GOLD PRO WEEKLY, January 25-29, 2016

[Sive Morten]

Fundamentals
(Reuters) - Gold fell on Friday as hints of more monetary stimulus from the European Central Bank weighed on the euro and pushed stocks higher, denting appetite for alternative assets.

Benchmark Brent crude futures , which had fueled risk aversion with a tumble to 12-year lows, closed out a volatile week by soaring 9 percent on Friday as traders cashed in on record short positions.

That fed into stronger appetite for assets viewed as higher risk, such as equities and industrial commodities, and weighed on gold.

"The flight to quality has been set aside," said Phillip Streible, senior commodities broker for RJO Futures in Chicago.

ECB President Mario Draghi said on Thursday that fading growth and inflation prospects will force the bank to review its policy stance in March, a strong signal that more easing could be coming within months.

"$1,100 to $1,115 is a tough level to overcome," said Commerzbank analyst Carsten Fritsch. "Today there is a rebound in stock markets that certainly contributed to this drop, but I wouldn't rule out another push above that level if stock markets start to tumble again."

Even with the day's loss, gold was poised to end the week higher. Bullion has benefited from the risk aversion that hurt stocks and crude oil this month, though slow physical demand from major consumers China and India kept a lid on price gains.

Gold premiums in China rose only slightly this week and sellers in India offered discounts given poor demand.

Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares , rose a further 1.8 tonnes on Thursday, data from the fund showed. That brought its inflow for the week to 4.2 tonnes.

CFTC data shows moderate bullish sentiment. We do not see explosive growth, but net long positions and open interest are gradually increasing:

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.

Changes come slow to monthly chart yet and it is mostly the same by far.

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 drops 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, refugees tensions in EU, 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. 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 will start to come to the same conclusion as gradually situation on gold market will start to change in positive area. International banks purchase gold in big volumes, mostly PBoC and Russian Central Bank. 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. Previously we've placed as examples - 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.

Anyway, gold's shift from downward action to flat one, even it will be wide - already will be significant moment.

Weekly
On weekly chart we've got another inside week.

So, 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 similar 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. As market stands in the same range for 2nd week, most changes stand on daily and lower time frames.

Daily
As we can see at the end of last week market was not really active. Here we also has inside sessions. Trend is bullish here and market is not at overbought.
Mostly we're watching 2 levels here. 1070 is breakeven point that separates bullish and bearish sentiment. Our major thought is if market will drop below 1070 it will re-establish bearish trend and destroy short-term upside context. For example, even butterfly that we are watching here also will be cancelled.

On a way up our first destination is 1130 - 1.27 butterfly extension, Fib level and daily overbought. This will be also inner AB=CD target.

Intraday

Here, guys we have almost the same picture as on Friday. Our major level to watch for was 1090 support. It is important by 2 reasons. First is - this is just strong support area and it is interesting to see how gold will behave around it. Normal bullish market should hold above it and turn up again. If this is not happened, then it will mean that gold is not as bullish as it seems.
Second - this level coincides with broken neckline and return of the market back below it will be negative sign that could put under question further bullish scenario.
Right now gold holds well - it was able to stay above this area and now keeps chances for minor butterfly pattern. It's target stands approx. around the H&S reversal pattern target:

So as gold has not jumped far out from this level yet - in the beginning of the week we will continue to watch over it.

On hourly chart you could recognize triangle pattern and also watch for it breakout. Conclusions will be the same, depending on direction of breakout:

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 keeps chances on upside action still. We will watch for patterns that now are forming, and on 1090 level.


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]

(Reuters) - Gold rallied to its highest since November on Tuesday, with investors shifting to safe-haven assets as worries over a slowing global economy hit stocks and crude oil again.

The Federal Reserve is expected to take notice of the macroeconomic headwinds from China to Europe when policymakers meet later in the day, boosting hopes that it may go easy in hiking U.S. interest rates further.

That bodes well for gold, which has risen nearly 5 percent so far this year, after losing more than 10 percent in 2015.

"Gold might go for a run," said Brian Lan, managing director at gold dealer GoldSilver Central in Singapore, adding the metal could test $1,138, reached on Nov. 3. "If that is breached, it could go to $1,160."

"We've heard some demand increasing in China because the stock market and currencies - people don't have confidence in these anymore - so the only one that they are looking at at the moment is gold," said Lan.

Asian stocks skidded, with Chinese shares down 5 percent, after oil prices fell back below $30 a barrel.

The Federal Open Market Committee starts a two-day policy meeting later on Tuesday, and is widely expected to leave its federal funds rate unchanged at 0.25-0.50 percent.

The probability of another rate increase at the next Fed meeting in March has eased, with some analysts seeing it postponed to later in the year.

At this week's meeting, it is likely that "the Fed will reiterate its dovish stance and this should push gold prices up", INTL FCStone analyst Edward Meir wrote to clients.

Meir said the poor shape of the U.S. equity market shows "a major capitulation will be needed in order to clear out much of the selling", suggesting investors should keep a bullish gold bias in the near term.

So, guys, on Gold market we do not see any problems at all. Market behaves as bullish one should to. All conditions that we've discussed have been accomplished. The major one - market has held above 1092 neckline area and now stands just 5$ below our first target:

Meantime, if still some retracement will follow today - it should be mild. There are two levels to watch for - 1108 and 1103-1104 K-support area. Gold is not at overbought, it has major targets straight ahead and has not completed any other ones, so no reasons for deep retracement on current stage of bull trend:

Do not forget to manage your position - tight stops to 1092-1095 area. Fed could bring volatility, but we hope that it will not hurt our position.

 

[Sive Morten]

Good morning,

Reuters) - Gold beamed near a 12-week peak on Wednesday, supported by a softer dollar as investors awaited the outcome of the Federal Reserve's first policy meeting of the year.

The U.S. central bank is widely expected to keep key rates unchanged at the conclusion of its two-day meet later in the day, but investors are keen on what policymakers have to say about global economic headwinds from China to Europe.

Expectations for a rate increase at the Fed's next meeting in March are receding as growth risks rise, which should boost the price of non-interest bearing gold.

"The world's economic condition doesn't seem to give the Fed reason to hike rates soon given the growth risks," said Barnabas Gan, analyst at OCBC Bank in Singapore.

With risk aversion intact as global growth concerns persist,

"I won't be surprised if gold hits $1,150, even $1,200 in the first quarter", said Gan.

Gold's safe-haven appeal is back in vogue this year amid falling equities and oil prices, lifting spot bullion nearly 6 percent so far this month. Gold dropped 10.4 percent in 2015.

U.S. gold for February delivery was little changed at $1,120 per ounce.

Reflecting rising confidence in gold, holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, stood at 21.52 million ounces on Tuesday, the highest since Nov. 5

China's net gold imports for December via main conduit Hong Kong surged to the highest in more than two years, data showed on Tuesday, as investors lost faith in collapsing stock markets and a weakening currency.

"China has taken advantage of low gold prices and an equity market rout to stock up on gold assets," said Helen Lau, analyst at Argonaut Securities.

Lau expects China's gold imports to remain strong due to a seasonal demand surge ahead of the Lunar New Year holiday in February.

So, gold almost has hit our target and now it is a time for some retracement. Probably it will be to 1105-1108 - former highs:

On 4-hour chart market has completed minor butterfly, and classical target of H&S. At the same time it has not quite reached 1.618 extension of AB-CD pattern. Also if you will look carefully on daily chart, you'll see that gold has not quite touched yet butterfly target.
That's why we expect another minor leg up when these both targets will be reached. After that retracement should happen. Fed statement could bring adjustments to normal process, but we have no intention to take position right now. It is too late for long entry and a bit early for short position.
That's being said today we expect to see minor leg up to 1125 area and then starting of downward retracement:

 

[Sive Morten]

Good morning,

(Reuters) - Gold edged down from 12-week highs on Thursday after the U.S. Federal Reserve acknowledged a challenging global economy but signalled it was unlikely to be deterred from raising interest rates this year.

The less dovish tone of the Fed's statement helped boost the dollar against a basket of currencies weighed on gold, which had gained on global uncertainties from China to Europe.

