climbed to 1250 area on Brexit fears. Now next pattern that we will be watching here is DRPO "Sell" LAL. Tops now stands relatively close and we need second close below 3x3 DMA:

So, now our major task is to understand how DRPO could start to work. On 4-hour chart we have "222" Sell pattern and may be it will trigger downward action:

At the same time - gold has formed bullish grabber. Grabber itself is not neccesary suggest further uspide continuation, but washing out of previous top. But it seems that grabber will be clue. To trigger DRPO "Sell" on daily we need to see gold's drop below 1210-1220 area. In this case price will erase grabber and return back in triangle. Or, let's grabber will be completed, but then price will drop below 1210 - it doesn't matter. This will significantly increase chances on DRPO confirmation.
If, still gold will move above 1250 top and hold there - market could turn to final pattern - daily butterfly.

 

[Sive Morten]

Good morning,

(Reuters) - Gold edged higher on Friday despite a rebound in stocks, underscoring support for the safe-haven asset from bullish technicals and money flows into exchange traded funds.

Asian shares rose following a firmer finish on Wall Street and as investors awaited a meeting of the Group of 20 finance leaders that will likely offer reassuring words, but little in the way of actual policy stimulus

Bullion was up only modestly for the week, that would mark its fifth weekly gain in six.

Gold prices are inversely tracking moves in the equity markets. Their 16.6-percent rally this year has been fuelled by safe-haven bids as equities tumbled on lower oil prices and fears of an economic slowdown. The metal hit a one-year top of $1,260.60 two weeks ago.

"The general economic situation is giving support to the gold market. I won't be surprised if we make new highs," said a bullion trader in Hong Kong.

"There does look to be good money going into ETFs, and their correlation with the price is really strong."

Assets of SPDR Gold Trust , the top bullion ETF, rose to their highest since March 2015 on Wednesday.

Inflows into the fund since the beginning of the year have already surpassed outflows for the whole of 2015. The increase in assets this year is the highest since 2010.

Bullion is also supported by strong technicals.

Gold prices have developed a bullish technical formation called the 'golden cross,' where the 50-day moving average goes above the 200-day moving average.

The shorter term price average is now about $3 above the longer-term average.

This is the first such occurrence in nearly two years and would be a bullish buy signal for technical traders and momentum-driven investors.

So, on daily chart we do not have new inputs. Actually last session was inside one and here we're waiting for DRPO "Sell" confirmation. It's target will point us suitable entry point. It should be around 1160-1170 and Yearly Pivot.

On 4-hour chart we have some conflict between "222" Sell pattern and bullish grabber. But it seems that upside pace is exhausting and weekly overbought prevents market from any meaningful upside action. That's why, it seems that this struggle will end in favor of "222" pattern, while grabber probably will fail:

Hourly chart mostly shows the same picture. Ceasefire in Syria could bring some relief and may be we will get DRPO confirmation even today: