Sive Morten
Special Consultant to the FPA
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Fundamentals
Gold mostly was driven by the same factors as Forex market, speaking on William's comments in particular. Next week there are also will be common issues - GDP release, ECB rate decision, but also UK PM appointment and two weeks ahead - Fed meeting.
As Reuters reports, on Friday gold has turned to retracement as the dollar firmed and investors took profits after prices briefly surpassed our major $1,450 target to hit a six-year peak on dovish signals from the U.S. Federal Reserve and is still on course for a second week of gains.
“Speculators and traders are taking some profits off the table after the good gains we had in the past two days. Also, there is always a little bit of pressure on gold when the dollar is up,” said Michael Matousek, head trader at U.S. Global Investors.
Prices have risen about 3% in the past two days on increased expectations for a rate hike by the Fed at its month-end meeting.
“With a breakout in gold market, positions have gotten larger and more players are in. So, it can get quite a bit more whippy,” said Tai Wong, head of base and precious metals derivatives trading at BMO.
The dollar was about 0.3% stronger against a basket of currencies, recovering from a sharp fall after top Fed officials on Thursday argued for the need to quickly stimulate the economy, cementing bets that the U.S. central bank will cut rates at its July 30-31 policy meeting.
“Gold is still looking good. The interest rates and dollar environment, uncertainties over the U.S.-China trade war and now the geopolitical situation being the icing on the cake; all of this has created a very supportive environment for gold,” said Mitsubishi analyst Jonathan Butler.
Consumers in leading Asian hubs continued to sell off physical gold this week, with some switching their holdings to silver, after a jump in prices that also attracted interest from investors betting further gains.
“Demand has been muted, with most people selling off gold to take profit,” said Brian Lan, managing director at Singapore dealer GoldSilver Central.
However, with many people looking to rebalance their portfolio “gold is the asset to be in this year”, he added.
“Investment buying has picked up somewhat,” said Samson Li, a Hong Kong-based precious metals analyst with Refinitiv GFMS, adding that prices would have to hold near cureent levels for longer to trigger more interest.
“For the past few weeks, demand has been very weak. Jewellers have enough stocks and they don’t want to buy at record levels,” said Chanda Venkatesh, managing director of CapsGold, a bullion merchant in the southern city of Hyderabad.
“Price rises in the world market and a duty hike by the government is prompting a few people to book profits,” said one Mumbai-based dealer with a private bullion-importing bank. “They’re selling old stocks instead of buying.”
Among other driving factors, that is more strategical and longer term, we could name crucial slow down of Singapore export and rising demand from Central Banks.
Thus, on first issue, Singapore exports endured their biggest fall in more than six years amid the worsening global trade climate - and analysts say a recovery in the second half of the year is now looking less likely.
Non-oil domestic exports (Nodx) fell by double-digits for the fourth straight month in June, with shipments in the key electronics sector sinking by around a third.
"The recent set of bad data has dashed any hope of a recovery in the second half. Typically, by the middle of the year, we should see numbers stabilising. But instead, we see further decline. The pace of decline has also accelerated."
The Nodx figures follow a "long string of awful data", Mr Seah added, with no respite in sight.
Nodx slumped 17.3 per cent compared with a year ago, down from a revised 16.3 per cent fall in May, Enterprise Singapore said yesterday. It was the biggest year-on-year drop since February 2013 and sharply below analysts' expectations of a 9.6 per cent fall in a Bloomberg poll.
UOB economist Barnabas Gan said Nodx for the first half of the year has seen its worst performance since the first six months of 2009, during the global financial crisis.
Well-known Gold market expert, Mr Barnabas Gan said: "While headwinds against exports are not isolated to Singapore alone, further contraction in Nodx is likely to be on the cards, given the ongoing trade slowdown seen across Asia."
He added that trade figures from South Korea, Indonesia and China have been lacklustre, and semiconductor sales in the Asia-Pacific are at their weakest since August 2009.
