GOLD PRO WEEKLY , July 10 - 14, 2017

[Sive Morten]

Fundamentals

(Reuters) - Gold fell to the lowest in nearly four months on Friday after stronger than expected United States jobs data increased the likelihood of another U.S. interest rate increase and the dollar rose.

U.S. non farm payrolls jumped by 222,000 jobs last month, the Labor Department said, beating expectations of a 179,000 gain. "We have a stellar U.S. jobs number," said Naeem Aslam, chief market analyst at Think Markets. "The data has brought negative news for gold traders as there isn't really anything in this number which is going to put the brakes on an interest rate hike."

Spot gold was down 1.2 percent at $1,209.90 an ounce by 2:21 p.m. EDT (1821 GMT), after touching $1,207.15, the weakest since March 15. It has dropped about 2.5 percent this week and is set for its biggest weekly fall since the week of May 5.

U.S. gold futures for August delivery settled down 1.1 percent at $1,209.70. Gold has shed about 6 percent since touching a seven-month peak of $1,295.97 on June 6.

The dollar index was firmer, making gold more expensive for buyers outside the United States. Dollar-denominated bullion typically loses value when the greenback and interest rates rise as it does not pay interest.

"Gold crumpled past May lows, unable to survive a dual assault from a strong payrolls headline and silver plunging through 2016 lows," said Tai Wong, director of base and precious metals trading for BMO Capital Markets. "Recent hawkish central bank rhetoric led by a likely rate hike from the Bank of Canada next week has offset mild inflation data and geopolitical concern, may see gold test $1,200 short term."

COT Report

So, as you can see, sentiment on gold market is started to change. We see clear bearish signs as in CFTC data as in SPDR fund stats. Thus, CFTC numbers show clear bearish dynamic, when price, speculative long position are dropping while open interest is rising. It means that new shorts are coming on market and recent drop stands not just due closing of some longs:

SDPR data shows strong outflow with just 2 sessions - before 4th July holiday and right after it. Just within 2 sessions SPDR fund has lost 10 tonnes of gold. This is fast drop and it brings nothing positive to bulls:

Today we have stronger bearish signs from sentiment analysis than usual. And it makes us think that may be we need to clarify current downside action not as retracement any more but as new trend down?

Technical
Monthly

As we talk about changes in sentiment right now, let's take a look at alternative scenario on gold market, compares to what we've discussed previously. Scenario that we will talk about has not been formed yet and it has some degree of uncertainty as major levels that are crucial for this scenario, have not been broken yet.

In fact, our previous scenario on possible reverse H&S pattern is still valid. The breakeven point between these scenarios stands around 1120 lows. If Price will drop below it - gold siginficantly will increase chances on downside continuation.

Right now trend has turned bearish again on monthly chart. Bullish grabber, that has been formed two months ago was completed. But it has reached just minimal target that has become W&R on weekly and daily charts. Other words speaking we see gold inability to support upside trend.

From Pivot point analysis, gold also shows a bit irrational behavior. Once YPP was broken up - gold was not able to reach YPR1 and suddenly has turned down.

It means that we could get either big Butterfly "Buy" pattern with potential target around 950$ or, at least "222" Buy around 1040 area on monthly chart . Until price stands above 1122 lows - there will be some uncertainty around them as gold also could form opposite pattern, we will take a look at it below. But breaking of 1122 will erase any questions...

Weekly

Weekly chart shows alternative scenario that stands in relation to the same 1122 lows. While market stands above this level - big butterfly "Sell" is possible, at least theoretically.

Still, here we should be prepared for deeper downside action. It is a bit early to talk whether price will break 1122 or not, but downside action will continue below 1222 level. Trend is bearish on weekly chart as well.

Here we also see some not quite bullish signs. First is, irrational downside reversal in area where were no barriers for upside continuation. Gold has turned down from 1295 area when it has broken all major resistance levels. Second - take a look at large AB-CD pattern. Gold was not able to reach even minor 0.618 extension around 1330 area and dropped. These moments point on weakness on the market.

