GOLD PRO Weekly January 26-30, 2014

[Sive Morten]

Fundamentals

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

Reuters reports, Gold fell as much as 1.3 percent on Friday as the dollar rose and markets digested the mixed implications of a European Central Bank plan to pump about one trillion euros into the euro zone's flagging economy.

The metal, often seen as a hedge against inflation, jumped more than 1 percent above $1,300 an ounce on Thursday after the ECB announcement.
But with the euro hitting an 11-year low against the dollar , gold prices pared some of those gains as investors focused on the impact of the stronger U.S. currency, which makes dollar-denominated assets more expensive for investors holding other currencies.

"Gold was completely dislocated from the dollar yesterday, meaning that euro-gold is the best performing commodity this year, helping dollar gold stay fairly stable around $1,300," Saxo Bank's Ole Hansen said.

"But that strength in the dollar is now proving too much."

Goldman Sachs in a report seen by Reuters on Friday raised its 2015 gold price forecast to $1,262 per ounce from $1,200.

Traders are likely to turn to Sunday's election in Greece and next week's Federal Open Market Committee policy meeting for clues on the wider economic environment and when U.S. interest rates might rise.

The Fed is expected to repeat that global risks have yet to throw the U.S. recovery or its rate-hike plans off track despite the growing number of central banks cutting rates and ramping up stimulus.

"People are coming to the conclusion that while the ECB is getting more expansionary, the Fed may be forced to be less restrictive because of the headwinds to inflation from the drop in oil prices, which can trigger some delay in interest rate hikes and would be positive for gold," Julius Baer analyst Carsten Menke said.

Recent CFTC data confirms structural changes in market sentiment. Open interest has started to grow very fast and its increasing stands due growing of long speculative positions but not short. Recall that before New Year picture was opposite – shorts have grown faster and then they were closed massively right at the end of 2014.
Right now investors are returning back to market, but on opposite side. SPDR Fund also has shown solid growth of storages.

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Finally, here is dynamic of SPDR Fund storages and gold price. Take a look that we have fast increasing of inflow in fund in recent 2 weeks. It creates bullish divergence with gold price. SPDR storages has formed reversal swing. So, accompanied by growth of net long position we could say, that gold dynamic is in fact new upside trend.

Technicals
Monthly

As New Year has started we’ve got some new inputs on monthly chart. Thus, we’ve got new yearly pivots.
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$. This pattern could take shape of butterfly, if it will proceed to 1.618 target. Still, this is really big setup and current move down could be treated as BC leg. If this leg will exceed ~1433 area then we will need to adjust current AB-CD and we will get closer final destination point – may be no 1050, but 1080 or even 1100…
On recent week market has shown solid upside action. Market right now not just exceeds yearly pivot, but passed half way to Yearly Pivot resistance 1 @ 1342,50.
At the same time, returning back to discussion of recent NFP release, the major driving factor for Gold is inflation and particularly here US economy has problem. Wages again have contracted for 0.2%. Crude oil prices show decreasing. Accompanied by positive NFP numbers increasing chances on sooner rate hiking will be negative combination for gold. That’s why currently we do not see reasons yet to cancel our 1050$ target or at least possible big AB-CD down. Meantime we do not exclude current upside retracement. But this possible rally does not cancel yet chances on later downward turnover. The point is that lack of inflation, drop in oil and other commodities prices and applying of QE by other countries could let to US slightly postpone active phase of rate hiking. And this will be supportive for gold.
Still, we would suggest you to read our recent weekly research on Forex markets. If we will take into consideration geopolitical situation and risks that have appeared recently, it could happen that current upside action could become not just retracement but real reversal and changing in global sentiment and risk assessment. Because even technically we have reversal pattern at place on monthly chart – 1.27 Butterfly...Trend probably will turn bullish here by the end of January. Recent CFTC and SPDR data support this opinion.

Weekly
One of our doubts that previously stand on weekly chart was lack of impulse character in upside action. In recent two weeks gold really has turned to acceleration. Right now market has passed through all monthly pivots and hit overbought at major Fib resistance. As we’ve said on previous week - here market has limited upside potential and looks like resistance holds market from further upside continuation.
In fact we’ve got DiNapoli bearish “Stretch” pattern that could be reason for short-term downward retracement.

Daily
We still have this butterfly as central object of daily chart. This reversal pattern has been formed right at the same level as weekly Stretch. As we know, even minor 3/8 retracement will be enough to say that butterfly has worked. When you have such CFTC and SPDR data on the back – it is difficult to suggest deeper retracement. Besides, move to 1250 area is typical for the gold since it will be re-testing of broken highs and this is one of gold’s habits. After retracement upside action should continue to next cluster of targets – 1330-1340 area. It includes butterfly 1.618 extension, ultimate H&S 1.618 target and Yearly PR1.
Retracement to 1250 area could give us DiNapoli “B&B Buy” pattern. This would be right to the purpose.

Hourly
As we’ve said in our daily update, currently we see just one pattern that looks like reversal one. This is hint on Double Top on hourly chart. May be later we will see more. Greece election could bring surprises and if results of voting will slightly less radical gold could take short term bearish reaction that will trigger retracement down. Target of this pattern also points on 1250 level.
Still this Double Top shows not quite “correct” action on the slopes of the tops and it could happen that it will become the part of something bigger, say, left shoulder of H&S pattern…

Conclusion:
From technical point of view we have no reasons yet to abandon possible long-term downward AB-CD as VoB (Volatility breakout) development. Current upside action does not contradict to it and in fact could become “BC” leg of this pattern.
Taking into consideration the way how gold moves, CFTC data that shows different trend in positions we think that major factors are geopolitical and fundamental. They will come on surface probably when they will be totally utilized by institutional investors and become not as important as they stand now. We’ve described our opinion and view on this topic in current Forex weekly research. Shortly speaking we suspect that current action could be not just retracement and indicates global shifts in sentiment of investors who start to feel some tension and growing risk.
In short-term perspective it would be logical to suggest retracement down to 1250 area, but no clear reversal patterns have been formed yet on intraday charts.


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 27, January 2015

Good morning,


Reuters reports today Gold struggled on Tuesday to recover losses from the previous two sessions as a firm dollar and strength in equities dulled the metal's appeal as a hedge, keeping the yellow metal firmly below a five-month high.

"The bullion market's focus may shift to the upcoming FOMC two-day meeting on 27-28 January," said James Steel, an analyst with HSBC, referring to the U.S. Federal Reserve's Federal Open Market Committee.

"In the near term, bullion may continue to consolidate from gains made earlier in the year," Steel said.

Investors will be watching the Fed meeting for clues about the timing of any interest rate increase.

The general assumption is the Fed will acknowledge the uncertain global outlook and stick to its promise to be patient on tightening.

Its timetable remains for an increase in rates by mid-year, a move that could further boost the dollar and hurt bullion, a non-interest-bearing asset.

News on central bank gold purchases and inflows into the world's top gold-backed exchange-traded fund (ETF) failed to lend support to the metal.

The Netherlands raised its gold holdings for the first time in 16 years in December, while Russia extended its buying spree of the precious metal into a ninth straight month, data from the International Monetary Fund showed on Tuesday.

Holdings in SPDR Gold Trust , the top gold ETF, rose 0.24 percent to 743.44 tonnes on Monday.

In the physical markets, buying has slowed due to the higher prices, with premiums in major trading hubs easing.

In Singapore, premiums have fallen to 70 cents to $1 an ounce, compared with $1.20 earlier this month. In Hong Kong, premiums were at 50-70 cents an ounce, down from $1 two weeks ago.