Exports to most of Singapore's top 10 markets fell last month, with shipments to Hong Kong, China and Europe leading the decline.
The US was an exception, and ING economist Prakash Sakpal noted it is likely due to the underlying strength of the US economy.
As World Gold Council reports, Holdings in global gold-backed ETFs and similar products rose sharply in June by 127 tonnes (t) to 2,548t – equivalent to US$5.5bn in inflows – as geopolitical uncertainty increased and central banks signalled a shift to a more accommodative policy over the coming months. This drove rates and the US dollar lower and shifted the momentum in gold as its price moved to a six-year high.
Global assets under management (AUM) in US dollars rose 15% to US$115bn, the largest monthly increase since 2012, as all regions experienced inflows.
Finally, Central banks bought more gold in 2018 than at any time since the early 1970s – and the trend has continued this year said Isabelle Strauss-Kahn, Member of the Advisory Board of the World Gold Council, former Director of Market Operations at the Banque de France and former Lead Financial Officer at the World Bank.
Among major driving factors stand heightened uncertainty about the global economic and geo-political outlook and second, gold’s intrinsic value as a reserve asset, trade tensions are a major unknown, global geo-political risks have not abated and may have a negative impact on economic activity. Idiosyncratic risks are increasing too, such as the rise of populist governments in Latin America and across Europe.
The dollar is the most widely held reserve asset but, according to International Monetary Fund statistics, gold comes third, accounting for 11% of global reserves. Having been net sellers until 2000, central banks have been net buyers ever since. In 2018 alone, central banks bought 651 tonnes of gold, up 74% compared to 2017 and the highest level since 1971. Over the past decade, central banks have purchased more than 4,300 tonnes of gold, taking their total holdings to around 34,000 tonnes today. The trend has continued in 2019, with net purchases reaching 90 tonnes before the end of the first quarter.
Notably too, central bank buying has been geographically diverse. Russia has been the most committed purchaser of gold – acquiring almost 275 tonnes in 2018, the largest amount ever purchased in a single year. China has been consistently adding to its reserves as well, but many other emerging market countries have been accumulating gold over the past year and more, including Hungary, Poland, Egypt, Kazakhstan and India.
These comments and tendency, with remind that Basel III standard has changed bank reserves for gold assets from 50% to 0%, now gold equals to cash in banking capital, supports our long-term view on new global upside trend on gold market. Despite that in short-term perspective we follow some tactic issues, such as economy statistics, Central Banks policy etc. and expect technical retracement, in longer-term view we're still bullish and think that current 200$ rally is just a beginning. Within few years more political risks to come, starting with 2nd D. Trump presidency, which definitely will exacerbated to 2024-2026 years, when term will be over not for the D. Trump, but V. Putin as well. Our view is global financial system stands at the eve of radical reformation, which should trigger unprecedented demand for gold among all countries to pass through this reform. Role of gold probably also will change in IMF SDR conception.
Technical
Monthly
On technical side we do not have a lot of new issues. This always happens when market hits some global target. In our case this is monthly 1450. Now our task is to wait for reaction on this target. As a rule, this is moderate retracement, that could see as trend down on daily chart and could provide a lot of good trading setups.
The one thing that we could add here, on monthly is acceleration to the target, almost the whole way was passed just in one month. As a rule, it means that gold should proceed at least to 1.618 butterfly target when retracement will be over.
Second moment here is standing above YPR1, which means that we're in a new long-term bull trend here
Retracement we discuss on lower time frames, while here we have next two upside targets - 1530$ of 1.618 butterfly extension and 1655 as XOP target of the same major AB=CD pattern.
Thus, our harmonic reverse H&S pattern hits minimal OP target and can't failed any more.
Weekly
Here weekly OP has been hit as well. Market stands at weekly Overbought. This is perfect combination for tactical short trades on lower time frames. Technically market has no reasons to form new tops or W&R as major targets have been completed on all time frames. In fact we have bearish "Kibby trade" by DiNapoli framework. This is analog of Stretch pattern, which is combination of OB/OS + Fib level, Kibby trade is combination of OB/OS + Extension.