Now we will try to estimate what level gold could reach on a way down in nearest future. Levels that we could use as intermediate targets on a way down. If, finally 1122 area will be broken - this butterfly will be erased...

Daily

Previously, guys, within last 2-3 weeks we meantion weakness on daily gold. Gold, in fact, has made the sequence of bearish steps that have made signicant impact on bullish ambitions. First - 1245 K-support area has been broken without any meaningful respect, then we saw breakout of trend line, appearing of bearish reversal swing as gold as dropped below 1214 lows, breaking of 2nd K-support area around 1225 with minor reaction as well...

Trend on daily chart stands bearish and drop has started with nice bearish MACD divergence. Now gold also has broken MPS1.

It seems that we could talk on Double Top pattern here, guys. Potentially it has 1140 target. Of course, it is possible that gold will try to keep harmony and show deep retracement up from 1188 area to 1256 to form 4th top here, but who knows... As major support level were not able to hold price and turn it up again - what guarantee that it will happen from 1188, that even is not a K-support level...

That's being said, on daily chart we do not see any bullish signs by far, any hints on possible upside reversal. And mostly should keep an eye on bearish continuation patterns:

Intraday

Here we do not have a lot of tools for analysis. Most helpul are harmonic swings as we, actually, do not have any patterns. Take a look that on a way down, gold keeps harmony very well. Each downside swing stands for ~ 35$, while upside swing for ~18$, on average. This creates Fib 1:2 ratio. As major daily support area has been broken, it leads us to following conclusions:
1. Next destination point stands around 1190 and coincides with next daily Fib support around 1188;
2. As downward action already has started - we probably could search for bearish continuation patterns there. Take a look that last retracement was 2 times smaller.

Currently, it is difficult to say, what particular pattern this will be, but as a rule this is either "V"-shape Fib retracement or "222" Sell pattern. It seems that 1220 level looks suitable for this purpose.

Conclusion

Today, guys, we've taken a look at alternative scenario of gold market. It's scale looks really thrilling. Although there is pretty lot distance till crucial area 1122, and we do not have definite signs that we will get this scenario yet, but nevertheless, recent bearish signs makes us be prepared for deeper downward action, despite, whether 1122 area will be reached or not.

In short-term perspective, we do not see any signs of bullish reversal yet, or better to say, we see opposite signs. Thus, while gold keeps downside tendency on 4-hour chart, we could watch for chances to go short.


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]

Good morning,

(Reuters) - Gold prices edged up on Monday from their lowest since mid-March in choppy trade, after
nearing technical support and as traders awaited signals from central banks on interest rate hikes.

Bullion is highly sensitive to rising rates because they push up bond yields, increasing the opportunity cost of holding non-yielding gold. They also tend to boost the dollar, in which gold is priced. Traders were looking ahead to Wednesday and Thursday, when U.S. Federal Reserve Chair Janet Yellen will address Congress.

"We're stalling right after the selling got a little exhausted on Friday," said Phillip Streible, senior commodities
broker for RJO Futures in Chicago. "A lot of people are forward-looking, waiting for Janet Yellen's testimony later on this week."

Spot gold , which dropped 2.3 percent last week, was up 0.07 percent at $1,213.61 per ounce by 2:32 p.m. EDT (1832 GMT), turning up after hitting $1,204.45, the lowest since March 15. U.S. gold futures for August delivery settled up $3.50, or 0.29 percent, at $1,213.20 per ounce.

Traders expected monetary tightening from many central banks. That rationale was bolstered by better than expected U.S. jobs data and strong German export figures. These also fuelled optimism about the global growth outlook, encouraging investors to ditch gold for riskier assets.

U.S. 10-year bond yields have risen sharply since late June, while gold is down nearly 7 percent from a high of $1,295.97 a month ago. Investors have sharply scaled back bets, reducing their net long positions in COMEX gold in the week to July 3 by more than half to the smallest bullish stance since January.

