Gold GOLD PRO WEEKLY, January 25 - 29, 2021

Sive Morten

Special Consultant to the FPA
Messages
14,354
Fundamentals

So, as gold market as other ones across the board - all are hostages of percolate political and economical events. The main barometer is interest rates as usual and any minor changes there echoes on other markets. As gold stands in strong relation to the interest rates, it reacts on any changes very rapidly and sharp. In general we talk about this subject within recent two weeks. Now the major question is whether recent rally on interest rates reflects real changes in economical and political environment, or this is just some expectations and attempt to shake the boat. If latter is true - everything should return back. And now we're coming to first serious test of that - big amount of important statistics and Fed meeting after important appointments by J. Biden, such as J. Yellen.

So, the test by statistics, that we expect should be pure, will tell us, what we have behind the interest rates jump. With poor statistics rates have to drop back and return back the status-quo. If this will not happen, it could mean only one thing - situation is changing drastically, gold rally comes to an end and we stand at the eve of dollar growth.

On gold market we have the same combination of two opposite views as on FX market.

"This new (U.S.) government will provide more economic stimulus and also the policy of the U.S. Federal Reserve is unlikely to become more hawkish going forward," said Commerzbank analyst Eugen Weinberg. Therefore we are likely to see continued support for gold prices."

U.S. President-elect Joe Biden outlined a $1.9 trillion stimulus package proposal last week to jump-start the economy and accelerate the distribution of COVID-19 vaccines. Chair Jerome Powell also said there was no reason to alter the central bank's highly accommodative stance with the U.S. economy still far from its inflation and employment goals.

However, Commerzbank's Weinberg said a stronger dollar, economic optimism and concerns about Janet Yellen as the U.S. Treasury secretary nominee, who might be restrictive on the fiscal stimulus side, were weighing on gold prices. Although U.S. inflation expectations have risen in anticipation of more U.S. fiscal stimulus, gold has not been the sole beneficiary - bond yields have risen and weighed on gold, Phillip Futures said in a note.

Gold rose to a near one-week high as the dollar weakened on U.S. Treasury secretary nominee Janet Yellen's call to "act big" on measures to help the U.S. economy recover from the impact of the pandemic. Yellen at her confirmation hearing on Tuesday said pandemic relief would take priority over tax increases, adding that the
benefits of a relief package outweigh the expenses of a higher debt burden.

Comments by Janet Yellen, Biden's nominee to head the Treasury Department, underscoring the need for stimulus also supported the metal, said Bob Haberkorn, senior market strategist at RJO Future.

Biden was sworn into office on Wednesday, with investors focused on his $1.9 trillion stimulus package proposal and the pace of COVID-19 vaccine distribution.

Gold looks fairly positive after all that talk about stimulus yesterday from Yellen weakened the dollar," said Michael Hewson, chief market analyst at CMC Markets UK, adding that President Biden's inauguration would provide more details about fiscal policy. If U.S. bond yields start to slip back then gold will regain some of the attraction it lost ...(if) Treasury yields remain fairly resilient, the upside for gold is likely to remain at the highs seen earlier this month."

Gold at $2,000 is still achievable "probably by the mid of second quarter, when a good amount of people get inoculated and there's so much cash in the system with demand almost coming back to normal," Howie Lee, an economist at OCBC Bank, said. People will start looking at inflation very closely then."

It remained to be seen whether the stimulus would go through both houses of Congress as quickly as Biden's expectations and "that's probably one of the reasons why gold hasn't been going huge", said StoneX analyst Rhona O'Connell.


Gold prices fell more than 1% on Friday as a broader market sell-off weighed on the metal along with a firm dollar, while hopes for further stimulus from the U.S. put bullion on track for its first weekly gain in three.

"Regardless of the asset class everything from equities to agricultural to softs are selling off and a lot of emphasis is on whether the stimulus could be passed and whether the (COVID-19) vaccine rollout could be effective," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago. The strength in the dollar was also weighing on bullion with benchmark U.S. Treasury yields firm above 1%, Streible said.

