GOLD PRO WEEKLY, January 11-15, 2016

[Sive Morten]

Fundamentals

Reuters) - Gold fell further from an earlier nine-week high but was still on track for its strongest week since August on Friday as stronger-than-expected U.S. payrolls data boosted the dollar and stock markets, shoring up a recovery in equities.

The Labor Department said U.S. job growth surged in December, and revised employment for the prior two months sharply higher, suggesting that a recent manufacturing-led slowdown in economic growth would be temporary.

That surprisingly strong payrolls report initially lifted stocks but they later lost ground. The dollar rose versus the euro.

Spot gold initially rose to the highest since early November in overnight trade at $1,112 an ounce. It was down 0.9 percent at $1,098.84 an ounce at 2:15 p.m. EST (1915 GMT), breaking a four-day winning streak. U.S. gold futures for February delivery settled down 0.9 percent at $1,097.90.

"(These are) very strong numbers, good for the U.S. dollar," said Georgette Boele, analyst at ABN Amro. "The U.S. dollar is the most important negative driver for gold prices, so this will add pressure."

A strong report could be seen as prompting the Federal Reserve to lift interest rates at a faster pace. Rising rates typically weigh on gold, as they lift the opportunity cost of holding non-yielding assets, while boosting the dollar.

"The week provided a good gold rally as stocks were slammed but today (a) 5 percent jobs report added some bears to gold as

(the) Fed seems on path with future rate hikes on this news," said George Gero, precious metals strategist for RBC Capital Markets in New York.

Jitters over the Chinese economy had spooked global stock markets earlier this week, sending investors sprinting to safe-haven assets, and pushing gold sharply higher.

"Although we expect further Fed tightening and dollar strength to prove headwinds for gold over the coming year, the price should be supported by safe-haven demand, a pickup in U.S. inflation and strong buying from emerging economies," said Capital Economics in a note.

Investment appetite for bullion showed signs of picking up this week. Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares , rose 4.2 tonnes on Thursday, data from the fund showed.

CFTC data shows mostly stagnation on speculative positions within last 2 months. Last week, net long position shows shy increase as well as open interest, but this change is too small to make any conclusions. It would be better to say that nothing has changed yet. This is also interesting, since we has significant upside action. So, something should change - either speculative position should rise or market should lost the pace and turn down...

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.

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. Current gold drop 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, not it is a Cologne tragedy with mass raping action on New Year, Brexit procedure a lot of contradiction inside EU as political as economical - North Stream-2, mutual sanctions, Ukraine membership voting, Montenegro NATO membership and a lot of others. 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. 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. For example, Fed has raised rate and push gold down, after that Turkey has hit Russian warplane. Now it is, say, NFP positive numbers, and conflict escalation between Iran and S.Arabia. But in reality there are more sources that could impact gold right now. But 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.

Weekly

So, last week we've estimated that 1050 area is rather strong support - monthly 50% Fib level, YPS1, 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 got confirmation and could continue further. Last time, when divergence has been formed - Gold has shown AB-CD upside action.
Still, right now 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).
Any monthly pivots are useless right now, since gold already has broken all of them.

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.
Still, on coming week we mostly will deal with most recent upside action, probably.

Daily

On daily chart trend is bullish, but market still stands around daily Overbought and Fib resistance. Positive NFP data had shy impact on gold price. Initially it has pushed prices lower but as soon as it has shown no wage growth (i.e. absence of inflation) gold has returned right back up.

Still, even ignoring fundamental numbers and following just technical ones, retracement should be deeper probably. As we've said already, we have DiNapoli bearish "Stretch" pattern, and when some market hits overbought it has a tendency to show deeper retracement. Also we know the feature of gold market - re-testing of important levels and extreme points, we expect that market still re-test 1085 area.

At the same time we still stand on our opinion and do not call you to trade market right now on short side. Our major task here is to wait for 1085 and then assess attractiveness of long entry around it. Our DRPO "Buy" pattern has hit minimal target - 50% resistance of the whole thrust range.

So, on daily trading plan is the same - wait for retracement down, probably to 1085 level.

4-hour

Trend turned bearish here. Currently market behavior confirms possibility of compound 2-leg retracement down. Here we will not argue on what we have on a top - whether this is DRPO "Sell", B&B or could we get H&S. In fact - we do not care what it will be. We just care to see gold around 1085 area. This is what we really would like to see...

That's being said - AB-CD pattern that now is forming on top has target precisely at 1085 and our K-support area. On coming week we will see will it happen or not...

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 or even 900$, but pace of drop will be significantly slower, or will turn to some wide range fluctuations.

In short-term perspective market shows upside retracement and currently it nearest destination stands around 1150 resistance. That's why on coming week we mostly will be watching for 1085 area as potential comfortable level for long entry.


