Gold GOLD PRO WEEKLY, June 08 - 12, 2020

Sive Morten

Special Consultant to the FPA
Messages
13,800
Fundamentals

The major driving factors of gold market were in the shadow of big economical events, such as ECB decision and NFP release. These factors have triggered sell-off on the gold market, making it to show deeper retracement. Eyes of investors mostly were focused on stock market and economy factors. In addition to drop of interest to political events, coming Fed meeting could hurt gold even stronger. Now markets start talking on possible Fed measures to chill the stock market and economy overheat. US interest rates already show hint by increasing the yield. This might be negative to gold market in near term.

Speaking on political tensions, it seems that they are eased, or, at least turn to some stagnation phase so that investors loose interest to them.

“There is continuation of optimism in regards to the reopening of the economy, shown in the ongoing rally in equities... Under that premise, it’s easy to understand gold could be slightly vulnerable,” said David Meger, director of metals trading at High Ridge Futures.


U.S. equities rose as optimism around reopening businesses overshadowed fears of Sino-U.S. trade tensions and protests in the country. However, gold’s overall trajectory is positive, analysts said, with the metal having gained over 18% after touching a near four-month low of $1,450.98 in March, mostly benefiting from economic uncertainties fuelled by the pandemic and a flurry of stimulus from global central banks.

On the U.S.-China front, two sources told Reuters China told state-owned firms to halt large-scale U.S. soybean and pork purchases, with one of them saying state purchases of U.S. corn and cotton have also been put on hold.

“If you see emotions heating up between U.S. and China over Hong Kong - that’s going to change the trade dynamic with Hong Kong. More people will gravitate towards gold,” said Michael Matousek, head trader at U.S. Global Investors.

Have HSBC and Standard Chartered “chosen profits over human rights” in backing China’s national security law for Hong Kong, as some suggest? Or does it reflect the tightrope businesses must navigate between Hong Kong’s protesters and Beijing? U.S. special treatment for Hong Kong is now in doubt as is the city’s role as a finance hub. Its position as a major goods trading centre will be threatened if wares become subject to the higher import tariffs paid in mainland China or if U.S. imports no longer enjoy zero rates. One silver lining may be more IPOs by Chinese firms ditching their New York listings or mainland newcomers debuting in Hong Kong rather than on Nasdaq. But as Beijing tightens its grip, an American Chamber of Commerce survey showed 30% of respondents were considering moving capital, assets or business operations. Heed Western warnings or stick with Beijing? It’s a choice more companies will have to make.

1591513800181.png



Reducing the appeal of gold, global shares vaulted to a near three-month high amid signs of a recovery in business activity as governments restart their economies
Governments and central banks around the globe have unleashed unprecedented fiscal and monetary stimulus for their economies floored by the coronavirus pandemic.

“Nevertheless, the weak economic backdrop continues to provide some support, with investors continuing to pile into gold-backed ETFs,” ANZ analysts wrote in a note.
There is not much pressure on gold to fall below the $1,700 level, Innes said, adding that investors would continue to buy it on dips amid low interest rates and prevailing uncertainties.


Gold prices dipped more than 2% on Friday as hopes for a global economic rebound got a boost from stronger-than-expected U.S. non-farm payrolls data, reducing demand for safe havens. Bullion has declined about 2.6% so far this week, on track for its biggest fall since the week ending March 13.

“We had significantly stronger-than-expected U.S. payroll numbers - an increase of 2.5 million versus an expectation of a decline of 7.5 million - that 10-million swing has brought forward expectations of the economic recovery in the United States,” said Bart Melek, head of commodity strategies at TD Securities.

Gold was also being pressured by stronger yields and a slightly firmer dollar, “meaning the opportunity cost to hold gold in the portfolio has gone up,” Melek added.
Wall Street surged following a crash into bear territory as the latest U.S. data showed a drastic fall in unemployment to 13.3% in May from 14.7% in April as layoffs abated. The data comes ahead of a two-day policy meeting of the U.S. Federal Reserve next week. The central bank has injected massive stimulus and cut interest rates to near zero to cushion the blow from the coronavirus pandemic.

However, “we’ve still got economic uncertainty, trade tensions, problems in the (United) States,” said INTL FCStone analyst Rhona O’Connell. “For the longer term, the influences are definitely more positive (for gold) than negative.”

CFTC data

Result of coming economical factors on first stage is decline long positions in gold. Not only by speculators but by hedgers as well. Take a look at the table - open interest has dropped. It means that gold stands in retracement as net long position is decreased due closing of the longs but not opening of new shorts. Still, sell-off was solid. Even hedgers have closed 34K short contracts, decreasing protection from gold's rally, suggesting that no fast upward action should happen soon. As a result, net position shows contrast to price action as they diverge from each other.


1591514265111.png


1591514386852.png

Source: cftc.gov
Charting by Investing.com


SPDR Fund doesn't show yet any drop in reserves, which is good sign, confirming idea of retracement. Otherwise, drop would be fast and strong.
1591514494105.png

Source: SPDR fund, FPA calculations

So, the drop of interest to politics means that next week in focus will be the Fed meeting. The U.S. Fed might be watching the steepening Treasury yield curve with trepidation. The steepening — when longer-dated yields rise faster than short-tenor ones — signals a brighter growth outlook. But too fast a rise in borrowing costs can strangle economic recovery.

After the June 9-10 FOMC meeting, investors will listen for the Fed’s views on the economic outlook; an upbeat tone could further feed the stocks rally and trigger Treasury selling.

Expectations that the global economy has dodged the worst-case coronavirus pandemic scenarios have led to a dramatic sell-off in U.S. government bonds from their record highs, pushing the yield curve to its steepest level since March. Investors will get a chance next week to see whether the U.S. Federal Reserve agrees with their optimism. The U.S. central bank’s two-day meeting, ending on Wednesday, will be the first since April when Fed Chair Jerome Powell said the U.S. economy could feel the weight of the economic shutdown for more than a year. The meeting will follow a surprise gain in the Labor Department’s closely watched jobs report on Friday that pushed benchmark 10-year Treasury yields to the highest since early March.

“The sell-off in the bond market in the last few weeks seems to be justified,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale.

While the Fed could introduce additional bond-buying programs known as quantitative easing or yield-curve control measures to target short-term rates, fund managers say they expect yields will need to rise significantly to justify any intervention in the bulk of the curve. Instead, they are watching for hints that the central bank believes the worst part of the coronavirus crisis has passed.

“They are really in this transition phase,” said Eric Stein, co-director of global income and portfolio manager at Eaton Vance. “Markets are functioning, if not all the way back to pre-shock levels, with very strong debt issuance and market improvement, even though the real economy is incredibly weak.”

As a result, Stein is looking for signs that the Fed believes the economic rebound can support the rise in yields.

“The Fed will be OK with a slow creep higher, particularly with a backdrop of a recovery, but if it moves too much and destabilizes the recovery, there’s a reason for concern,” he said.

Ed Al-Hussainy, senior interest rate analyst at Columbia Threadneedle, expects the Fed to focus on its newly announced Main Street Lending Program to support small- and medium-sized businesses facing financial strain from the pandemic, rather than introducing significant new stimulus measures.

“The Fed is likely to communicate that there is more scope for fiscal measures but that is a very uncomfortable spot to be in,” he said. “We won’t have a clear sense of direction of the economy until well into the fourth quarter because all the sequential data now is massively positive.”

The manufacturing ISM index rose to 43.1 in May from 41.5 in April, while weekly jobless claims fell to 1.877 million from 2.126 million the week before.

“Recent economic reports in the U.S. have been uniformly weak, though not any worse than expected,” said Kevin Cummins,senior U.S. economist at NatWest Markets.

Eddy Vataru, lead portfolio manager at Osterweis Capital Management, said the larger risk for the Fed is that rates remain too low, making it unlikely that there will be a significant push for yield curve-control measures.

“We can now discredit the worst outcomes of the virus. The sentiment around the risks around the virus have really changed,” he said, pointing to declining infection and fatality rates in coronavirus hot spots such as the New York City region.

As a result, he is moving into corporate debt and mortgage-backed securities and shying away from Treasuries, which he said have “no investment value” at their current yields.

“At the end of the day, we have a ton of stimulus, both fiscal and monetary, and the markets have reacted to it,” he said.

Still, current Fed watch tool by CME shows that we should not overestimate the pace of possible rates recovery. It is just 10% change in probability in favor of rate hike. This balance of 90/10 holds for all future interest rates till 2021.

1591514988752.png


That's being said, fundamental and sentiment background is bearish for gold market in short-term. It doesn't mean that long-term bullish trend doesn't exist anymore. It just means that gold has to accumulate more power for breakthrough. Now it just has no sufficient resources to break to new top. Euphoria on stock market, and no progress in tensions of different kind decrease effect of supportive factors for gold. Even minor hawkish hint from the Fed on coming week could make bomb effect on gold, triggering significant sell-off that already has started.
Political news are taking backseat especially when they stagnate. Now we see no progress in questions of US trade tariffs and sanctions imposed on 5G companies, Britain's call on "Boycott China!" , support US position in HK question also make no significant effect. All these factors have to show negative progress to make feasible impact on gold market. As we do not see it, next week we should be ready for downside continuation.



Technicals
Monthly


Technical picture mostly reflects the change in sentiment. On monthly chart price was not able to go up further, retreat and dropped below the top of the doji pattern.
This happens third time since doji has been formed, showing inability to proceed upside trend immediately. It seems that gold needs some relief. Doji pattern is rather large and gold could drop to any level inside its range as it was not able to continue upward action.

The bottom of the doji is strong support area of YPP and K-area, accompanied by monthly oversold. But, I hope that it it won't run to that. More probable is reaching of some strong support areas inside the doji range.

Trend here still stands bullish. Upside targets stand the same - with overbought level around 1800 and no Fib levels above next logical destination is top of 2012 around 1800 area and then 1920 top.

gold_m_08_06_20.png


Weekly

Trend has turned bearish on weekly chart. Here we should focus on 1645 - 1660 area - combination of Fib level and weekly oversold that potentially gives us bullish "Stretch" pattern. It means that first bounce up should happen right from here, but it is still unclear whether this will be upward continuation or just pullback before deeper retracement:

gold_w_08_06_20.png


Daily

On daily chart trend stands bearish as well. It means that on pullback we could consider short entry, as we did last week, when situation starts to change. Daily charts shows that 1645 area is even stronger than it is shown on weekly chart. 1630-1645 is K-area and Agreement with XOP target, accompanied by daily Oversold level. This combination makes almost riskless long entry around it. So, this is the major area that daily traders should focus on. Meantime price stands around first support of 1687:

gold_d_08_06_20.png


Intraday

Our AB-CD target accurately has been hit on Friday. The shape of the pattern suggests downside continuation after pullback, because CD leg shows acceleration and looks faster than AB. In most cases it promises action to next area, which is XOP. On coming week first we focus on upside pullback. It seems it should be inside of CD leg to some Fib levels, but ultimately it could reach 1730 or even 1740 area, if H&S pattern is forming. Once pullback will be over it will be possible to consider taking of short positions on intraday charts with 1645 area target.

gold_4h_08_06_20.png


At first glance, we should focus on 1700 area initially. Now we can't say yet how upside action will develop because it even has not started. But gold keeps harmonic swing accurately in recent few sessions, and it points on K-resistance, agrees with former lows as well.

If market climbs to 1716 it might be the sign that reverse H&S could be formed, with potential target around 1740 area, as we've said on 4H chart. This is our reserved scenario. Thus these two setups will be in focus next week:
gold_1h_08_06_20.png


Conclusion:

Within few previous weeks we talked that daily traders have nothing to do by far as gold stands near resistance and completed all targets. Healthy pullback is needed to awake interest to long positions again. It seems that on background of changes in fundamental factors gold finally is turning to retracement. Today we've made just approximate analysis that shows us possible scenarios how retracement could develop. But even now we have 2-3 trading setups for coming week.

Major fundamental event will be FOMC meeting next week. We're mostly interesting in Fed's view on combination of huge liquidity injections and low interest rates, whether any changes will happen here. Any minor hint on possible rate change will be bearish to gold market.
 

JOELIBOK

Private, 1st Class
Messages
27
Fundamentals

The major driving factors of gold market were in the shadow of big economical events, such as ECB decision and NFP release. These factors have triggered sell-off on the gold market, making it to show deeper retracement. Eyes of investors mostly were focused on stock market and economy factors. In addition to drop of interest to political events, coming Fed meeting could hurt gold even stronger. Now markets start talking on possible Fed measures to chill the stock market and economy overheat. US interest rates already show hint by increasing the yield. This might be negative to gold market in near term.

Speaking on political tensions, it seems that they are eased, or, at least turn to some stagnation phase so that investors loose interest to them.

“There is continuation of optimism in regards to the reopening of the economy, shown in the ongoing rally in equities... Under that premise, it’s easy to understand gold could be slightly vulnerable,” said David Meger, director of metals trading at High Ridge Futures.


U.S. equities rose as optimism around reopening businesses overshadowed fears of Sino-U.S. trade tensions and protests in the country. However, gold’s overall trajectory is positive, analysts said, with the metal having gained over 18% after touching a near four-month low of $1,450.98 in March, mostly benefiting from economic uncertainties fuelled by the pandemic and a flurry of stimulus from global central banks.

On the U.S.-China front, two sources told Reuters China told state-owned firms to halt large-scale U.S. soybean and pork purchases, with one of them saying state purchases of U.S. corn and cotton have also been put on hold.

“If you see emotions heating up between U.S. and China over Hong Kong - that’s going to change the trade dynamic with Hong Kong. More people will gravitate towards gold,” said Michael Matousek, head trader at U.S. Global Investors.

Have HSBC and Standard Chartered “chosen profits over human rights” in backing China’s national security law for Hong Kong, as some suggest? Or does it reflect the tightrope businesses must navigate between Hong Kong’s protesters and Beijing? U.S. special treatment for Hong Kong is now in doubt as is the city’s role as a finance hub. Its position as a major goods trading centre will be threatened if wares become subject to the higher import tariffs paid in mainland China or if U.S. imports no longer enjoy zero rates. One silver lining may be more IPOs by Chinese firms ditching their New York listings or mainland newcomers debuting in Hong Kong rather than on Nasdaq. But as Beijing tightens its grip, an American Chamber of Commerce survey showed 30% of respondents were considering moving capital, assets or business operations. Heed Western warnings or stick with Beijing? It’s a choice more companies will have to make.

View attachment 54336


Reducing the appeal of gold, global shares vaulted to a near three-month high amid signs of a recovery in business activity as governments restart their economies
Governments and central banks around the globe have unleashed unprecedented fiscal and monetary stimulus for their economies floored by the coronavirus pandemic.

“Nevertheless, the weak economic backdrop continues to provide some support, with investors continuing to pile into gold-backed ETFs,” ANZ analysts wrote in a note.
There is not much pressure on gold to fall below the $1,700 level, Innes said, adding that investors would continue to buy it on dips amid low interest rates and prevailing uncertainties.


Gold prices dipped more than 2% on Friday as hopes for a global economic rebound got a boost from stronger-than-expected U.S. non-farm payrolls data, reducing demand for safe havens. Bullion has declined about 2.6% so far this week, on track for its biggest fall since the week ending March 13.

“We had significantly stronger-than-expected U.S. payroll numbers - an increase of 2.5 million versus an expectation of a decline of 7.5 million - that 10-million swing has brought forward expectations of the economic recovery in the United States,” said Bart Melek, head of commodity strategies at TD Securities.

Gold was also being pressured by stronger yields and a slightly firmer dollar, “meaning the opportunity cost to hold gold in the portfolio has gone up,” Melek added.
Wall Street surged following a crash into bear territory as the latest U.S. data showed a drastic fall in unemployment to 13.3% in May from 14.7% in April as layoffs abated. The data comes ahead of a two-day policy meeting of the U.S. Federal Reserve next week. The central bank has injected massive stimulus and cut interest rates to near zero to cushion the blow from the coronavirus pandemic.

However, “we’ve still got economic uncertainty, trade tensions, problems in the (United) States,” said INTL FCStone analyst Rhona O’Connell. “For the longer term, the influences are definitely more positive (for gold) than negative.”

CFTC data

Result of coming economical factors on first stage is decline long positions in gold. Not only by speculators but by hedgers as well. Take a look at the table - open interest has dropped. It means that gold stands in retracement as net long position is decreased due closing of the longs but not opening of new shorts. Still, sell-off was solid. Even hedgers have closed 34K short contracts, decreasing protection from gold's rally, suggesting that no fast upward action should happen soon. As a result, net position shows contrast to price action as they diverge from each other.


View attachment 54337

View attachment 54338
Source: cftc.gov
Charting by Investing.com


SPDR Fund doesn't show yet any drop in reserves, which is good sign, confirming idea of retracement. Otherwise, drop would be fast and strong.
View attachment 54339
Source: SPDR fund, FPA calculations

So, the drop of interest to politics means that next week in focus will be the Fed meeting. The U.S. Fed might be watching the steepening Treasury yield curve with trepidation. The steepening — when longer-dated yields rise faster than short-tenor ones — signals a brighter growth outlook. But too fast a rise in borrowing costs can strangle economic recovery.

After the June 9-10 FOMC meeting, investors will listen for the Fed’s views on the economic outlook; an upbeat tone could further feed the stocks rally and trigger Treasury selling.

Expectations that the global economy has dodged the worst-case coronavirus pandemic scenarios have led to a dramatic sell-off in U.S. government bonds from their record highs, pushing the yield curve to its steepest level since March. Investors will get a chance next week to see whether the U.S. Federal Reserve agrees with their optimism. The U.S. central bank’s two-day meeting, ending on Wednesday, will be the first since April when Fed Chair Jerome Powell said the U.S. economy could feel the weight of the economic shutdown for more than a year. The meeting will follow a surprise gain in the Labor Department’s closely watched jobs report on Friday that pushed benchmark 10-year Treasury yields to the highest since early March.

“The sell-off in the bond market in the last few weeks seems to be justified,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale.

While the Fed could introduce additional bond-buying programs known as quantitative easing or yield-curve control measures to target short-term rates, fund managers say they expect yields will need to rise significantly to justify any intervention in the bulk of the curve. Instead, they are watching for hints that the central bank believes the worst part of the coronavirus crisis has passed.

“They are really in this transition phase,” said Eric Stein, co-director of global income and portfolio manager at Eaton Vance. “Markets are functioning, if not all the way back to pre-shock levels, with very strong debt issuance and market improvement, even though the real economy is incredibly weak.”

As a result, Stein is looking for signs that the Fed believes the economic rebound can support the rise in yields.

“The Fed will be OK with a slow creep higher, particularly with a backdrop of a recovery, but if it moves too much and destabilizes the recovery, there’s a reason for concern,” he said.

Ed Al-Hussainy, senior interest rate analyst at Columbia Threadneedle, expects the Fed to focus on its newly announced Main Street Lending Program to support small- and medium-sized businesses facing financial strain from the pandemic, rather than introducing significant new stimulus measures.

“The Fed is likely to communicate that there is more scope for fiscal measures but that is a very uncomfortable spot to be in,” he said. “We won’t have a clear sense of direction of the economy until well into the fourth quarter because all the sequential data now is massively positive.”

The manufacturing ISM index rose to 43.1 in May from 41.5 in April, while weekly jobless claims fell to 1.877 million from 2.126 million the week before.

“Recent economic reports in the U.S. have been uniformly weak, though not any worse than expected,” said Kevin Cummins,senior U.S. economist at NatWest Markets.

Eddy Vataru, lead portfolio manager at Osterweis Capital Management, said the larger risk for the Fed is that rates remain too low, making it unlikely that there will be a significant push for yield curve-control measures.

“We can now discredit the worst outcomes of the virus. The sentiment around the risks around the virus have really changed,” he said, pointing to declining infection and fatality rates in coronavirus hot spots such as the New York City region.

As a result, he is moving into corporate debt and mortgage-backed securities and shying away from Treasuries, which he said have “no investment value” at their current yields.

“At the end of the day, we have a ton of stimulus, both fiscal and monetary, and the markets have reacted to it,” he said.

Still, current Fed watch tool by CME shows that we should not overestimate the pace of possible rates recovery. It is just 10% change in probability in favor of rate hike. This balance of 90/10 holds for all future interest rates till 2021.

View attachment 54340

That's being said, fundamental and sentiment background is bearish for gold market in short-term. It doesn't mean that long-term bullish trend doesn't exist anymore. It just means that gold has to accumulate more power for breakthrough. Now it just has no sufficient resources to break to new top. Euphoria on stock market, and no progress in tensions of different kind decrease effect of supportive factors for gold. Even minor hawkish hint from the Fed on coming week could make bomb effect on gold, triggering significant sell-off that already has started.
Political news are taking backseat especially when they stagnate. Now we see no progress in questions of US trade tariffs and sanctions imposed on 5G companies, Britain's call on "Boycott China!" , support US position in HK question also make no significant effect. All these factors have to show negative progress to make feasible impact on gold market. As we do not see it, next week we should be ready for downside continuation.



Technicals
Monthly


Technical picture mostly reflects the change in sentiment. On monthly chart price was not able to go up further, retreat and dropped below the top of the doji pattern.
This happens third time since doji has been formed, showing inability to proceed upside trend immediately. It seems that gold needs some relief. Doji pattern is rather large and gold could drop to any level inside its range as it was not able to continue upward action.

The bottom of the doji is strong support area of YPP and K-area, accompanied by monthly oversold. But, I hope that it it won't run to that. More probable is reaching of some strong support areas inside the doji range.

Trend here still stands bullish. Upside targets stand the same - with overbought level around 1800 and no Fib levels above next logical destination is top of 2012 around 1800 area and then 1920 top.

View attachment 54341

Weekly

Trend has turned bearish on weekly chart. Here we should focus on 1645 - 1660 area - combination of Fib level and weekly oversold that potentially gives us bullish "Stretch" pattern. It means that first bounce up should happen right from here, but it is still unclear whether this will be upward continuation or just pullback before deeper retracement:

View attachment 54342

Daily

On daily chart trend stands bearish as well. It means that on pullback we could consider short entry, as we did last week, when situation starts to change. Daily charts shows that 1645 area is even stronger than it is shown on weekly chart. 1630-1645 is K-area and Agreement with XOP target, accompanied by daily Oversold level. This combination makes almost riskless long entry around it. So, this is the major area that daily traders should focus on. Meantime price stands around first support of 1687:

View attachment 54343

Intraday

Our AB-CD target accurately has been hit on Friday. The shape of the pattern suggests downside continuation after pullback, because CD leg shows acceleration and looks faster than AB. In most cases it promises action to next area, which is XOP. On coming week first we focus on upside pullback. It seems it should be inside of CD leg to some Fib levels, but ultimately it could reach 1730 or even 1740 area, if H&S pattern is forming. Once pullback will be over it will be possible to consider taking of short positions on intraday charts with 1645 area target.

View attachment 54344

At first glance, we should focus on 1700 area initially. Now we can't say yet how upside action will develop because it even has not started. But gold keeps harmonic swing accurately in recent few sessions, and it points on K-resistance, agrees with former lows as well.

If market climbs to 1716 it might be the sign that reverse H&S could be formed, with potential target around 1740 area, as we've said on 4H chart. This is our reserved scenario. Thus these two setups will be in focus next week:
View attachment 54345

Conclusion:

Within few previous weeks we talked that daily traders have nothing to do by far as gold stands near resistance and completed all targets. Healthy pullback is needed to awake interest to long positions again. It seems that on background of changes in fundamental factors gold finally is turning to retracement. Today we've made just approximate analysis that shows us possible scenarios how retracement could develop. But even now we have 2-3 trading setups for coming week.

Major fundamental event will be FOMC meeting next week. We're mostly interesting in Fed's view on combination of huge liquidity injections and low interest rates, whether any changes will happen here. Any minor hint on possible rate change will be bearish to gold market.
Thank you Sir Sive,For your explicitly analysis as always .
 

Sive Morten

Special Consultant to the FPA
Messages
13,800
Good morning everybody,

On Gold market we follow our trading plan that suggest taking of short position, using pullback that we have now. On daily chart we see logical reaction on 1687 Agreement area, but this reaction has reached its minimal level. And now major concern is whether gold starts deeper pullback to 1730 area or not. Other words speaking - whether we will get H&S pattern or downside action starts now.

gold_d_09_06_20.png


On 4H chart we can see that price hits first level that we've discussed. It completes harmonic swing, and re-tests broken trend line. If price moves up further - we first should get action to 1716 area and potential reverse H&S pattern, leading price to 1730-1740, where the top of right arm of daily H&S pattern should be formed. All these things we discussed on weekly report. Alternatively, price could start dropping immediately. In this case we start watching for 1645 target:
gold_4h_09_06_20.png


On 1H chart you can see that harmonic swing target coincides with XOP and K-resistance. This combination provides very good point for short entry. It doesn't guarantee the success, but it provides minimal potential risk as stop should be slightly above recent top. This is the choice that traders should make - either try to go short here, or wait for daily H&S and deeper upside action.
gold_1h_09_06_20.png
 

Sive Morten

Special Consultant to the FPA
Messages
13,800
Greetings everybody,

So, gold has turned to our secondary scenario, showing stronger upward retracement. Let's call it as retracement by far as daily trend still stands bearish. It means that the shape of price action is changing.
gold_d_10_06_20.png


As market has doubled upside harmonic swing, we deny idea of immediate drop to 1645 target and turn instead to wide H&S pattern here. The major point - market has to form right arm of the pattern and its top around 1740 area. How market will go there, is not as important, but it might be crucial for those who makes scalp trades here. Now price stands near major 1729 resistance and this lets us to suggest reverse H&S pattern shape on 1H chart.
gold_4h_10_06_20.png


Here is we have steep AB-CD with OP that agrees with major resistance level. This also could become the neckline of the pattern. If we're correct - pullback should happen and right bottom to be formed. And, final stage is moving to the target around 1740, that completes pattern on 1H and completes right arm of wide 4H pattern:
gold_1h_10_06_20.png


Potentially we could get a lot trading setups here - scalp "Short" from 1727-1729, scalp "Buy" from ~1700 and then short from 1740. But this happens only if we are absolutely correct on the shape price, which hardly possible. So we will update analysis in daily videos. But if even some of these setups will be formed, this would be nice.
 

Sive Morten

Special Consultant to the FPA
Messages
13,800
Greetings everybody,

So, gold keeps our 2nd scenario with higher target. Fed statement was mostly gold supportive as JP said no interest rate hike in foreseeable future. Now price stands at vital level, where it either has to turn down or no retracement will happen and price turns to new highs.
gold_d_11_06_20.png


On 4H chart we're watching for wide H&S pattern. And market almost has reached an area of shoulders' top. Moving above 1750 will tell us that we should forget about retracement and be prepared for upward continuation and new highs on the market.
gold_4h_11_06_20.png


On 1H chart you can see what reaction was on our OP target - pullback was very short-term, and our reversed H&S pattern is strongly skewed as left shoulder looks very small. Then you could see reaction on Fed statement, it is fast and strong. Now price goes to XOP at 1747. This is the end. Do nothing today and keep watching. Reversal from XOP will keep chances for deep retracement and bearish scenario in general, while if price moves above it - be prepared for break of sentiment and upside continuation:
gold_1h_11_06_20.png
 

Sive Morten

Special Consultant to the FPA
Messages
13,800
Greetings everybody,

Yesterday we've shared with our worries on too active upside action. It puts under the question daily retracement, as price is coming back to the top. Theoretical chances still hold but hope on pullback is becoming more blur day by day. Markets probably are scared by J. Powell long recovery term and 6.5% drop in GDP this year. That provides additional support to gold market. Trend on daily chart turns bullish and price stands at the eve of upside breakout:
gold_d_12_06_20.png


Let's take a look fist at 1H chart. Here is our XOP mostly hit. Theoretically this is potential point to go short for the bears, based on H&S pattern that we have on 4H chart, and the stop could be placed very close:
gold_1h_12_06_20.png


But not everything as perfect as it seems. Indeed, on 4H chart we see that price hits our predefined 1740-1745 area, matching to the tops of right arms. But this pattern has few serious flaws. First is - AB-CD action on the right slope of the head. Overall shape of H&S is not perfect and, what is more important - here we could recognize reverse H&S or, some call it cup&handle shape, that potentially is bullish and suggests upside breakout. It means that currently pullback to 1700 could happen and if market will not go lower - this will the sign of reversal. Thus, think twice before selling gold right now. This weak setup doesn't encourage me to step in.

gold_4h_12_06_20.png
 
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