Nearest support stands at 1380 area. Also overall situation on Gold market makes difficult to follow idea of strong trend against the dollar on FX market as a result of major events of coming two weeks. It more suggests opposite action, that dollar should rise, which provides hits as on positive GDP data, dovish ECB decision and neutral Fed statement.
Daily
Here we already talked about potential bearish position on Friday. Daily XOP and butterfly target have been reached as well. Right on top we have bearish engulfing pattern, which also shows the feature of as I call it "2-bar grabber". When grabber's feature appears not in single session but in two side-by-side session.
Weekly + daily analysis tells that market could start action to weekly 1380 support, which is K-support here of 1370-1380 levels. The daily OS level stands close. Grabber suggests drop below 1400 area.
As we mentioned previously, it is not needed to hurry up with short entry. Those of you who doesn't trade on intraday chart, could wait for extended bearish pattern here, which has good chances to appear soon, as retracement has monthly background. Most probable is H&S pattern. So you could skip/miss first downside action to 1380 and try to go short around right arm's top around 1425 area again.
Others, who trades more often could try to ride as on slope of the head as on the H&S totally.
Intraday
Daily analysis makes our task relatively simple, as on FX market. We do know our invalidation point - this is the top of daily engulfing pattern. Hence, while market stands below it, we could focus on short entry.
On 4H chart we could take in consideration bearish divergence:
While our major time frame is 1H. Fast acceleration to OP suggests downside continuation to XOP target. Thus, we have to suitable levels to watch for short entry - 1328 and 1432 K-resistance area.
Conclusion
No doubts, gold keeps positive mood, shows great upside impulse and fundamental background for continuation. Our major 1450 target has been hit and nearest few weeks (or may be months) we intend to trade moderate retracement down. Clear setup on gold puts the shadow on bullish perspective of EUR/USD and other currencies, which makes us think about dollar supportive results of coming events - ECB meeting, GDP release and Fed meeting.
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 mostly was driven by the same factors as Forex market, speaking on William's comments in particular. Next week there are also will be common issues - GDP release, ECB rate decision, but also UK PM appointment and two weeks ahead - Fed meeting.
As Reuters reports, on Friday gold has turned to retracement as the dollar firmed and investors took profits after prices briefly surpassed our major $1,450 target to hit a six-year peak on dovish signals from the U.S. Federal Reserve and is still on course for a second week of gains.
“Speculators and traders are taking some profits off the table after the good gains we had in the past two days. Also, there is always a little bit of pressure on gold when the dollar is up,” said Michael Matousek, head trader at U.S. Global Investors.
Prices have risen about 3% in the past two days on increased expectations for a rate hike by the Fed at its month-end meeting.
“With a breakout in gold market, positions have gotten larger and more players are in. So, it can get quite a bit more whippy,” said Tai Wong, head of base and precious metals derivatives trading at BMO.
The dollar was about 0.3% stronger against a basket of currencies, recovering from a sharp fall after top Fed officials on Thursday argued for the need to quickly stimulate the economy, cementing bets that the U.S. central bank will cut rates at its July 30-31 policy meeting.
“Gold is still looking good. The interest rates and dollar environment, uncertainties over the U.S.-China trade war and now the geopolitical situation being the icing on the cake; all of this has created a very supportive environment for gold,” said Mitsubishi analyst Jonathan Butler.
Consumers in leading Asian hubs continued to sell off physical gold this week, with some switching their holdings to silver, after a jump in prices that also attracted interest from investors betting further gains.
“Demand has been muted, with most people selling off gold to take profit,” said Brian Lan, managing director at Singapore dealer GoldSilver Central.
However, with many people looking to rebalance their portfolio “gold is the asset to be in this year”, he added.
“Investment buying has picked up somewhat,” said Samson Li, a Hong Kong-based precious metals analyst with Refinitiv GFMS, adding that prices would have to hold near cureent levels for longer to trigger more interest.
“For the past few weeks, demand has been very weak. Jewellers have enough stocks and they don’t want to buy at record levels,” said Chanda Venkatesh, managing director of CapsGold, a bullion merchant in the southern city of Hyderabad.
“Price rises in the world market and a duty hike by the government is prompting a few people to book profits,” said one Mumbai-based dealer with a private bullion-importing bank. “They’re selling old stocks instead of buying.”
Among other driving factors, that is more strategical and longer term, we could name crucial slow down of Singapore export and rising demand from Central Banks.
Thus, on first issue, Singapore exports endured their biggest fall in more than six years amid the worsening global trade climate - and analysts say a recovery in the second half of the year is now looking less likely.
Non-oil domestic exports (Nodx) fell by double-digits for the fourth straight month in June, with shipments in the key electronics sector sinking by around a third.
"The recent set of bad data has dashed any hope of a recovery in the second half. Typically, by the middle of the year, we should see numbers stabilising. But instead, we see further decline. The pace of decline has also accelerated."
The Nodx figures follow a "long string of awful data", Mr Seah added, with no respite in sight.
Nodx slumped 17.3 per cent compared with a year ago, down from a revised 16.3 per cent fall in May, Enterprise Singapore said yesterday. It was the biggest year-on-year drop since February 2013 and sharply below analysts' expectations of a 9.6 per cent fall in a Bloomberg poll.
UOB economist Barnabas Gan said Nodx for the first half of the year has seen its worst performance since the first six months of 2009, during the global financial crisis.
Well-known Gold market expert, Mr Barnabas Gan said: "While headwinds against exports are not isolated to Singapore alone, further contraction in Nodx is likely to be on the cards, given the ongoing trade slowdown seen across Asia."
He added that trade figures from South Korea, Indonesia and China have been lacklustre, and semiconductor sales in the Asia-Pacific are at their weakest since August 2009.
Exports to most of Singapore's top 10 markets fell last month, with shipments to Hong Kong, China and Europe leading the decline.
The US was an exception, and ING economist Prakash Sakpal noted it is likely due to the underlying strength of the US economy.
As World Gold Council reports, Holdings in global gold-backed ETFs and similar products rose sharply in June by 127 tonnes (t) to 2,548t – equivalent to US$5.5bn in inflows – as geopolitical uncertainty increased and central banks signalled a shift to a more accommodative policy over the coming months. This drove rates and the US dollar lower and shifted the momentum in gold as its price moved to a six-year high.
Global assets under management (AUM) in US dollars rose 15% to US$115bn, the largest monthly increase since 2012, as all regions experienced inflows.
Finally, Central banks bought more gold in 2018 than at any time since the early 1970s – and the trend has continued this year said Isabelle Strauss-Kahn, Member of the Advisory Board of the World Gold Council, former Director of Market Operations at the Banque de France and former Lead Financial Officer at the World Bank.
Among major driving factors stand heightened uncertainty about the global economic and geo-political outlook and second, gold’s intrinsic value as a reserve asset, trade tensions are a major unknown, global geo-political risks have not abated and may have a negative impact on economic activity. Idiosyncratic risks are increasing too, such as the rise of populist governments in Latin America and across Europe.
The dollar is the most widely held reserve asset but, according to International Monetary Fund statistics, gold comes third, accounting for 11% of global reserves. Having been net sellers until 2000, central banks have been net buyers ever since. In 2018 alone, central banks bought 651 tonnes of gold, up 74% compared to 2017 and the highest level since 1971. Over the past decade, central banks have purchased more than 4,300 tonnes of gold, taking their total holdings to around 34,000 tonnes today. The trend has continued in 2019, with net purchases reaching 90 tonnes before the end of the first quarter.
Notably too, central bank buying has been geographically diverse. Russia has been the most committed purchaser of gold – acquiring almost 275 tonnes in 2018, the largest amount ever purchased in a single year. China has been consistently adding to its reserves as well, but many other emerging market countries have been accumulating gold over the past year and more, including Hungary, Poland, Egypt, Kazakhstan and India.
These comments and tendency, with remind that Basel III standard has changed bank reserves for gold assets from 50% to 0%, now gold equals to cash in banking capital, supports our long-term view on new global upside trend on gold market. Despite that in short-term perspective we follow some tactic issues, such as economy statistics, Central Banks policy etc. and expect technical retracement, in longer-term view we're still bullish and think that current 200$ rally is just a beginning. Within few years more political risks to come, starting with 2nd D. Trump presidency, which definitely will exacerbated to 2024-2026 years, when term will be over not for the D. Trump, but V. Putin as well. Our view is global financial system stands at the eve of radical reformation, which should trigger unprecedented demand for gold among all countries to pass through this reform. Role of gold probably also will change in IMF SDR conception.
Technical
Monthly
On technical side we do not have a lot of new issues. This always happens when market hits some global target. In our case this is monthly 1450. Now our task is to wait for reaction on this target. As a rule, this is moderate retracement, that could see as trend down on daily chart and could provide a lot of good trading setups.
The one thing that we could add here, on monthly is acceleration to the target, almost the whole way was passed just in one month. As a rule, it means that gold should proceed at least to 1.618 butterfly target when retracement will be over.
Second moment here is standing above YPR1, which means that we're in a new long-term bull trend here
Retracement we discuss on lower time frames, while here we have next two upside targets - 1530$ of 1.618 butterfly extension and 1655 as XOP target of the same major AB=CD pattern.
Thus, our harmonic reverse H&S pattern hits minimal OP target and can't failed any more.
Weekly
Here weekly OP has been hit as well. Market stands at weekly Overbought. This is perfect combination for tactical short trades on lower time frames. Technically market has no reasons to form new tops or W&R as major targets have been completed on all time frames. In fact we have bearish "Kibby trade" by DiNapoli framework. This is analog of Stretch pattern, which is combination of OB/OS + Fib level, Kibby trade is combination of OB/OS + Extension.
Nearest support stands at 1380 area. Also overall situation on Gold market makes difficult to follow idea of strong trend against the dollar on FX market as a result of major events of coming two weeks. It more suggests opposite action, that dollar should rise, which provides hits as on positive GDP data, dovish ECB decision and neutral Fed statement.
Daily
Here we already talked about potential bearish position on Friday. Daily XOP and butterfly target have been reached as well. Right on top we have bearish engulfing pattern, which also shows the feature of as I call it "2-bar grabber". When grabber's feature appears not in single session but in two side-by-side session.
Weekly + daily analysis tells that market could start action to weekly 1380 support, which is K-support here of 1370-1380 levels. The daily OS level stands close. Grabber suggests drop below 1400 area.
As we mentioned previously, it is not needed to hurry up with short entry. Those of you who doesn't trade on intraday chart, could wait for extended bearish pattern here, which has good chances to appear soon, as retracement has monthly background. Most probable is H&S pattern. So you could skip/miss first downside action to 1380 and try to go short around right arm's top around 1425 area again.
Others, who trades more often could try to ride as on slope of the head as on the H&S totally.
Intraday
Daily analysis makes our task relatively simple, as on FX market. We do know our invalidation point - this is the top of daily engulfing pattern. Hence, while market stands below it, we could focus on short entry.
On 4H chart we could take in consideration bearish divergence:
While our major time frame is 1H. Fast acceleration to OP suggests downside continuation to XOP target. Thus, we have to suitable levels to watch for short entry - 1328 and 1432 K-resistance area.
Conclusion
No doubts, gold keeps positive mood, shows great upside impulse and fundamental background for continuation. Our major 1450 target has been hit and nearest few weeks (or may be months) we intend to trade moderate retracement down. Clear setup on gold puts the shadow on bullish perspective of EUR/USD and other currencies, which makes us think about dollar supportive results of coming events - ECB meeting, GDP release and Fed meeting.
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.