GOLD PRO Weekly January 12-16, 2014

[Sive Morten]

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

Reuters reports, Gold rose on Friday as the dollar and equities failed to react to a better-than-forecast U.S. jobs report, and the metal was set for the first weekly gain in four weeks as political uncertainty in Greece boosted demand for assets seen as safe.
Spot prices were heading for a 2.5 percent weekly gain, snapping a three-week losing streak, mostly due to global equities slumping at the start of the week on worries over developments in Greece that could see it quitting the euro.
Despite recent improvements in the job market, investors remained focused on the fact that the minutes of the Federal Reserve's latest policy meeting released on Wednesday indicated the U.S. central bank would be patient in raising interest rates due to low inflation expectations.
"Fed doves are happy to wait until they feel inflation's rapier at the tip of their breastbone, rather than just seeing the whites of their eyes," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
Boston Fed President Eric Rosengren highlighted the Fed's cautious stance, saying it can likely be patient not only on the timing of the first rate hike but also on subsequent increases.
Gold is supported in this tight $1,200/$1,230 range because people are still a bit worried that with low inflationary pressures the Fed will not hike interest rates so soon," ABN Amro analyst Georgette Boele said.

In the physical markets, demand from China has been strong in recent weeks in the build-up to the Lunar New Year holiday in February, when gold is bought for gift-giving.

Premiums on the Shanghai Gold Exchange were hovering between $5 and $6 on Friday over the global benchmark, indicating strong buying interest.


Finally CFTC data starts to give some information. Recent data shows shy increase in open interest, but take a look – this open interest grows mostly due long position, but not short… Interesting. So, it seems that upside action still is getting some support from purchases. Now we need to get respond from SPDR fund – it should either confirm it or… this upside action will fade soon and CFTC data will change. At the same time we need to say that total investors’ positions are small.

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Also guys, I want to share with you on rumors that have appeared around CME. Rumors tell that CME has adopted new trading rule that put more limitations on single day price changing on gold options and futures:
http://www.cmegroup.com/content/dam...ion/lookups/advisories/ser/files/SER-7258.pdf
It raises some questions. Most radical traders think that CME is preparing to unprecedented gold rally and tries to insure and protect itself in advance. Personally I’ve not studied this document with scrutiny yet, but probably I will have to do it soon. It will be great if you will take a look at it and share with your opinion on forum.



Technicals
Monthly
As New Year has started we’ve got some new inputs on monthly chart. Thus, we’ve got new yearly pivots. Most important thing here is shifting up of YPS1. In 2014 it stand at 1020, while in 2015 it stands at 1082$. This is very close to our ultimate 1050 target and in fact coincides with 1.618 butterfly target on monthly chart.
Second important issue – we’ve got bearish grabber on monthly chart as result of December close. I do not know how to match it with worries on new CME regulation act, but this is just a rumor yet and it is possible that this rumor is overestimated. But grabber is a pattern that we have in place. Still they do not contradict to each other, because market could reach lower targets first and only after that turn to upside rally…
Here we still have last big pattern in progress that is Volatility breakout (VOB). It suggests at least 0.618 AB-CD down. And this target is 1050$. This pattern could take shape of butterfly, if it will proceed to 1.618 target.
On recent week market has shown solid upside action. If it will continue in the same manner, then monthly grabber will fail probably. Somehow we think that market tends to YPP@1237. If this is indeed so, then grabber probably will fail…
At the same time, returning back to discussion of recent NFP release, the major driving factor for Gold is inflation and particularly here US economy has problem. Wages again have contracted for 0.2%. Accompanied by positive NFP numbers increasing chances on sooner rate hiking will be negative combination for gold. That’s why currently we do not see reasons yet to cancel our 1050$ target. Analysts of different big banks also think that gold will remain under pressure in the first half of 2015 and announce close targets around 1000-1100$. Meantime we do not exclude current upside retracement, when market could test YPP or even move slightly higher. But this possible rally does not cancel yet chances on later downward turnover. Seasonal bullish trend will finish within 1 month or so. Then we will see how situation will start to change.

