Sive Morten
Special Consultant to the FPA
- Messages
- 18,531
Fundamentals
Gold has shown impressive performance last week, supporting our long-term view that gold could be in a phase of starting of new long-term upside trend. The reason for that is the same as weakness of the dollar that we've mentioned yesterday in our FX report - coming Fed meeting and anticipation of more dovish steps from the Fed. Everybody keeps in mind shutdown impact on US economy that yet to be discovered.
As Reuters reports - gold jumped over 1 percent to a more than a seven-month high on Friday, briefly surpassing $1,300 as the dollar slid ahead of a U.S. Federal Reserve meeting next week where the central bank is widely expected to leave interest rates unchanged.
“The major catalyst supporting gold is a big drop in the dollar, amid expectations the Fed will reiterate a pause to its hiking cycle next week,” said Fawad Razaqzada, an analyst with Forex.com.
Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.
The dollar fell off a three-week high reached in the previous session as investors focused on the Fed meeting next week. This made gold, which is traded in dollars, cheaper for holders of other currencies.
“There are also some rumors that the Fed is backing off their quantitative tightening program, which would mean they are going dovish. This would in turn mean a probable end of rate hikes in 2019, which would be supportive for gold,” said Bob Haberkorn, senior market strategist at RJO Futures.
Holdings of SPDR Gold, the largest gold-based exchange traded fund, hovered around their highest levels since late June 2018.
Risks “from economic and political perspectives, are keeping gold relatively well supported going forward,” said Commerzbank analyst Daniel Briesemann.
A global economic slowdown is under way and any escalation in the U.S.-China trade war would trigger a sharper downturn, according to the latest Reuters polls of economists around the world.
Investors are also worried about the impact of the longest U.S. government shutdown in history, with two bills to end the partial shutdown failing to win enough votes in the Senate.
Yesterday guys, we've talked about forecasts on US economy situation, global financial crisis and Fed policy in 2019 based on report of Fathom Consulting. This discussion as well as extractions from Fathom report you could find here. '
Since SPDR fund reserves stands near the top and gold rallies more, I would suggest that net long position is growing, although we can't confirm it by CFTC data.
Another hot topic of global politics and trade is China - US relations and, as a consequence, China economy situation. Fathom puts update on China perspectives - China’s official GDP data point to weakest quarterly growth since the financial crisis.
Particularly, Fathom points that recent
"release of official GDP data suggests that China’s economy grew at 6.4% in the year to 2018 Q4 — its slowest annual pace since the financial crisis. That figure coincides with the latest reading from the CMI, which suggests that the economy grew by 6.4% in the twelve months to November. For 2018 as a whole, official growth was 6.6%, its weakest since 1990. Problematically for Beijing, efforts to stimulate the economy will only exacerbate existing domestic and global imbalances, both of which are already taking their toll. Indeed, recent trade data suggest that the tariffs imposed on China’s exports to the US are starting to pinch. Looking ahead, we expect growth to slow further from here."
Technical
Monthly
Market has done another step with our, lets call it as "symmetrical" model. As we've identified clear symmetry in market action, we have suggested that future action could be a reflection of previous downside action shape. Last week, market has moved more above the trend line, which was a crucial level for long-term technical picture.
As we've said earlier - gold shows good performance in December, which could lay the foundation of new long-term upside trend.
We still keep our harmonic technical model on monthly chart as primary tool of analysis.
Fundamental reasons for gold rising mostly relate to changing of global political and economical situation. Strong global shifts never could happen without big political events. This should provide big support to gold market. Now it is widely suggested that these processes should accelerate closer to 2020 year, or even in second half of 2019. For example, here is report by Fathom Consulting and their expectations to see world crisis around 2020.
Here is explanation of our "symmetrical" model and scenario. Recent action on gold market reminds reverse H&S shape but very choppy and extended it time. Important COP target has been hit and upside action has started. In fact we have mirror action to the right and to the left from COP point. Market forms approximately equal lows on both sides. The speed is also similar. Is it possible that reversal is forming? Why not.
On monthly chart we keep watching whether gold will be able to hold above trend line. Now price stands above YPP as well.
Weekly
Previously we already mentioned that price action looks too aggressive to treat it just a retracement on long-term bear trend, especially when gold has shown acceleration right to OP target and Agreement resistance of 1286 area.
With no doubts on upside continuation we still have suggested some moderate pullback, because technically it looks reasonable around strong weekly resistance and Agreement area. In reality retracement was very shy and barely could be called moderate, even for intraday charts.
So, market shows real strength. It makes us to suggest upside continuation to our next XOP target around 1330. Market is not at Overbought right now, it has no strong resistance levels above, so it should be easy journey to 1330. Especially if we will get clear dovish hints from the Fed. In fact, we've got bullish upside reversal week, as market dropped below the lows of previous week (and not only previous but of three weeks) and closed above the top of them.
Daily
Trend stands bullish right now at all time frames, including monthly (although it is not confirmed yet by close price). So, market follows to our expectation, but we haven't got the scenario with failure downside breakout that we've discussed through the week.
Anyway, now we're watching for upside continuation. Market stands near overbought area, and price has broken up rectangle consolidation. So, minimum upside target should be equal to its width and leads us to 1320 area. Also it would be better if market will not drop too deep back in consolidation area.
Intraday
Here we can't say a lot by far. It seems that acceptable retracement stands around WPP and nearest Fib support of 1293. At the same time, gold is not overbought and theoretically could continue upside action right on Monday.
So we will be watching for some retracement in a shape of AB-CD, may be "222" patterns. On 1H chart, as thrust looks good, it could be, say, DiNapoli B&B "Buy" for example.
Conclusion:
Long term sentiment still looks good for gold market. Next week all eyes will be on Fed. Market has big hopes that dovish comments support rally.
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.
Gold has shown impressive performance last week, supporting our long-term view that gold could be in a phase of starting of new long-term upside trend. The reason for that is the same as weakness of the dollar that we've mentioned yesterday in our FX report - coming Fed meeting and anticipation of more dovish steps from the Fed. Everybody keeps in mind shutdown impact on US economy that yet to be discovered.
As Reuters reports - gold jumped over 1 percent to a more than a seven-month high on Friday, briefly surpassing $1,300 as the dollar slid ahead of a U.S. Federal Reserve meeting next week where the central bank is widely expected to leave interest rates unchanged.
“The major catalyst supporting gold is a big drop in the dollar, amid expectations the Fed will reiterate a pause to its hiking cycle next week,” said Fawad Razaqzada, an analyst with Forex.com.
Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.
The dollar fell off a three-week high reached in the previous session as investors focused on the Fed meeting next week. This made gold, which is traded in dollars, cheaper for holders of other currencies.
“There are also some rumors that the Fed is backing off their quantitative tightening program, which would mean they are going dovish. This would in turn mean a probable end of rate hikes in 2019, which would be supportive for gold,” said Bob Haberkorn, senior market strategist at RJO Futures.
Holdings of SPDR Gold, the largest gold-based exchange traded fund, hovered around their highest levels since late June 2018.
Risks “from economic and political perspectives, are keeping gold relatively well supported going forward,” said Commerzbank analyst Daniel Briesemann.
A global economic slowdown is under way and any escalation in the U.S.-China trade war would trigger a sharper downturn, according to the latest Reuters polls of economists around the world.
Investors are also worried about the impact of the longest U.S. government shutdown in history, with two bills to end the partial shutdown failing to win enough votes in the Senate.
Yesterday guys, we've talked about forecasts on US economy situation, global financial crisis and Fed policy in 2019 based on report of Fathom Consulting. This discussion as well as extractions from Fathom report you could find here. '
Since SPDR fund reserves stands near the top and gold rallies more, I would suggest that net long position is growing, although we can't confirm it by CFTC data.
Another hot topic of global politics and trade is China - US relations and, as a consequence, China economy situation. Fathom puts update on China perspectives - China’s official GDP data point to weakest quarterly growth since the financial crisis.
Particularly, Fathom points that recent
"release of official GDP data suggests that China’s economy grew at 6.4% in the year to 2018 Q4 — its slowest annual pace since the financial crisis. That figure coincides with the latest reading from the CMI, which suggests that the economy grew by 6.4% in the twelve months to November. For 2018 as a whole, official growth was 6.6%, its weakest since 1990. Problematically for Beijing, efforts to stimulate the economy will only exacerbate existing domestic and global imbalances, both of which are already taking their toll. Indeed, recent trade data suggest that the tariffs imposed on China’s exports to the US are starting to pinch. Looking ahead, we expect growth to slow further from here."
Technical
Monthly
Market has done another step with our, lets call it as "symmetrical" model. As we've identified clear symmetry in market action, we have suggested that future action could be a reflection of previous downside action shape. Last week, market has moved more above the trend line, which was a crucial level for long-term technical picture.
As we've said earlier - gold shows good performance in December, which could lay the foundation of new long-term upside trend.
We still keep our harmonic technical model on monthly chart as primary tool of analysis.
Fundamental reasons for gold rising mostly relate to changing of global political and economical situation. Strong global shifts never could happen without big political events. This should provide big support to gold market. Now it is widely suggested that these processes should accelerate closer to 2020 year, or even in second half of 2019. For example, here is report by Fathom Consulting and their expectations to see world crisis around 2020.
Here is explanation of our "symmetrical" model and scenario. Recent action on gold market reminds reverse H&S shape but very choppy and extended it time. Important COP target has been hit and upside action has started. In fact we have mirror action to the right and to the left from COP point. Market forms approximately equal lows on both sides. The speed is also similar. Is it possible that reversal is forming? Why not.
On monthly chart we keep watching whether gold will be able to hold above trend line. Now price stands above YPP as well.
Weekly
Previously we already mentioned that price action looks too aggressive to treat it just a retracement on long-term bear trend, especially when gold has shown acceleration right to OP target and Agreement resistance of 1286 area.
With no doubts on upside continuation we still have suggested some moderate pullback, because technically it looks reasonable around strong weekly resistance and Agreement area. In reality retracement was very shy and barely could be called moderate, even for intraday charts.
So, market shows real strength. It makes us to suggest upside continuation to our next XOP target around 1330. Market is not at Overbought right now, it has no strong resistance levels above, so it should be easy journey to 1330. Especially if we will get clear dovish hints from the Fed. In fact, we've got bullish upside reversal week, as market dropped below the lows of previous week (and not only previous but of three weeks) and closed above the top of them.
Daily
Trend stands bullish right now at all time frames, including monthly (although it is not confirmed yet by close price). So, market follows to our expectation, but we haven't got the scenario with failure downside breakout that we've discussed through the week.
Anyway, now we're watching for upside continuation. Market stands near overbought area, and price has broken up rectangle consolidation. So, minimum upside target should be equal to its width and leads us to 1320 area. Also it would be better if market will not drop too deep back in consolidation area.
Intraday
Here we can't say a lot by far. It seems that acceptable retracement stands around WPP and nearest Fib support of 1293. At the same time, gold is not overbought and theoretically could continue upside action right on Monday.
So we will be watching for some retracement in a shape of AB-CD, may be "222" patterns. On 1H chart, as thrust looks good, it could be, say, DiNapoli B&B "Buy" for example.
Conclusion:
Long term sentiment still looks good for gold market. Next week all eyes will be on Fed. Market has big hopes that dovish comments support rally.
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.