Sive Morten
Special Consultant to the FPA
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- 18,635
Fundamentals
Gold market right now mostly stands indecision as we do not have any progress in major driving factors - US interest rates, geopolitical sphere and tariffs war. Summer is traditionally not best time for gold as market stands in bearish seasonal trend that usually ends at the end of August.
Recent drop on gold market that lasts for two months already mostly was triggered by active growth of US interest rates. After testing of 3% level it takes some pause. Still, major target of 3.36% stands ahead.
Despite that rate hike in June and mostly in December already is priced-in, it still suggest higher levels of rates and this prevents gold upside action. Tariffs war also brings little support to gold market as it is unclear yet how it will impact global market and trade relations between major partners, as situation and information changes too fast and too often. It is still unclear what tariffs will be initiated, whether they will be initiated at all, on what term, in what countries etc.
Taking in consideration fund statistics, we mostly see negative performance. As Reuters reports Bank of America Merrill Lynch (BAML) said on Friday that bank’s data, which tracks fund flows from Wednesday to Wednesday, showed that investors withdrew $500 million from precious metals but put $900 million to work in equities.
SPDR statistics also shows negative dynamic. While gold price somehow still holds in tight range - physical reserves drops 7 weeks in a row and relatively fast...
Investors mostly have no clear view on gold perspective in near term. "Gold is up today, but not doing much. The G7 talks are a bit disconcerting with tariffs. We have the Fed meeting coming on Wednesday keeping a lid on gold," said Patrick Magilligan, director of metals marketing for Key Metal Refining. "The June 12 meeting with (North) Korea, probably underneath the gold price, keeping it buoyant," he added.
Technically, it is interesting that gold stands in tightest range over 10 years. It has hardly budged since last Friday's close, with the spread between its highs and lows at just $13.70 an ounce - the narrowest of any week since August 2007. Usually very strong directional move could follow after so small range, especially when some important events will happen next week.
COT data looks a bit more positive. It shows shy open interest increasing, as well as net long position. It means that some new long positions were opened.
So, may be on coming week situation will become a bit more clear, but right now we have mostly neutral fundamental background for a gold. Although major factors mostly stand bearish, they are known well enough and mostly are priced-in already.
Technical
Monthly
June shows rather tight trading range by far, it has low impact on technical picture which looks more bearish rather than bullish.
Last four months gold stands in rather tight range. This is range of January - all following months were spent inside its range. In May gold is taking step lower and now we see warning signs in this behavior. As we've pointed in our previous research -
"most important moment for long-term gold right now is ability to move higher. 1327 level is long-term COP target of AB-CD started at 1046$, in July 2015. First it was reached in July 2017. After logical minor bounce price returns back to it. But right now it should be an action higher, to next 1450 target, which is OP of the same AB-CD.
If gold will not be able to do it - strong drop is possible, because price will fail to proceed next extension leg, showing inability and lack of strength to do it. This could break whole AB-CD construction. Besides, this standing below "B" point also keep door open for downside butterfly. As longer gold will stand under resistance as weaker it position will be."
Now take a look at price action that we have. Market has failed to break 1360 top, which means that it has failed to proceed to OP target. Which, in turn, means breaking of CD leg. This process has not finished yet, but signs that we see right now makes us worry.
Besides, we have W&R of 1360 COP top, which also has bearish sentiment.
Our hopes to get bulilsh grabber on May were vanished as price has closed below MACDP line.
Based on monthly chart, it seems that nearest target is 1268 Yearly Pivot, as gold has failed even to touch YPR1 around 1391.
That's being said, on long-term chart gold looks heavy and weak and overall picture is not attractive for taking long-term bullish position.
Weekly
Last time we've talked on gold in the end of May, after strong drop and come to following conclusion:
"On coming week we will track downside action to 1265-1270 area."
But since then, gold is stuck around, and just hangs on support line of weekly flag, forming small pennant consolidation. Usually this is bearish sign, when market forms flag or pennant right under or above the border. This is stormcrow of breakout.