Despite the slowdown, interest in top consumer China continued to remain stronger than last month due to the upcoming Lunar New Year holiday and is likely to stay so till mid-February.


So, as we've epxected gold right now has difficulties to pass through solid weekly resistance and ovebought. As we've said in our weekly research - we have bearish weekly "Stretch" pattern that is confirmed by daily 1.27 butterfly and it is logical to expect some retracment on gold market.
It would be nice if gold will give us B&B "Buy" because overall situation points on further possible continuation to at least Yearly PR1 around 1340 area. FOMC could trigger volatility and that, in turn, could lead to appearing multiple patterns on gold:

But as current close will be second one below 3x3 DMA - it mostly looks like DRPO "Sell" chance...

On hourly chart although market has reached neckline of our Double top pattern - we see that it is returning above it. And this is not normal. It seems that our suggestion that DRPO looks more probably now gets confirmation from hourly chart. Other words, this picture suggests that today-tomorrow some upside splash is possible, although we do not know what it will be - just W&R of previous top or direct action right to 1340 area... FOMC results could trigger any scenario.
From another point of view - we do not care, because our primary object is to get pattern on daily, whether it will be B&B or DRPO... We will trade any of them correspondingly.

 

[Sive Morten]

Gold Daily Update Wed 28, January 2015

Good morning,


Reuters reports Gold hovered in a tight range near $1,290 an ounce on Wednesday as the focus turned to whether a weaker global economy might push back the timing of an interest rate rise expected this year from the U.S. Federal Reserve.

The Federal Open Market Committee is scheduled to release a statement at the end of a two-day policy meeting later on Wednesday and a dovish bias could support gold, a non-interest-bearing asset.

"Our view is that the central bank will likely pay greater attention to the slowing global macro picture and reinforce its

'go-slow' approach on interest rates," INTL FCStone analyst Edward Meir said in a note to clients.

The metal is consolidating around $1,290 ahead of the Fed's statement, which may not offer any surprise, said Howie Lee, an investment analyst at Phillip Futures.

"I think it'll be mostly a non-event. The Fed will probably stick to the status quo and if that proves to be true, then gold should continue to hover between $1,270 and $1,290 in the near term," Lee said.

Lee expects the Fed to remain on course to raise U.S. interest rates by June, given how the world's top economy has recovered, a trend set to continue this year.

With the U.S. bracing for its first rate hike in nearly a decade, gold prices are forecast to fall for a third year in a row in 2015, a Reuters poll showed. But analysts say the market should find a floor, paving the way for a recovery next year.

In the near term, gold is unlikely to fall below $1,250 because of buying interest from the Chinese ahead of the Lunar New Year next month, Lee said.

Gold imports from Hong Kong by top consumer China fell nearly a third in 2014, although the purchases were still the second highest on record at just over 813 tonnes.


Currently we do not see any surprising action. As gold has not continued move lower, obviously we will not get B&B "Buy" here. It means that on daily chart we could get either DRPO "Sell" that will assume deeper retracement down and 1250 level will become a reality, or market just will continue move higher. But this will happen, probably if Fed will bring some dovishness in comments...

Hourly chart shows that our concern was not vain and curious action around Double Top has led to upside continuation. This just increases chances on daily DRPO. Second part of it could take shape of butterfly "Sell" on hourly chart...

 

[Sive Morten]

Gold Daily Update Thu 29, January 2015

Good morning,


According to Reuters news Gold dropped for the fourth session in five on Thursday after the Federal Reserve painted a bullish picture of the U.S. economy, signalling it was on course to lift interest rates this year.

The prospect of a hike in U.S. rates makes non-interest-bearing assets such as gold less attractive, helping pull bullion further away from a five-month peak reached last week.

"People are already adjusted to the new policy stance and there's no further reason to push up gold to a much higher level," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

In Wednesday's policy statement, the Fed said the U.S. economy was expanding "at a solid pace" with strong job gains,

leaving the central bank on track to raise rates this year. But it repeated it would be "patient" in deciding when to increase benchmark borrowing costs from zero.

