GOLD PRO Weekly July 13-17, 2015

[Sive Morten]

Fundamentals

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

Reuters reports Gold gave up earlier gains on Friday after U.S. Federal Reserve Chair Janet Yellen said she expected the central bank to raise interest rates sometime this year but pointed to concerns that U.S. labor markets remain weak.

In a speech that cautioned about the status of workers as well as some international risks, Yellen gave no direct hint about whether she anticipated more than one rate hike over the Fed's four remaining meetings in 2015.

"(It) looks like a probable interest rate hike scheduled for this year, with or without Greece," said George Gero, precious metals strategist for RBC Capital Markets in New York.

"Yellen's more hawkish-than-expected tone is sparking a modest gold selloff," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.

"Gold is getting some support from the stronger euro, but if we get a deal with Greece on Sunday, it should be bearish for gold because it removes any risk," Societe Generale analyst Robin Bhar said.

Physical demand remained tepid this week as prospective investors in China chased bargains in equities after a market selloff, while those in India delayed purchases.

The metal in India still sold at a discount to the global benchmark.

Chinese stocks rose sharply for the second straight day after Beijing banned shareholders with large stakes in listed companies from selling, moving to stem a rout that pulled down key indexes by about 30 percent from mid-June.

Also benefiting gold earlier, the International Monetary Fund trimmed its forecast for global economic growth this year to 3.3 percent from 3.5 percent, citing recent weakness in the United States.

Recent CFTC data shows increase in open interest and contraction of net long position. Speculative short positions were increasing during whole June, while long positions mostly stand flat and even have decreased recently. So, CFTC data shows classical bearish dynamic and supports further decreasing on gold market.
SPDR fund mostly reports on stagnation of its storages. Two weeks ago they have dropped to 702 tonnes, and then have increased to 709. Now storages stands around 707.8 tonnes.
That’s being said sentiment data mostly supports further downward action on gold market.

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Summary:

Technicals
Monthly
Last week shows no impact on monthly chart. Gold stands rather flat on monthly chart within 4 months in a row. Currently bearish dynamic pressure becomes very clear on this chart. It seems that gold just waits for some push. It means that as bearish dynamic pressure as VOB pattern are still valid.
On long-term horizon 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$. At the same time we need 1130 breakout to start clearly speak on 1050 target.
But what action market should show to break huge bearish patterns on monthly? Dynamic pressure is a tendency of lower highs within bullish trend. Hence, to break it, market should show higher high. I’ve marked it with arrow. It means that market should take out 1308 top to break this pattern and make investors doubt on bearish perspectives of gold market in long term. That’s why action that we have on daily and intraday charts right now is not an action of monthly one yet. Early bell of changing situation could be moving above YPP.
Overall picture still remains mostly bearish. In the beginning of the year market showed solid upside action. Gold was able to exceed yearly pivot, passed half way to Yearly Pivot resistance 1 but right now has reversed down and closed below YPP. From technical point of view this is bearish sign. This could be very significant moment and next logical destination will be yearly pivot support 1 around 1083$.
Fundamentally, gold mostly is hostage of dollar value and US economical data (mostly inflation) in nearest perspective. Approximately the same was announced by Fed in forecast on inflation and had become a reason of dovish approach to rate hiking. Another concern right now is too strong dollar that becomes a problem per se for economy growth and kills inflation. Prices are fallen so no needs to hike rates. The same information comes from President’s administration – it seems that Obama’s cabinet unsatisfied with too strong dollar and IMF was asking Fed to postpone rate hike on next year. We do not know whether these moments were become a reason of dovish tone in Fed comments or not, but result is the same. Fed has announced some worrying on employment and inflation and said that they need to get more strength in this data…
If we will take into consideration geopolitical situation and risks that have appeared recently, it could happen that situation will change, especially if situation in Ukraine will escalate and peaceful regulation will fail. Day by day we see worrying geopolitical news – Macedonia, Yemen, and Syria are to name some. Unfortunately the geopolicy is sphere where we can’t do much.
That’s being said, as gold has passed through 1200 and until it stands below 1308 top, our long-term next destination point is previous lows at 1130, but if gold will return to 1130 for second time – this is temporal destination and we should prepare for further downward action.

Trend is bearish here. Unfortunately (or fortunately) gold has not shown solid action on weekly chart and mostly situation remains the same as it was on previous week. Since April trend mostly holds bullish (by MACD), but price action is not, gold can’t start upside action. This could be the sign of market’s weakness.
Last week we also have got pure bearish grabber, and it looks as it should to. This is new pattern that points on downward continuation.
Our major pattern here is still big butterfly. Speaking on targets, we have three different patterns that point on the same level. They are butterfly “buy”, AB=CD and the part of this AB-CD that takes “222” Sell shape.
Thus, all these patterns point at the same destination around 1080$. This level is special, because it coincides with YPS1. Acceleration probably should happen after 1130 breakout.

Daily
Trend is bearish here. On daily chart market slowly but stably continues move down. Major pattern here is downward AB=CD that should lead market to our next target around 1130-1135. Last week market has shown reasonable respect of support area around trend line and MPS1. As market has passed through minor 0.618 extension of AB-CD, now gold stands in kind of semi-position between 0.618 and 1.0 targets. In this case in most cases market gravitates to next target and rarely turns opposite direction before will hit it.
Theoretically we could assume appearing another minor butterfly here with left wing at 1140-1230 swing. But currently it is difficult to say whether this will happen or not.

4-hour
Last week market mostly accomplished our target and reached 1150 level. As we’ve suggested market whole week has spent in upside retracement to 1160-1162 level. Now we see couple of moments that could be important soon. First is, take a look that market has shown fast acceleration on the way to AB=CD target and 1.27 butterfly extension. Usually when market shows such sort of action, later it returns to downward action and reaches 1.618 extension. Second – take a look at recent action. Market has reached 1160 resistance but has not turned to downward action yet. Here we start to see signs of bearish dynamic pressure. While trend has turned bearish market mostly stands flat. That’s why picture that we see right now on 4-hour time frame suggests that downward continuation is a question of time.

Conclusion:
Long-term picture remains bearish and major patterns stand mostly intact. Our long-term target still stands at 1050-1080 area. We do not exclude scenario with possible upside action if situation in Greece will develop in negative direction but we think that hardly this event drastically will change the tendency. Other words speaking, we accept idea of possible upside action, may be it even could be significant, but this action hardly will break long-term bearish trend and sentiment. Reaction on Greece default could be strong, but probably it will not be long-term. Greece problem was discussing for a long period already and negative result probably partially was priced in already.
On short-term charts if nothing drastical will happen, we expect re-establishing of downward action from current levels to 1130-1135 area. Any explosive upside action at Monday’s open will tell us to avoid bearish position.

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 14, July 2015

Good morning,


Reuters reports today Gold stretched losses from the previous session on Tuesday as the dollar gained on expectations the U.S. Federal Reserve was on course to increase interest rates this year.

Fed Chair Janet Yellen may provide more signals of a looming rate hike at her semiannual testimony to Congress on Wednesday and Thursday, shifting global focus to the U.S. central bank from Greece which agreed to talks on an 86-billion-euro bailout in exchange for pledging tough reforms.

Investors are now waiting for what Yellen would say in her testimony even as a U.S. rate hike is "pretty much written on the wall", said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

"It's probably a one-time rate increase this year and probably in September and we may see gold falling to $1,080 when that happens."

Yellen said on Friday the U.S. central bank was on course to raise interest rates at some point later this year, the first hike in nearly a decade, though labour markets remained weak.

Investors tend to shun gold, which doesn't pay interest, when market expectations point to U.S. interest rates rising.