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,

(Reuters) - Gold edged higher on Tuesday, snapping two sessions of decline, as concerns over China's economic growth and pressure on stock markets rekindled the safe-haven status of the precious metal.

Asian stocks held near four-year lows and crude oil prices approached a 20 percent drop in less than two weeks as investors worried over the extent of China's economic slowdown and its impact on emerging markets.

"For gold, I'm looking for a bearish case at $950 an ounce, driven by higher Fed fund rate to 1.25–1.5 percent and overall dollar strength," said OCBC Bank analyst Barnabas Gan.

"Still, gold behaves like a safe haven at this juncture given risk aversion on Chinese equity markets and low oil prices."

China's main stock indexes each dropped more than 5 percent on Monday. Oil prices have fallen to new 12-year lows, as concerns over China hurt commodity prices broadly.

Right from the beginning of 2016, markets have been rocked by plunges in Chinese stocks, the yuan's fall and subsequent heavy intervention by the Chinese authorities.

The chaotic moves have led to worries China's economy may be in for tough time rather than stabilising as some had hoped.

China is the world's biggest consumer of gold at around 1,000 tonnes a year.

The yellow metal is often seen as an alternative investment during times of financial uncertainty, although safe-haven rallies tend to be short-lived.

The gain in gold prices is likely to be capped by concerns that higher U.S. rates would lower demand for the non-interest-paying asset, while boosting the dollar. The Fed raised rates in December and attention has shifted to how many hikes will follow in 2016.

Atlanta Federal Reserve Bank President Dennis Lockhart said there may not be enough fresh data on inflation to support another U.S. rate hike by March.

Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rose 0.69 percent on Friday, data from the fund showed.

So, guys, currently we do not see anything curious in gold's action. Last week we've foreseen 2-leg retracement down and not it stands in progress. Right now gold stands closer to our major beacon - 1085 area. If gold is really bullish market now - it should stay above it and form some bullish reversal pattern.
If it will drop below it - then we should be ready to 1000$ march.

Right now gold stands at support of WPP. Downward action is developing rather gradually and this is a good sign for bulls. Probably till the end of the week we should get gold around our 1085 area, which is K-support and Agreement (if market will complete downward AB-CD pattern that now is forming)

 

[Sive Morten]

Good morning,

(Reuters) - Gold lost more ground on Wednesday as a rebound in stock markets reduced some of the precious metal's safe haven appeal with additional pressure from a strengthening greenback.

Asian shares made their first real rally of the year after Chinese trade data handily beat expectations, offering a rare shaft of light for the global economy.

A late rebound in energy and biotech shares helped push the S&P 500 to a second straight day of gains on Tuesday and the pan-European FTSEurofirst 300 index climbed 1.1 percent after four sessions of declines

"The market is expecting, perhaps in March the Fed will have its second interest rate hike. It will lead to a very strong U.S. dollar, so gold prices are likely to face pressure," said Shandong Gold Group chief analyst Shu Jiang.

The metal's rally in early January to a nine-week top has run out of steam as expectations of further U.S. interest rate increase lowers demand for the non-interest-paying asset, while boosting the dollar.

The Fed raised rates in December and attention has shifted to how many hikes will follow in 2016.

The dollar and risk-sensitive currencies recovered ground against the yen and the euro after China's central bank held the yuan steady and better than expected Chinese trade data helped reduce some of bearishness toward the world's second largest economy.

Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rose 2.1 tonnes on Monday, data from the fund showed.

China has launched interbank gold trading at the beginning of this year, part of a broader drive to open up the country's bullion market and increase financial investments in the world's largest consumer of the precious metal.

So, gold has reached our 1085 area but now is trying to push it lower. At the same time we do not have our entry setup, since no patterns have been formed around 1085 support. Any step down below 1085 will decrease chances on upside continuation, since normal bullish market should not return back in previous consolidations. Right now gold is flirting around 1080 already. Still on daily chart we will be watching for bullish grabber today-tomorrow. If it will be formed, then setup for long entry will not be lost absolutely.

On 4-hour chart we could see why gold is loosing bullish confidence. Take a look that our area was K-support and Agreement. This is very strong level. But gold has passed through it. Such kind of areas always hold market on retracement if market is really bullish. But gold has broken it. Now we have another one ahead - 1072 - Fib support, WPS1 and another Agreement but with 1.618 extension on this time.
And here we could ask reasonable quesiton - if gold has broken through K-support and Agreement, what chances that single Agreement will hold it? That's why we need something else and bullish grabber could add confidence and make overall scenario more or less acceptable. So right now we call you to not take any longs until we will not get all patterns in place.
If gold will drop through 1072 - it will mean that 1000-1038 area 80% will be reached.

 

[Sive Morten]

Good morning,

(Reuters) - Gold edged lower on Thursday as the market paused after last session's 0.6-percent gain, which was triggered by falling global equity markets and weakness in the U.S. dollar.

Asian shares fell in the wake of steep losses on Wall Street, as Brent oil skidded to 12-year lows amid a commodities rout that heightened fears about the global economy.

"It is a bit of profit-taking at the moment," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

"The focus is on equity markets and currencies, Dow was down and we are seeing further pressure on Asian stock markets."

U.S. stocks sank on Wednesday, pushing the S&P 500 to a close below 1,900 for the first time since September as investors grew anxious about weak energy prices, U.S. corporate earnings and the global economy. [.N]

Sentiment soured for the greenback, which retreated from a one-week high against a basket of major currencies as U.S. stocks fell.

he deepening slide in oil and concerns about China's economy have rattled equity markets, which have failed to sustain any significant rallies in early 2016.

Chicago Federal Reserve Bank President Charles Evans said he was nervous about the potential effects of China's slowdown on the U.S. economy and about the possibility that inflation expectations may be slipping.

The Fed raised U.S. interest rates in December and attention has shifted to how many increases will follow in 2016. Rate hikes typically lower demand for non-interest-paying gold while boosting the dollar.

So Gold is still struggling with 1085 area. Yesterday session has started from moving below 1080, but by the end of day Gold has rebounded. It's a pitty that we haven't got our bullish grabber... situtation in this case could be much simpler. But still, gold by this upward bounce has kept chances on upside action. If this was just technical bounce - gold will return back soon. If not - it should turn to upside action

On 4-hour chart market has moved above 1085 again, but still we have not sufficient context for long entry. No patterns have been formed and current upside move could be just reaction on support's strengh and could have no continuation....
Now it is clear the major reason why gold has dropped slightly below AB=CD target - it is re-testing of former top...

That's being said, our thought is we do not have context for long entry yet, as well for short entry. For short entry we need breakout at least below 1072. For long entry.... if you still would like to go long, wait at least, when market will show another leg up and move above WPP. In this case you could try to go long on K-support on hourly chart. But, as we've said this is not recomendation, this is just absolutely necessary condition. ALthough it also will not guarantee final success, but it will at least something, because right now gold stands even below WPP and by moving above it gold will show at least some strength and provement that current move is not just response on support area:

 

[Sive Morten]

Good morning,

(Reuters) - Gold edged higher on Friday, after dropping for the past four out of five sessions, as falling Asian stock markets underpinned the precious metal although gains were capped by expectations of another U.S. interest rate increase.

Asian stocks slumped to 3-1/2-year lows as brief gains earlier in the session gave way to renewed pressure on oil prices and disappointing Chinese data, ratcheting up investor concerns about the global economy.

"Many people do not expect the Fed to raise interest rates further in January but there is talk of rates going higher in the future which will keep gold prices capped," said Shandong Gold Group chief analyst Shu Jiang.

The metal hit a two-month high at $1,112 last week as volatility in Chinese stocks hit appetite for risk, but trading has since fallen as expectations of further U.S. interest rate increases lowers demand for the non-interest-paying asset.

The Fed raised rates in December and attention has shifted to how many hikes will follow in 2016.

St. Louis Federal Reserve President James Bullard said a continued decline in inflation expectations may change his outlook for further Fed rate hikes, though so far he feels the United States continues on a healthy track.

Bullard's comments followed those by Chicago Fed President Charles Evans on Wednesday, when he said he was nervous about the potential effects of China's slowdown on the U.S. economy and about the possibility that inflation expectations may be slipping.

The world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, reported a 2.4 tonne rise in its holdings on Wednesday, bringing its total inflow for the year to 11.7 tonnes.

So, on Gold market is still balancing on the edge, although we think that hardly gold will be able to hold. If of course no new negative will come from political stage. Yesterday gold dropped further, but at the same time has formed bullish grabber:

It is still trying to hold above 1072 area. Yesterday we've said as K-support and Agreement was not able to hold price, next destination is an area around 1072 major Fib support, WPS1 and Agreement with 1.618 AB-CD target. So market has reached it:

Still overall situation has not changed for us dramatically. As previously our bearish context will be triggered if&when gold will drop below 1072. Logic is simple. In this case gold will erase bullish grabber, break last strong support and fail to return back and hold in consolidation above 1085. This almost 100% will lead to further drop.
For bullish scenario due last drop we demand even tougher conditions. Market has to move above WPP and form upside reversal swing. Only in this case we will think on bullish perspectives. Yesterday, as you understand, gold has failed to form another leg up, that was absolutely necessary condition for long entry and dropped miserably.