The Federal Open Market Committee said it would take

"financial and international developments" into account when determining when to raise rates, referencing global markets for the first time since January 2013. But analysts say that does little to alter market expectations of a mid-year rate increase.

"Overall, there is little to signal a shift from expecting the first hike to come in June," Mizuho Bank said in a note.

Gold is likely to "test levels below $1,200" again once the first U.S. rate hike happens, Phillip Futures said in a note. Investors will be watching U.S. gross domestic product data on Friday for more clues on the strength of the economy.

Some economists say a drop in U.S. business investment spending for the fourth straight month in December suggested a risk that fourth-quarter economic growth could fall short of forecasts that mostly hover around a 3.0 percent annual pace.


So, guys, today's update is mostly interesting from news point of view, rather than from technical point of view. On daily chart we do not see many changes, in fact, Gold stands as it was yesterday. And its still keeping chances on forming DRPO "Sell" pattern.
Fed statement is interesting by some nuances. First is including phrase on "international development". I think that this is dovish comment and despite what everybody said that Fed still stands hawkish - take a look at Fed Fund futures. They show drop in probability of rate hiking in June from 70% last year to 51% right now. Besides, Treasuries has shown solid drop in yields and it seems that not everybody agrees with "hawkish" treating of recent Fed comments...
so, on daily chart we haven't got second close above 3x3 DMA yet, but we've got bullish grabber and it suggests this upside action:

On hourly chart market still keeps the chance to creat Butterfly "sell" pattern. It is interesting that as daily grabber as butterfly here have the same invalidation point. So, if butterfly will fail - the same will happen with grabber. But current downward action looks very heavy and gradual and mostly has the signs of retracement. Thus, uspide action still could happen and we will be watching for it and for DRPO "Sell" pattern on daily:

 

[Sive Morten]

Gold Daily Update Fri 30, January 2015

Good morning,


Reuters reports Gold edged up on Friday, after falling more than 2 percent to a two-week low overnight on concerns over a looming increase in U.S. interest rates, but prices were still on track for their biggest weekly drop in two months.

Despite the threat of U.S. monetary tightening, increased liquidity through the ECB's stimulus should support gold going forward, said Victor Thianpiriya, analyst at Australia and New Zealand Banking Group.

"The overriding theme for the next 12 months for precious metals is that there's going to be a lot more liquidity that's being added to the system via the ECB and the U.S. economy is going to have to continue to outperform in order to attract investment dollars," said Thianpiriya, who sees bullion at $1,280 by year-end.

"The risk is whether the U.S. can really sustain this level of growth particularly with wages growth still quite tepid."

The Federal Reserve painted a bullish view of the U.S. economy after its first policy meeting this week that analysts say puts it on course to raise interest rates as early as June.

That dimmed the appeal of non-interest yielding assets such as gold, which Phillip Futures expects to fall below $1,200 again once the first U.S. rate hike occurs.

Investors will next be eyeing U.S. fourth-quarter gross domestic product data due out at 1330 GMT that may show a solid pace of economic expansion as the Fed had described in its policy statement on Wednesday.



It looks like we finally have got B&B "Buy" on daily chart. Although it is not absolutely perfect, since gold has reached 1250 Fib level on 4th close below 3x3 DMA but not on 3rd, as it should be by letter. Still we think that we could treat it as normal B&B, or treat it as LAL B&B if you want...:

In fact we've discussed this retracement in weekly research, because odds have suggested it. On 4-hour chart we see that this is also AB-CD pattern. Thus we have Agreement support at 1250 level.

As we know, minimum target of B&B will be 1286 Fib resistance level. But it also could be just the starting point for further upside action. Today we will get GDP release for 4th Q, and it could make an impact on market. Currently we do not have any reversal patterns on hourly chart yet.