The metal is not far above a four-month low of $1,146.75 hit last week, with its safe-haven draw also not working despite the recent equities rout in China and the Greek debt crisis.

"Where once we felt that gold was being extremely sticky around the $1,200 level, that level of fluctuation has since been shifted substantially downwards," Phillip Futures analyst Howie Lee said in a note.

Amid waning interest in gold as an investment, Lee said he now sees resistance for gold at $1,165.

In Greece, the terms imposed by international lenders led by Germany in all-night talks at an emergency summit obliged Prime Minister Alexis Tsipras to abandon promises of ending austerity.

Economic growth in top gold consumer China is forecast to be the weakest since the global financial crisis in the second quarter, with a Reuters poll of 52 economists showing annual GDP expansion of 6.9 percent. The data will be released on Wednesday.


So, currently our expectations are confirming by price action and we continue stay on 1130 target for short-term perspective, based on downward AB=CD pattern.

On 4-hour chart our 1162 resistance has held the market from further upside continuation, and bearish dynamic pressure starts to work, but gold has not reached its target yet at previous 1147 lows.
It seems that gold turns to some downward channel. In short-term perspective market could form another minor butterfly that has the same target as a big one - around 1135 area. So let's keep watching. Right now we need to see taking out of most recent lows and completion of bearish pressure target;

 

[Sive Morten]

Gold Daily Update Wed 15, July 2015

Good morning,


Reuters reports today Gold traded in a narrow range on Wednesday as investors waited for Federal Reserve Chair Janet Yellen's congressional testimony for more clues on the timing of a U.S. interest rate increase this year and whether that would be followed by further hikes.

Ahead of Yellen's testimony, data showed economic growth in top gold consumer China held steady at 7 percent in the second quarter, above market expectations of 6.9 percent.

Last week, Yellen said the Fed was on course to lift rates at some point this year, but an unexpected drop in U.S. retail sales in June renewed concerns the world's top economy may be slowing again.

"Markets will want to know whether this year's expected rate hike will be followed by a succession of other increases and how quickly these set in," INTL FCStone analyst Edward Meir said in a note.

A looming U.S. rate hike boosts the dollar, putting dollar-priced assets such as gold out of favour as they become more costly for buyers holding other currencies.

U.S. retail sales slipped 0.3 percent last month, the weakest reading since February, after May's downwardly revised 1.0 percent increase.

The data came ahead of Yellen's semiannual testimony on monetary policy to the U.S. House of Representatives later on Wednesday at which she is likely to reiterate that it will be appropriate to raise interest rates later this year, a point she again made in a speech last week.

Asian stocks surrendered most of their gains as Chinese shares slid despite upbeat economic data. Apart from gross domestic product, China's industrial output also beat market estimates, rising 6.8 percent in June, well ahead of the forecast 6.0 percent clip.

Phillip Futures analyst Howie Lee said the recent stock market crash is "expected to have hidden but deep impacts on the economy, and China will face a huge test to manage another 7 percent growth in the third quarter".


Situation barely has changed on gold. Market just waits results of Greek government voting on bailout plan and Yellen's speech. On daily chart this has led to tight consolidation - market forms side by side inside sessions and stands in the range for recent 2 weeks. Since our major pattern is still valid here and trend is still bearish, we do not see reasons yet to change our mind and 1135 traget:

On hourly chart this consolidation takes shape of triangle. So, all that we need to do is just wait for breakout. Technical picture suggests that it should be downside, but major driving factors right now are Greece and Yellen:

 

[Sive Morten]

Gold Daily Update Thu 16, July 2015

Good morning,


Reuters reports today Gold hovered near its lowest level since March on Thursday after Federal Reserve Chair Janet Yellen reiterated that a U.S. interest rate increase is likely this year, buoying the dollar at bullion's expense.

Yellen said the U.S. central bank remains on course to raise interest rates this year, with labour markets expected to steadily improve and turmoil abroad unlikely to throw the U.S. economy off track.