Gold holdings at the world's largest bullion-backed exchange-traded fund, SPDR Gold Trust, fell 2 percent in the week to Friday.

Standard Chartered analysts said that investors should buy at about $1,200 because Indian demand, which was dented by a new sales tax, is likely to recover and U.S. interest rates are expected to rise slowly over the next few years.

Technical support for gold was at $1,200 and $1,195, the March low, ScotiaMocatta analysts said in a note.

Gold shows very shy progress since our recent discussion. Actually, on daily chart nothing has changed, but abscence of any attempts to go higher, even from "free space", where market stands right now - shows how gold market weak is.

On 4-hour chart we have very sharp harmonic swings and it's using leads us to 1192 area, i.e. to next daily Fib support:

It means that on hourly chart we could search patterns for short entry. But here, situation has changed slightly, compares to weekly research. Market has formed upside reversal swing and minor H&S pattern at the bottom. It means that upside retracement should be 2-leg, in the shape of some AB=CD, but entry level will be the same - around 1220.
AS a result, here we could get "222" Sell pattern...

 

[Sive Morten]

Good morning,

On gold market we do not have any fundamental news, but , market as other ones across the board will be watching for Yellen's speech in Confgress today and tomorrow.

Technically, on daily chart situation stands the same. Overall swings too small to be visible on daily chart and mostly make some sense only for intraday analysis. Still, we see that some signs of bounce have appeared here as well:

On 4-hour chart gold keeps harmony very well. We have the same swings as on 22th of June - first drop, then 18$ retracement and then stronger drop should follow. Let's see whether price will repeat the same patterns:

On hourly chart our setup has been completed. As you can see AB=CD pattern has reached predefined 1220 strong resitance area, minor H&S pattern has been completed. As a result we've got "222" Sell. here you can see my orders and attempt to go short. So, If you're looking for chances to go short as well - think about this setup, may be it will suite to your trading plan as well.
Anyway, we do not have any other setups on gold by far. Let's see what impact Yellen speech will take. May be we will get something tomorrow...

 

[Sive Morten]

Good morning,

On gold market we've got mixed results yesterday. BoC rate decision has mixed all plans and led to strong volatility on the market as yields of short-term bonds changed. Yellen's speech also was mostly dovish and brought more support to gold.

Still Gold has not erased overall bearish situation yet. On daily chart we see that consolidation continues, right now we have mostly inside session is forming. The major pattern that we will keep an eye on is bearish grabber. As it could become starting point for next leg to 1190 area:

Harmonic swing patterns on 4-hour chart also has not been broken. Right now price stands at channel's border and completed retracement 18$ harmonic swing:

On hourly chart we have more tricky situation. As you can see our "222" pattern has not been destroyed totally and even was in time to complete minimal 3/8 retracement target, but price right now has returned back in previous consolidation (above silver thick line).
And here we have some uncertainty - greater H&S pattern could be formed that will trigger higher upside retracement, or, market will fail to do it and drop down.

That's why right now it would be better to wait for two things - appearing of daily grabber and price drop out below sliver line, just to get signs that now H&S will be formed. These two moments are neccesary to get confidence with downward continuation...

 

[Sive Morten]

Good morning,

On Gold market situation is more interesting than on EUR. At least, here we've got bearish grabber on daily chart, that suggests drop below 1204 lows. But in current circumstances, guys, drop below 1204 is the same as drop to 1189 Fib support.
Overall action stands gradual, yesterday was inside session. Grabber will be valid until price stands below its top:

On 4-hour chart, following the logic of harmonic patterns here - downside long leg should start. It stands in agreement with major daily Fib support:

Although our first "222" Sell pattern is still valid, we're mostly interested in most recent swing down as this is swing of daily grabber. Probably if you have bearish view and searching chances to go short, you could watch for some upside retracement, say to 1220 area. This could get another minor "222" Sell pattern. So, just do the job that we do every time when searching entry point - watch for bearish patterns or retracement that will give you suitable entry point.