Besides, gold very accurately stands as below MPP as below former 1302 lows, and can't move above it.
Still, this chart shows that strong K-support area stands in company with YPP around 1266-1273. All in all, but 1273 is just 3/8 retracement and brings nothing bad to long-term picture. Mostly longer-term forecast will depend on price behavior around major support. If gold will find some power to hold above it - upside action still could be re-established, weekly OP could be reached. If not - we should be prepared for downside acceleration as it could take the scale of massive sell-off. But such kind of action hardly will happen without any factor of fundamental kind.
Daily
On daily gold we've taken look just recently. Here our view has not changed significantly. Bearish signs look stronger here. Take a look - any drop happens fast, with tale close and long shadows, while upside action shows no signs of thrust and hits only minor Fib retracement. This has happened on OP reaction, and then again on 1285 major support area.
Last two week gold shows very choppy action without any direction. Definitely this is not a reversal price behavior.
Recently we have signs of bearish dynamic pressure - daily trend has turned bullish, but price action is not and mostly stands flat. It could be early sign of coming downside breakout.
Our major target on daily is XOP at 1262 that is mostly corresponds to strong weekly support area and makes it even stronger.
First sign that suggests destruction of our view is action above 1310 area, which is K-resistance on daily/4H time frame.
Intraday
Following our logic, downside action could take the shape of butterfly "Buy" and its 1.618 extension that stands at 1266 and almost coincides with major daily target of 1262 area.
Still, as stuation stands rather blur, it is difficult to point on definite direction with relatively more or less probability. Still, if you will decide to take short position, it would be better to do as close to butterfly invalidation point as possible, to minize risk. This point is 1308-1310 top.
Conclusion
If no geopolitical surprises or natural disaster will happen - gold will remain under pressure in foreseeable future. Within few weeks we expect reaching of major support around 1260-1270 area. Depending on what will happen there - will determine following long-term direction of the market.
On coming week we will keep an eye on butterfly pattern and impact of Fed and ECB meeting on gold market. Taking in consideration all inputs that we have now - it seems that situation stands a bit in favor of bears.
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 market right now mostly stands indecision as we do not have any progress in major driving factors - US interest rates, geopolitical sphere and tariffs war. Summer is traditionally not best time for gold as market stands in bearish seasonal trend that usually ends at the end of August.
Recent drop on gold market that lasts for two months already mostly was triggered by active growth of US interest rates. After testing of 3% level it takes some pause. Still, major target of 3.36% stands ahead.
Despite that rate hike in June and mostly in December already is priced-in, it still suggest higher levels of rates and this prevents gold upside action. Tariffs war also brings little support to gold market as it is unclear yet how it will impact global market and trade relations between major partners, as situation and information changes too fast and too often. It is still unclear what tariffs will be initiated, whether they will be initiated at all, on what term, in what countries etc.
Taking in consideration fund statistics, we mostly see negative performance. As Reuters reports Bank of America Merrill Lynch (BAML) said on Friday that bank’s data, which tracks fund flows from Wednesday to Wednesday, showed that investors withdrew $500 million from precious metals but put $900 million to work in equities.
SPDR statistics also shows negative dynamic. While gold price somehow still holds in tight range - physical reserves drops 7 weeks in a row and relatively fast...
Investors mostly have no clear view on gold perspective in near term. "Gold is up today, but not doing much. The G7 talks are a bit disconcerting with tariffs. We have the Fed meeting coming on Wednesday keeping a lid on gold," said Patrick Magilligan, director of metals marketing for Key Metal Refining. "The June 12 meeting with (North) Korea, probably underneath the gold price, keeping it buoyant," he added.
Technically, it is interesting that gold stands in tightest range over 10 years. It has hardly budged since last Friday's close, with the spread between its highs and lows at just $13.70 an ounce - the narrowest of any week since August 2007. Usually very strong directional move could follow after so small range, especially when some important events will happen next week.
COT data looks a bit more positive. It shows shy open interest increasing, as well as net long position. It means that some new long positions were opened.
So, may be on coming week situation will become a bit more clear, but right now we have mostly neutral fundamental background for a gold. Although major factors mostly stand bearish, they are known well enough and mostly are priced-in already.
Technical
Monthly
June shows rather tight trading range by far, it has low impact on technical picture which looks more bearish rather than bullish.
Last four months gold stands in rather tight range. This is range of January - all following months were spent inside its range. In May gold is taking step lower and now we see warning signs in this behavior. As we've pointed in our previous research -
"most important moment for long-term gold right now is ability to move higher. 1327 level is long-term COP target of AB-CD started at 1046$, in July 2015. First it was reached in July 2017. After logical minor bounce price returns back to it. But right now it should be an action higher, to next 1450 target, which is OP of the same AB-CD.
If gold will not be able to do it - strong drop is possible, because price will fail to proceed next extension leg, showing inability and lack of strength to do it. This could break whole AB-CD construction. Besides, this standing below "B" point also keep door open for downside butterfly. As longer gold will stand under resistance as weaker it position will be."
Now take a look at price action that we have. Market has failed to break 1360 top, which means that it has failed to proceed to OP target. Which, in turn, means breaking of CD leg. This process has not finished yet, but signs that we see right now makes us worry.
Besides, we have W&R of 1360 COP top, which also has bearish sentiment.
Our hopes to get bulilsh grabber on May were vanished as price has closed below MACDP line.
Based on monthly chart, it seems that nearest target is 1268 Yearly Pivot, as gold has failed even to touch YPR1 around 1391.
That's being said, on long-term chart gold looks heavy and weak and overall picture is not attractive for taking long-term bullish position.
Weekly
Last time we've talked on gold in the end of May, after strong drop and come to following conclusion:
"On coming week we will track downside action to 1265-1270 area."
But since then, gold is stuck around, and just hangs on support line of weekly flag, forming small pennant consolidation. Usually this is bearish sign, when market forms flag or pennant right under or above the border. This is stormcrow of breakout.
Besides, gold very accurately stands as below MPP as below former 1302 lows, and can't move above it.
Still, this chart shows that strong K-support area stands in company with YPP around 1266-1273. All in all, but 1273 is just 3/8 retracement and brings nothing bad to long-term picture. Mostly longer-term forecast will depend on price behavior around major support. If gold will find some power to hold above it - upside action still could be re-established, weekly OP could be reached. If not - we should be prepared for downside acceleration as it could take the scale of massive sell-off. But such kind of action hardly will happen without any factor of fundamental kind.
Daily
On daily gold we've taken look just recently. Here our view has not changed significantly. Bearish signs look stronger here. Take a look - any drop happens fast, with tale close and long shadows, while upside action shows no signs of thrust and hits only minor Fib retracement. This has happened on OP reaction, and then again on 1285 major support area.
Last two week gold shows very choppy action without any direction. Definitely this is not a reversal price behavior.
Recently we have signs of bearish dynamic pressure - daily trend has turned bullish, but price action is not and mostly stands flat. It could be early sign of coming downside breakout.
Our major target on daily is XOP at 1262 that is mostly corresponds to strong weekly support area and makes it even stronger.
First sign that suggests destruction of our view is action above 1310 area, which is K-resistance on daily/4H time frame.
Intraday
Following our logic, downside action could take the shape of butterfly "Buy" and its 1.618 extension that stands at 1266 and almost coincides with major daily target of 1262 area.
Still, as stuation stands rather blur, it is difficult to point on definite direction with relatively more or less probability. Still, if you will decide to take short position, it would be better to do as close to butterfly invalidation point as possible, to minize risk. This point is 1308-1310 top.
Conclusion
If no geopolitical surprises or natural disaster will happen - gold will remain under pressure in foreseeable future. Within few weeks we expect reaching of major support around 1260-1270 area. Depending on what will happen there - will determine following long-term direction of the market.
On coming week we will keep an eye on butterfly pattern and impact of Fed and ECB meeting on gold market. Taking in consideration all inputs that we have now - it seems that situation stands a bit in favor of bears.
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.
