Sive Morten
Special Consultant to the FPA
- Messages
- 18,776
As Reuters reports, palladium tumbled to a one-month low on Friday, extending its biggest drop in nearly a year in the previous session, as investors awaited confirmation that South Africa's longest mining strike would end soon. The leader of South Africa's striking AMCU union said on Friday he hoped to meet the three major platinum firms over the weekend to give them formal feedback from workers about a wage offer that could mean the end of a five-month strike. On Wednesday, palladium had rallied to a 13-year high on speculation of a deadlock in wage talks.
Palladium, however, tumbled as much as 5 percent on Thursday on news that platinum group metal (PGM) producers and the AMCU agreed in principle on a wage deal, taking a step closer to resuming operations after the longest strike in the 130-year history of South Africa's mines. Analysts said PGMs still have some upside as the miners start the long and slow process of getting operations back up. "South African supply issues do not end with a resolution of the 21-week old strike," said UBS metals strategist Edel Tully. "A correction in PGMs would present an attractive entry point." South Africa's crippling five-month strike in the platinum belt has lifted palladium prices by more than 15 percent this year, outpacing gains in platinum which is up just six percent.
Gold prices edged up after Thursday's 1 percent gain. The safe-haven metal, however, failed to rally further on market expectations that security conditions in Iraq will improve soon, traders said. On Friday, Iraq's most senior Shi'ite Muslim cleric urged followers to take up arms against a full-blown Sunni militant insurgency to topple Shi'ite Prime Minister Nuri al-Maliki, escalating a conflict that threatens civil war and a possible break-up of the country. "The general thought out there is that what's going on in Iraq will be contained and should not create a significant impact globally by affecting oil production," said Mike Meyer, assistant vice president at EverBank World markets in St. Louis.
At the same time, guys, Open Interest gradually decreasing for a long period of time by far. Thus, in July, 2013 it was at 830 K, while right now it stands slightly lower than 600K. Net position stands at very low 51K level. It probably could mean that interest to short positions gradually becomes weaker.
SPDR fund storage of gold slightly has increased from 776 tonnes to 787 tonnes within previous 2 weeks, but still storages stand near lowest levels since great fall on gold market has started. Light upward action that was accompanied by increasing of OI in April has exhausted fast, as soon as Ukraine elections has happened.
Monthly
May right at the end has shown it’s power by solid plunge down. It could mean that bearish grabber that was formed 2 months earlier has started to work. Also we’ve discussed possible bearish dynamic pressure here and now it looks rather clear. At the same time our reversal level here becomes farer and farer. Even if price will reach 1350 area – it will not change big picture. Situation could change only if market will move above 1400 area.
Grabber pattern and pressure is so important right now, because they provide direction for long-term perspective.
At the same time grabber has appeared right at Yearly Pivot Point – this is not best combination for bulls and could indicate reaction of the gold on Yearly pivot. Otherwords it could be a confirmation of bearish sentiment for the whole year. Grabber potentially strong pattern that could lead price back at least to 1180 lows again.
That’s being said recent action indicates that bears’ power is growing and may be market finally has turned to more active behavior. Besides, if we even will get any deeper retracement up - hardly it will change long-term picture. Currently, there are 3 major driving factors on gold - some unexpected geopolitical tensions, inflation and seasonal trend, i.e. spot demand. None of them show significant appreciation. Hence, it is very difficult to take bet on upward reversal on gold market by far. Even more, US fundamental data and seasonal trend now makes pressure impact on gold. Minor solace may be could come from CFTC data that shows that market is tied from constant decreasing. When net positions will reach extremely low levels – something could happen. May be this will coincide with end of seasonal bearish trend in late August, or even accompanied by some fundamental events.
Weekly
Weekly chart is major one for gold right now. Trend is bearish here. Weekly chart shows us the reason of bounce up on previous week. Yes, fundamentally this could be Iraq turmoil, but technically this is reaching of minor 0.618 extension of AB=CD pattern. Usually reaching of minor target does not suggest deep retracement. If market is really bearish it should continue move down soon. Thus our task in short-term perspective is to understand where the final point of retracement will stand, catch some patterns, etc.
By taking farer look, if move down will continue – market could form AB=CD down to 1140$ area, because monthly grabber suggests taking out of previous lows and next nearest target below it is precisely AB=CD objective point.