After keeping U.S. interest rates unchanged as expected, Fed policymakers said the economy was still on track for moderate growth and a stronger labour market even with "gradual" rate increases, suggesting its concern about global events had diminished but not squashed chances of a rate hike in March.

Investors were also taking profits on gold after its recent run-up, said Daniel Ang, investment analyst at Phillip Futures in Singapore.

"I think the safe-haven appeal of gold is tapering off a bit and investors are looking at other havens such as the Japanese yen," Ang added.

Prior to the Fed's first policy meeting for the year, expectations for a U.S. rate hike in March had receded amid the global economic headwinds.

But traders believe the Fed will still take the slow route to raising rates, boding well for gold.

"Although the Fed's comments were not as dovish as hoped, the continued expectation that future interest rate rises will be slow and gradual will support the metal," MKS Group trader James Gardiner wrote to clients.

A mild recovery in Asian stocks also dented gold's appeal as investors slowly returned to battered equities.

So, Gold brings no surprises at all. Very discipline action even from theoretical point of view. On daily chart short-term targets have been hit. Now we will be watching for retracement down. This bounce will tell us whether market will go to next 1145-1150 level or not.
If gold really has intention to do this - retracement should not be deep and stop somewhere around 1108-1110 area. As deeper market will drop as fewer chances on upward continuation with our current bullish context:

On 4-hour you can see that gold indeed has shown final minor leg up before reversal as we've discussed yesterday. So, all targets have been hit. And here we have first hint on retracement's depth. This is DRPO "Sell" pattern. Although it has not been confirmed yet (we need 2nd close below 3x3) - It has minimal target at 1110 area:

That's being said, daily traders will wait and watch for current retracement down, while scalpers could try to trade it short but only when bearish patterns will be confirmed...

 

[Sive Morten]

Good morning,

(Reuters) - Gold steadied on Friday after recent gains that lifted the metal to its highest since November, keeping it on track to end January with its strongest monthly climb in a year.

The metal got a strong boost this week after the U.S. Federal Reserve said it was closely watching the global economy and financial markets, supporting expectations that policymakers may not be able to raise interest rates again as soon as March.

Underpinning that belief, data on Thursday showed new orders for U.S. durable goods posted their biggest drop in 16 months in December, suggesting that growth in the world's top economy braked sharply at the end of 2015.

A March rate hike is looking "extremely unlikely," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

"Now that the Fed has said that they are looking at international conditions and their impact on the U.S. economy it's quite clear they'd be waiting...and there are not just enough macro data between now and the March meeting for them to shift from their current position," said McCarthy.

That should support gold in the near term as the dollar comes under pressure, he said.

Spot gold was little changed at $1,114.62 an ounce by 0630 GMT.

Profit-taking on Thursday caused bullion to retreat from a 12-week high of $1,127.80 reached the previous day. For the month, gold was up 5 percent, its biggest such gain since January last year.

U.S. gold for February delivery was flat at $1,115 an ounce.

Despite gold's gains, Barclays is sticking to its price forecast of $1,075 for the first quarter and $1,054 for 2016.

"We think China's volatility and its implications for the U.S. are the top risks for gold in 2016," the bank said in a report.

Investors are eyeing U.S. fourth-quarter gross domestic product due later on Friday. Economists polled by Reuters suggest U.S. GDP growth of 0.8 percent in October-December, slowing from a 2 percent expansion in the third quarter.

So, Gold continues to please us with its behavior. On daily nothing has changed significantly. Market stands in reasonable retracement down, which we've expected to 1106-1110 area:

On 4-hour chart - DRPO minimum target has been hit and gold also has completed harmonic swing retracement. So, to keep short-term bullish context, market should turn up again somewhere around 1106-1110 area:

On 30-min chart we see that falling wedge is forming that also has a lot of inner patterns - AB-CD, multiple butterflies and even could have 3-Drive Buy. Still taking in consideration the choppiness of the market we probably will follow to most safe scenario - wait for wedge upside breakout and forming of reversal swing. After that we will try to buy some deep: