Gold GOLD PRO WEEKLY, January 28 - 01, 2019

Sive Morten

Special Consultant to the FPA
Messages
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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."
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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.

gold_m_28_01_19.png


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.
gold_w_28_01_19.png


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.
gold_d_28_01_19.png


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.
gold_4h_28_01_19.png


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.
 
Greetings everybody,

So, gold stands as we've suggested, keeping positive mood on expectations of dovish Fed statement. Although our extended targets stand the same - 1220 as rectangle breakout, it could be short-term pit stop, while major target is XOP at 1330. Despite these targets, today we also be aware of 1312 level. On daily - this is overbought area:
gold_d_29_01_19.png


At the same time, on 4H chart, as we haven't got W&R of the lows, we have butterfly "Sell". Market shows minor reaction on 1.27 - that's what we've discussed in weekly report, and next 1.618 target coincides with daily overbought level. So, probably it will be ceil for today session.
Second moment - once 1.618 butterfly is completed, market usually shows at least 3/8 retracement, so broken upper border of rectangle could be re-tested, right at the eve of Fed meeting:
gold_4h_29_01_19.png
 
Greetings, guys

So, 1312 ideed was a ceil for yesterday's session, but now market is turning to "creeping with Overbought" action as I call it. Still, today will be Fed announcement and press conference, and it could add more volatility on the market. Commodities are not very impacted by OB/OS and feel more comfortable compares to financial markets.
it means that despite OB level, gold could hit as 1320 as 1330 targets today, if Fed will be dovish enough:
gold_d_30_01_19.png


On 4H chart we could see relatively rare situation of butterfly failure. We were correct that market has to reach 1.618 butterfly target, but we haven't got any 30% retracement. It means that butterfly has failed, because this is bearish patterns.
Butterflies have a feature - when they fail, they fail miserably. It means that market shows rather strong action in the direction of the failure. In our case it should be upside, which confirms overall view on gold market:
gold_4h_30_01_19.png
 
Greetings everybody,

So, on background of dovish Fed statement, gold has completed our 1320 target. Action that we call as "creeping with OB" continues. Now, next short-term destination point is daily XOP @ 1330.
gold_d_31_01_19.png


Meantime, NFP release stands for tommorrow, but today it should be relatively quiet session. 4H chart shows that we have another two extensions that point on 1325-1327 levels, i.e. mostly coincide with daily XOP.

So, if NFP will be friendly, these targets should be hit tomorrow. Today retracement action somewhere to 1313-1315 area seems as very probable.
gold_1h_31_01_19.png
 
Greetings everybody,

We have not much changes on gold today. Retracement that we've discussed yesterday finally has started, but our XOP target has not been hit yet due daily OB level. It means that today, on NFP volatility, 1330 target could be reached:
gold_d_01_02_19.png


On 1H chart market has hit our OP target and turned to retracement. Single harmonic swing down already has been completed and now market is showing second one. Combination of possible "222' Buy pattern here around 1H K-support area and uncompleted yet daily XOP at 1330 creates nice upside combination with potential of 15$/contract.

Despite what NFP numbers we will get, chances to get spike up, at least, to complete XOP, looks very probable:
gold_1h_01_02_19.png
 
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