And finally, guys, here could be even butterfly Buy pattern. It has even lower target – 1110$. At the same time, this area around 1000-1100$ will become an area of big demand. This is the breakeven cost of gold mining. Price will not be able to hold below this level for long period, otherwise it will be just unprofitable to mine gold… I dare to suggest that market could reach it at the end of the summer, when seasonal trend shifts bullish.
Daily
So, as we’ve said on weekly chart – market has reached 0.618 AB=CD target and done this by Butterfly “Buy” pattern. Yesterday we’ve discussed MPP and 1273-1275 K-resistance area, since it could become an area where market could turn down. But right now we see that gold is passing through it and market has closed above MPP. This tells probably that upward action will continue and gold has two target levels. First and minor one is upper border of downward channel. Second and is major level is next K-resistance around 1295-1300 area, that also includes MPR1 and daily overbought. It seems that market has all chances to reach it, because tensions in Iraq and US participation just have started and nobody can say now what will really happen and how situation will turn there. But this level is important by some other reason as well. It includes major 3/8 Fib level and this level is perfect for end of retracement after minor 0.618 weekly target and also because this is MPR1. Until market stands below it – bearish trend is still valid. That’s why 1295-1300 area has such strong value for future of gold market. Move above this area probably will destroy current bearish setup.
4-hour
It’s interesting that market also has reached the low the 1st of April. At first glance it seems that market has broken through K-resistance, but this is not the fact yet, because gold could slightly penetrate it to re-test former lows. I do not see any patterns yet here. May be market will show some retracement down, but daily chart points on possible upward continuation.
1-hour
If market finally will turn to downward retracement – here are levels to watch for. In fact we have two major areas to watch. First one is combination of WPP and Fib level around 1268 and second, major one is K-support 1262-1263 and WPS1. How definitely it will happen and what pattern will trigger this move down we’ll see...
Conclusion:
Market has to breakout either 1400 to change long-term situation significantly. On previous week market has turned to fast action and has done as much as we have expected form it during much longer time. Thus, we’ve got as bearish grabber as dynamic pressure that point on reaching at least of recent lows around 1180s. But potentially, gold could reach deeper levels.
In short-term perspective market has hit first minor AB=CD extension on weekly chart. As a result, some bounce up could take place in nearest future. “Minor bounce” for weekly chart could reach as far as 1295-1300 area. If market is still bearish – it should not pass through this area. In the beginning of the week we mostly will focus on possible minor retracement down, since gold has reached first resistance level.
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.
Palladium, however, tumbled as much as 5 percent on Thursday on news that platinum group metal (PGM) producers and the AMCU agreed in principle on a wage deal, taking a step closer to resuming operations after the longest strike in the 130-year history of South Africa's mines. Analysts said PGMs still have some upside as the miners start the long and slow process of getting operations back up. "South African supply issues do not end with a resolution of the 21-week old strike," said UBS metals strategist Edel Tully. "A correction in PGMs would present an attractive entry point." South Africa's crippling five-month strike in the platinum belt has lifted palladium prices by more than 15 percent this year, outpacing gains in platinum which is up just six percent.
Gold prices edged up after Thursday's 1 percent gain. The safe-haven metal, however, failed to rally further on market expectations that security conditions in Iraq will improve soon, traders said. On Friday, Iraq's most senior Shi'ite Muslim cleric urged followers to take up arms against a full-blown Sunni militant insurgency to topple Shi'ite Prime Minister Nuri al-Maliki, escalating a conflict that threatens civil war and a possible break-up of the country. "The general thought out there is that what's going on in Iraq will be contained and should not create a significant impact globally by affecting oil production," said Mike Meyer, assistant vice president at EverBank World markets in St. Louis.
At the same time, guys, Open Interest gradually decreasing for a long period of time by far. Thus, in July, 2013 it was at 830 K, while right now it stands slightly lower than 600K. Net position stands at very low 51K level. It probably could mean that interest to short positions gradually becomes weaker.
SPDR fund storage of gold slightly has increased from 776 tonnes to 787 tonnes within previous 2 weeks, but still storages stand near lowest levels since great fall on gold market has started. Light upward action that was accompanied by increasing of OI in April has exhausted fast, as soon as Ukraine elections has happened.
Monthly
May right at the end has shown it’s power by solid plunge down. It could mean that bearish grabber that was formed 2 months earlier has started to work. Also we’ve discussed possible bearish dynamic pressure here and now it looks rather clear. At the same time our reversal level here becomes farer and farer. Even if price will reach 1350 area – it will not change big picture. Situation could change only if market will move above 1400 area.