COT Report

Here is we have not inspiring picture - people are leaving gold, at least for short-term perspective. This week we have drop of open interest and close as longs as shorts approximately at the same amount. This could mean only one thing - we're correct about importance of coming events and traders want to cut the risk exposure. Second conclusion that we could make - speculators are not sure enough on upward continuation, despite all these talks about stimulus, J. Yellen etc. Hedgers do the same - just out of the market. Still, this out might be first bell of massive contraction of gold positions. Unfortunately you can't check this definitely right now.

1611480316512.png



Once again guys, we can't miss the look at interest rate chart. Real interest rates shows the tick below historical lows of "-1.7%" in 2012, but for how long rates stay there. By market reaction, it seems that consensus doesn't suggest that it lasts too long. Otherwise gold should rally.


1611479978447.png



And the reason for that we have on the chart of nominal 10-year US rates. Market stubbornly stands above 1% level, forming potentially bullish pattern. This put the shadow on gold market and doesn't let it to grow.

1611480581831.png


Second, we probably could argue with some statements that made above by analysts of large banks. For example, Janet Yellen as the U.S. Treasury secretary nominee, hardly restrictive on the fiscal stimulus side, at least based on the market reaction. Also we have opposite view concerning IIQ of 2021 perspective. Above we put the quotation - that gold still could hit 2000$ area because of massive inoculation, with the rising consumption and spending, so that "People will start looking at inflation very closely then." Our view that this triggers opposite action - rising of US Dollar as interest-bearing assets and currencies become more attractive. Our position is if gold has any chances at all - they stand in IQ 2021. Right now, with poor statistics ahead and new wave of Biden's stimulus, gold has chances to fluctuate around 2000$. But if investors will not believe to poor starts and keep positions on anticipation of global changes - downside shift starts earlier than we're suggested. But this is what we intend to check by coming stats this week.


Technicals
Monthly


So, volatility gradually is growing and market becomes nervous around data release. Currently technical picture mostly consists of multiple grabber patterns but on different time frames. All of them are important.

For instance, here we have confirmed bullish pattern with minimum target above 1980 and unconfirmed yet the bearish one. Whether it will be confirmed or not - we will see this week, as it is just 5 days till the end of January. And these patterns can't be combined, as they stand mutually exclusive. Mostly the same we could tell about fundamental picture right now.
gold_m_25_01_21.png


Weekly

Next one stands on the week, its bearish and coincides with the monthly one. Also this is bearish reversal candle. Grabber in particular suggests drop below recent lows and stays in direct confrontation with monthly one. Also grabber stands in a row with AB-CD pattern as OP target has not been reached when gold has turned up. Obviously one of the patterns has to fail. Reversal candle also brings nothing good to the bulls. Appearing of these patterns should make us think about 1685-1700 support area as potential one for long entry. But this makes sense only if coming statistics will be neutral or at least not directly bearish to the gold.

gold_w_25_01_21.png


Daily

Finally we come to daily chart. The price action on Friday was rather dramatic but yes - it has been formed. Here pattern suggests drop below 1800 lows. It means that gold re-test 1800, at least, or in a worse scenario - start dropping below 1760 lows. Despite good rally on Wed, market shows the deep retracement that we've discussed in last two sessions. So, all that we could squash out of the market - we did, getting best entry setup.

gold_d_25_01_21.png


Intraday

Here is what we're taking about. the pullback to 1845 that we were waiting for two days is done, giving us excellent entry point. Those who have taken long position there now should move stops to breakeven as daily grabber keeps us in tension:
gold_4h_25_01_21.png


Currently, as further upward action mostly depends on external factors - both positions have its own adv and disadv. For bullish position we have relatively slow action, good reaction on K-support area and Agreement. While in favor of bearish position stands daily grabber and potentially bullish situation on the interest rates. Also it depends on time frame. For intraday trading it is possible to rely on daily grabber, while for longer perspective it would be better to get downside breakout of 1800 lows:

gold_1h_25_01_21.png


Also guys, you do no mistake as well, if you still on the hands through all this mess. As M. Twain said - "you are never wrong to do the right thing".
 

Sive Morten

Special Consultant to the FPA
Messages
14,354
Greetings everybody,

Today we have few important issues that could impact on the market very soon. First is - drop of interest rates. The triangle that we've mentioned above is broken down now which is potentially supportive to the gold. This is not known yet, whether this is preparation to the bumpy ride on Thursday or change of view on the markets, but this is one of the most important components for the Gold.

On daily chart, despite appearing of the bearish grabber, price is not hurry up to follow it, turning to consolidation. As support area still holds, we, in turn, hold H&S pattern on the table as well:
gold_d_26_01_21.png


On 4H chart we see minor grabber that doesn't impact on major picture but could trigger minor drop back to K-support area to take out the previous lows:
gold_4h_26_01_21.png


On 1H chart price performance also looks bullish because triangle consolidation right around K-resistance usually means preparation to breakout. And with interest rates going low - this scenario is getting more chances.
So, if you would like to sell - it makes sense to wait for real downside breakout of 1830 area. Bullish market has no choice but to go up, as major retracement already is done. If it doesn't do this - its bearish. That's simple.
For bulls, it is possible to consider long entry either inside the triangle or, after 4H grabber completes the target around 1840 area. Major clarity we should get on Thursday.
gold_1h_26_01_21.png
 

Sive Morten

Special Consultant to the FPA
Messages
14,354
Greetings everybody,

Today we have interesting setup on intraday chart. This is at least something after two weeks of random walk. On daily - everything most stands the same, grabber is valid, but yesterday we've got another one in opposed to the former. All in all - price still stands in tight range:
gold_d_27_01_21.png


Here is what we have. Yesterday, 4H grabber is completed as we've suggested. But overall price action is very slow and gradual, which makes us think that gold could make an attempt to climb higher. US rates still stands flat after yesterday's drop, so they should not become a barrier.

At the same time, if this attempt fails, we still could get bullish setup here of a larger scale - "222' Buy" from 1830 support area... but today it is different pattern stands in focus.
gold_4h_27_01_21.png


Here is, on 1H chart due 4H grabber action we've got "222" buy inside the triangle. There is only single tricky moment stands with it - ab-cd OP target is not completed yet around 1841. Thus, before upward action, gold could try to hit it, additionally grab the stops around the lows. Vital level for this setup is lows of "222" pattern of 1835. Currently combination looks clear, hopefully it works ;)
gold_1h_27_01_21.png
 

Sive Morten

Special Consultant to the FPA
Messages
14,354
Greetings everybody,

So, on the daily chart we could see how gold is erasing bullish potential. Market was not able to use any of multiple bullish setups to turn up, daily grabber is valid, price shows downside acceleration and it seems that last bullish outpost around YPP falls.
It means that miserable plunge stands on horizon and we could consider butterfly pattern that might lead price to our next strong support area - weekly 1685 K-level. The only thing that could change situation from top to bottom is today's GDP release - now it is major risk factor, as Fed has made no impact on the markets.
gold_d_28_01_21.png


On 4H chart we see minor reaction on our "222" Buy pattern that we've discussed, but it was too small, and price almost erased it. This is bearish sign and our "222" easily transforms into another butterfly here with the target around daily 1753 lows:
gold_4h_28_01_21.png


On 1H chart - the triangle that potentially was bullish, has been broken down - another crush of bulls' hopes. So, currently, at least before data release, we do not see any bullish signs, overall context stands bearish, the same as on EUR:
gold_1h_28_01_21.png
 

Sive Morten

Special Consultant to the FPA
Messages
14,354
Greetings everybody,

So, on Gold was approximately the same reaction as on other markets. First attempt of rally was reversed fast. It means that either market treats 4% GDP as positive (compares to negative ones of UK and Germany), or indeed - something serious stands behind of interest rates rally in December. Whatever option is - it brings nothing good to dollar's rivals.

On daily chart our short-term setup is valid, including bearish grabber. We keep the butterfly here, as it could become a reality, despite that market currently mostly stands indecision. To return bullish context here, it has to move above 1875 resistance and erase all bearish stuff that we have:
gold_d_29_01_21.png


On 4H chart price has theoretical chances to reverse as it still stands around support and we could recognize the hint on H&S shape. But the price action... it should be different as market had a lot of bullish chances to start upward action. If this has not happened - this is the sign that makes bullish context weak.
gold_4h_29_01_21.png


On 1H chart price turns to sideways consolidation, recent action looks like price level rejection as gold dropped out fast. All this stuff leads us to conclusion that gold in some kind of indecision situation with gravitation to the bearish context:
gold_1h_29_01_21.png
 
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