Yellen's comments were in line with her recent remarks along with the most recent policy statement by the Federal Open Market Committee, which will meet next on July 28-29. Yellen is expected to repeat those comments when she testifies before the Senate Banking Committee on Thursday.

A potential U.S. rate hike has been discussed in financial markets as early as 2013, and gold has already fallen as a consequence, said HSBC analyst James Steel.

"This leads us to conclude that most of gold's declines based on a rate rise have already occurred, and that gold's reaction to the rate hike - whenever it comes - and subsequent hikes, may be muted or short-lived," Steel said in a note.

"This reinforces our view that gold prices are likely to stay above $1,100/oz although they may remain weak due to momentum selling near term."

A looming U.S. rate hike boosts the dollar, making dollar-priced assets such as gold more expensive for buyers holding other currencies.

There was more evidence of U.S. economic growth improving, with industrial production rebounding last month and factory activity in New York state picking up in July.

Premiums for physical gold on the Shanghai Gold Exchange picked up slightly to $2-$4 an ounce over spot, although analysts say a slowing economy could cap demand from China, the world's top gold consumer.

Gold imports by No. 2 consumer India dropped 37 percent in June from a year earlier to $1.96 billion, the country's trade ministry said on Wednesday.


So, gold slowly but stably continues move lower and almost has reached our short-term 1130-1135 target. 1140 level was reached and now gold stands just few bucks above our target. May be we even will see it's reaching till the end of the week. So we think that our analysis here is still valid and we will keep it:

On 4-hour chart gold still drifts inside the channel but action has become slower. We have two different butterflies, but both of them has the target around 1135 area. The one thing that seems important here is possible bullish divergence with MACD. It tells that market could form, say, small 3-Drive buy pattern right to complete 1135 target.

 

[Sive Morten]

Gold Daily Update Fri 17, July 2015

Good morning,



Reuters reports today Gold languished near its lowest level in eight months on Friday and is set to extend its losing run to a fourth week, pressured by a firmer dollar as expectations grow that the Federal Reserve will raise interest rates this year.

Platinum and palladium held near multi-year lows, with market players warning of more losses in precious metals if the dollar strengthens further and equities advance.

"We remain nervous about gold and would not be surprised to see a rather sizable, stop-induced fall to take place if and when we significantly pierce the $1,141 support on the next downswing," INTL FCStone analyst Edward Meir said.

"Not only are the charts looking shaky, but we are also seeing the stronger dollar and firmer global equity markets reassert themselves, much as they did back in February and March."

Gold is down for a third year running, dropping more than 3 percent so far this year, with the non-interest bearing asset losing favour against an impending U.S. rate hike.

Bullion took a deeper hit this week after Federal Reserve Chair Janet Yellen told Congress the U.S. central bank is on track to lift interest rates this year if the U.S. economy expands as expected, sending the dollar to a seven-week high versus a basket of currencies on Thursday.

The price drop failed to spur demand in top consumers in Asia with domestic prices in No. 2 market India remaining at a discount to global spot.

Meir said a "serious rout in platinum and palladium," spurred by rising supplies, "could spill over into either gold or silver more forcefully, as funds scramble to raise cash."

"If equities continue to push higher, and the U.S. dollar maintains its ascendancy, the precious complex could well come under severe pressure in the near term," said MKS Group trader Jason Cerisola.



So, no significant changes in fundament background. Today we will get US inflation numbers, so may be it will add some volatility on gold. ON daily chart we still keep our analysis with AB-CD pattern and 1135 target:

Market also stands below MPS1 and it tells that current move down is not some retracement, this is bear trend.

On 4-hour chart we will continue to watch for our major short-term support cluster around 1130 - butterflies targets and AB=CD ultimate 1.618 extension. May be today US inflation data will trigger some action. Anyway this level probably will be hit on next week