Grabber pattern and pressure is so important right now, because they provide direction for long-term perspective.
At the same time grabber has appeared right at Yearly Pivot Point – this is not best combination for bulls and could indicate reaction of the gold on Yearly pivot. Otherwords it could be a confirmation of bearish sentiment for the whole year. Grabber potentially strong pattern that could lead price back at least to 1180 lows again.
That’s being said recent action indicates that bears’ power is growing and may be market finally has turned to more active behavior. Besides, if we even will get any deeper retracement up - hardly it will change long-term picture. Currently, there are 3 major driving factors on gold - some unexpected geopolitical tensions, inflation and seasonal trend, i.e. spot demand. None of them show significant appreciation. Hence, it is very difficult to take bet on upward reversal on gold market by far. Even more, US fundamental data and seasonal trend now makes pressure impact on gold. Minor solace may be could come from CFTC data that shows that market is tied from constant decreasing. When net positions will reach extremely low levels – something could happen. May be this will coincide with end of seasonal bearish trend in late August, or even accompanied by some fundamental events.
Weekly
Weekly chart is major one for gold right now. Trend is bearish here. Weekly chart shows us the reason of bounce up on previous week. Yes, fundamentally this could be Iraq turmoil, but technically this is reaching of minor 0.618 extension of AB=CD pattern. Usually reaching of minor target does not suggest deep retracement. If market is really bearish it should continue move down soon. Thus our task in short-term perspective is to understand where the final point of retracement will stand, catch some patterns, etc.
By taking farer look, if move down will continue – market could form AB=CD down to 1140$ area, because monthly grabber suggests taking out of previous lows and next nearest target below it is precisely AB=CD objective point.
And finally, guys, here could be even butterfly Buy pattern. It has even lower target – 1110$. At the same time, this area around 1000-1100$ will become an area of big demand. This is the breakeven cost of gold mining. Price will not be able to hold below this level for long period, otherwise it will be just unprofitable to mine gold… I dare to suggest that market could reach it at the end of the summer, when seasonal trend shifts bullish.
Daily
So, as we’ve said on weekly chart – market has reached 0.618 AB=CD target and done this by Butterfly “Buy” pattern. Yesterday we’ve discussed MPP and 1273-1275 K-resistance area, since it could become an area where market could turn down. But right now we see that gold is passing through it and market has closed above MPP. This tells probably that upward action will continue and gold has two target levels. First and minor one is upper border of downward channel. Second and is major level is next K-resistance around 1295-1300 area, that also includes MPR1 and daily overbought. It seems that market has all chances to reach it, because tensions in Iraq and US participation just have started and nobody can say now what will really happen and how situation will turn there. But this level is important by some other reason as well. It includes major 3/8 Fib level and this level is perfect for end of retracement after minor 0.618 weekly target and also because this is MPR1. Until market stands below it – bearish trend is still valid. That’s why 1295-1300 area has such strong value for future of gold market. Move above this area probably will destroy current bearish setup.
4-hour
It’s interesting that market also has reached the low the 1st of April. At first glance it seems that market has broken through K-resistance, but this is not the fact yet, because gold could slightly penetrate it to re-test former lows. I do not see any patterns yet here. May be market will show some retracement down, but daily chart points on possible upward continuation.
1-hour
If market finally will turn to downward retracement – here are levels to watch for. In fact we have two major areas to watch. First one is combination of WPP and Fib level around 1268 and second, major one is K-support 1262-1263 and WPS1. How definitely it will happen and what pattern will trigger this move down we’ll see...
Conclusion:
Market has to breakout either 1400 to change long-term situation significantly. On previous week market has turned to fast action and has done as much as we have expected form it during much longer time. Thus, we’ve got as bearish grabber as dynamic pressure that point on reaching at least of recent lows around 1180s. But potentially, gold could reach deeper levels.
In short-term perspective market has hit first minor AB=CD extension on weekly chart. As a result, some bounce up could take place in nearest future. “Minor bounce” for weekly chart could reach as far as 1295-1300 area. If market is still bearish – it should not pass through this area. In the beginning of the week we mostly will focus on possible minor retracement down, since gold has reached first resistance level.
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.
Waking up this morning it's nice to have buy entry's all in profit from as low as $1244.86