Weekly
Weekly charts mostly shows warning to us in relation to current upside price action. First of all, upside action does not look as impulse upside action, as reversal. Mostly it reminds retracement up.
Initial reaction of AB=CD completion point and monthly Agreement now looks not as impressive as previously. It is slowed and become more choppy with long shadows as to upside as to downside. Taking into consideration recent fundamental data and existence of untouched butterfly and 1.618 AB-CD targets, downward continuation seems not impossible. That’s being said, when market reaches significant support area but reaction on this event is mild – logically to suggest possible further downward continuation. This is one of the reasons why we think that it is too early to refuse our bearish targets.

Daily
Today guys, I will not show you here H&S pattern that we already know well. Weekly chart puts me to one thought and I will draw it here. This choppy action as we’ve said mostly looks like retracement. Hence this upside action might be temporal. We have some other reasons that point on this, right? Current price action holds ratios of 3-Drive very well. It means that market could finish upside action around 1240-1245 area. It will test YPP, MPR1, also will complete AB=CD target of H&S and 1.618 target of initial H&S AB-CD pattern. Simultaneously 3-Drive pattern could become reversal one for downward gold continuation and will answer on question why gold is growing but physical demand is not…

4-hour
4-hour chart shows perfect bullish action. As we’ve talked – to keep bullish setup it is preferable to see that retracement will be shy, only to re-test neckline of double bottom. This has happened. Right now market turns to upside again. Gold is not overbought on daily chart, so it has space to move up further. Still we have neckline of daily H&S around 1230 accompanied by daily overbought. This probably will be next short-term destination on gold market.

Hourly
Action to neckline at 1230 could take shape of butterfly. As major retracement down already has happened market probably should move directly to neckline and any retracement will be small. Thus, if you would like to take long position, better to watch for 1217 Fib level.

Conclusion:
Since market still keeps normal bearish tendency we should not refuse our 1050 target yet. Recent data shows some chill out in further upside sentiment. Currently it is not quite clear whether the reason is just end of the year and Xmas or really something is changing in big sentiment. Recent data suggests that first variant is more probable by far. Technical picture also does not look rock hard bullish. January will probably clarify some moments.
In short-term perspective market points on possible action to 1230 first, but may be even to YPP around 1240-1250 area in perspective. At the same time this action currently mostly look as 3-Drive pattern that could point on reversal nature of it.



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 13, January 2015

Good morning,


Reuters reports Gold extended gains on Tuesday to climb to its highest since October, boosted by safe-haven demand triggered by a continued slump in oil prices and weakness in some equities markets.

Asian stocks were mostly on the defensive on Tuesday as the continuing slide in crude oil prices turned investors cautious towards risk assets. Brent crude and U.S. WTI both fell to their lowest in almost six years.

Weaker oil prices tend to hurt gold as they reduce the need for the precious metal as a hedge against oil-led inflation. But as equity markets have been hit by the slump in oil prices and concerns have risen over its economic impact, flight-to-safety demand has bolstered the metal.

Gold, typically seen as an alternative investment to riskier assets such as stocks, rose as investors channelled money into the asset along with other safe havens such as the yen.

MKS Capital trader James Gardiner said buying around the $1,240 area "might result in a sharp spike into the mid-40's if the metal spends some time today consolidating around $1,238-39".

Other traders said weakness in the dollar and buying in Chinese physical markets were also supporting prices.

However, not many were convinced gold could hold the gains through the year.

Barclays expects gold to breach the $1,130 level this year, the metal's lowest since 2010.

"We expect gold prices to test new lows in 2015 as they battle formidable hurdles in the form of the dollar strengthening against the euro to levels last reached over 10 years ago and the first rate hike in the United States in nine years," Barclays analyst Suki Cooper said in a note.

Strong U.S. economic data in the last few months have led many in the market to expect the U.S. Federal Reserve to increase interest rates this year for the first time since 2006.

The U.S. economy is motoring ahead in its recovery, probably putting the Fed in a position to raise rates by the middle of the year, Atlanta Fed President Dennis Lockhart said on Monday.



So, currently many investors explain gold appreciation by technical short-term factors. In general this agrees with our view, as we think that current move up mostly retracement and gold will have chances to turn down...
Meantime, market has passed through neckline of our H&S pattern. Currently market stands at daily overbought and could take pause for some time to take a breath... We prefer to get tight consolidation, better if market will stay flat without solid bounces down...

Also do not forget that 1240 is an area of Yearly Pivot point and here we could get some surprises. Still, market could complete our short term target around 1260 area where we have big cluster of targets - 3-Drive, 1.618 AB-CD, H&S, most recent AB-CD etc...

Another reason why we think that pause is possible - gold is approaching to target of Double bottom on 4-hour chart...

 

[Sive Morten]

Gold Daily Update Wed 14, January 2015

Good morning,


Reuters reports Gold steadied below a 12-week high on Wednesday as weakness in the dollar supported the safe-haven metal, after earlier losses spurred by a rout in other commodities such as oil and copper.

"We are giving back some of the gains because of the overall unwinding of positions in commodities," said a precious metals trader in Sydney, adding that gold also faced technical resistance at around $1,244.

"Gold might push higher, given equities have been volatile, but it will be hard work. In the short term we might squeeze lower to $1,220 before we head back up."

Asian equities dipped on worries over global economic growth. On Tuesday the World Bank lowered its global growth forecasts for 2015 and next year due to disappointing prospects in the euro zone, Japan and some major emerging economies.

Typically, lower equities and a slowdown in the global economy would have lifted the price of safe-haven gold, but bullion traders found it hard to ignore the sharp sell-offs in oil and copper on Wednesday.

Three-month copper on the London Metal Exchange tumbled as much as 8.7 percent, while Shanghai copper fell 5 percent, the maximum it is allowed to fall in one day, because of the global economic concerns and a wave of stop-loss orders.

The metal is often considered a barometer of industrial demand, so the slump leant extra gravitas to the forecast cut from the World Bank.

In the physical bullion markets, buyers turned cautious after gold failed to hold on to the previous session's highs.

Premiums in top consumer China fell to around $3 an ounce over the global benchmark from $4-$5 in the previous session.



Recent economy data rises some questions. For example, employment in US is growing as many other indicators, but why wages and inflation stagnating? If in China, US situation is not bad, why major industrial commodities stand under pressure? Or may be in US is just some artificial improvements? Anyway, situation of lack inflation presses on gold market.
Yesterday we was ready for pause because gold has hit overobought on daily. But to keep chances on upside continuation market should not show too deep retracement. Do not forget that ~1237 is Yearly Pivot on 2015:

Now, guys, we need just wait a bit and see what patterns will be formed on hourly-4 hour charts... Again, due possible retracement on Dollar Index, gold could continue move higher...

 

[Sive Morten]

Gold Daily Update Thu 15, January 2015

Good morning,


Reuters reports Gold was steady on Thursday as Asian stocks recovered from earlier losses, but the metal stayed below a 12-week high as a recent sell-off in commodities took its toll.

Asian stocks pared earlier losses and edged up on Thursday after a rebound in oil prices brought a semblance of calm, but global growth worries remained after weak U.S. retail sales data compounded concerns over plunging copper prices.

Gold was sold off along with copper, which slid to a 5-1/2 year low on Wednesday after the World Bank cut its global growth forecast, and oil, which rebounded late in the session.

"Gold has now tested $1,245 three times and failed on each occasion. We believe gold could test $1,215-20 in the coming days," said Jason Cerisola, a metals dealer at MKS Group.

The bearish mood towards commodities failed to offset disappointing U.S. retail sales data and a weaker dollar that would have typically boosted safe-haven bids for the metal.

The dollar nursed losses on Thursday, having retreated across the board after U.S. retail sales recorded their largest decline in 11 months in December. But the greenback is still not too far from a nine-year peak.

Gold prices are up 4 percent so far this month, after two straight years of declines, but the outlook for the year remains clouded.

UBS lowered its gold price forecast for the year to $1,190 from $1,200, saying it had underestimated the downside risks earlier.

"Downside risks have slightly been increased by the decline in oil prices given the potential positive impact this would have on the U.S. economy and the implied absence of an inflation threat," UBS analysts said in a note on Thursday.

The dollar strength is also likely acting as a ceiling for gold rallies amid lower U.S yields and lurking concerns over global economic growth and deflation, they said.


The fact that gold was not able to rise on bad retail data is a worrying sign. Although bounce down right now does not look too significant, but this fact reduces chances on upside continuation. Again, we should recall that 1237-1240 is an area of Yearly Pivot point.
Market just can't yet pass through resistance of YPP, WPR1 and overbought. So we need to monitor situation a bit more. At least that gold holds tight around and does not show deep retracement keeps chances on upside action:

On 4-hour chart most probable retracement destination stands at K-support area around 1214-1219. Also take a look gold has hit 0.618 of big AB-CD pattern. This also becomes technical reason for pullback:

That's being said, we do not see anything curious with current retracement by far. Upside chances still exists. Let's see what gold will show us around 1215 support...

 

[Sive Morten]

Gold Daily Update Fri 16, January 2015

Good morning,


According to Reuters news Gold traded near its highest level in four months on Friday and looked set to post its best week in ten months, as investors sought safety from market volatility after Switzerland unexpectedly scrapped a cap on the franc.

Thursday's volatility in global markets saw investors channelling money towards gold, often seen as an alternative investment to riskier assets. A breach of some key technical levels also pushed gold higher.

"Gold looks like the flavour of the month at the moment and has now pushed above some key downward trend lines against the dollar," said James Gardiner, a trader at MKS Group.

"The SNB announcement has really shaken the market," he said, adding that gold may see some momentum buying today.

The Swiss National Bank shocked financial markets on Thursday by scrapping a three-year-old cap on the franc, sending the currency soaring against the euro and stocks plunging on fears for the export-reliant Swiss economy.

The U-turn sent the franc nearly 30 percent higher against the euro in chaotic early trading. Coming a week before the European Central Bank is expected to unveil a bond-buying programme to counter deflationary pressures, it fed speculation that this quantitative easing scheme will be so big that the SNB would have struggled to defend the cap.

The Swiss move sent most European shares soaring while bond yields and Swiss equities tumbled. U.S. stocks closed lower, marking a fifth straight session of losses.

Asian shares stumbled on Friday and the dollar skidded against the safe-haven yen after Switzerland's unexpected move.

In a reflection of improving investor confidence, SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, said its holdings rose 1.35 percent to 717.15 tonnes on Thursday.

"Gold may be lifted further as the repercussions of the SNB action continue to reverberate in the markets and portfolio and real money managers decide on how to allocate holdings in light of franc developments. These actions will likely buoy gold, at least for a while," said HSBC analysts.

Physical demand, however, has seen a setback with the higher prices putting off buyers in Asia, the top consuming region.

In China, premiums on the Shanghai Gold Exchange fell to $1-$2 an ounce over the global benchmark, from about $3-$4 in the previous session, indicating softer demand.


So, as we already have said in FX today's update - we do not exclude possible gold buying from SNB and we think that this could be among major reasons of franc releasing...
Anyway, it means that gold still stands with our analysis and we can continue. Thus, right now market stands at crucial point. 1260-1270 is an area where logical retracement should finish. If gold will continue move up - this will be not just retracement, at least on daily chart.
Right now market has completed multiple targets - 3-Drive, couple of AB-CD's and almost completed H&S target.
Currently, guys, we need to get response and reaction of market on this level. Also we will check it by CFTC and SPDR data...
So, on daily chart you see completion of all targets but H&S and reaching of overbought:

Right now it is logical to assume some bounce down. Most probable destination is 1235-1238 area - it includes previous top and Yearly Pivot point. Slightly lower we have K-support level: