GOLD PRO WEEKLY, June 20-24, 2016

[Sive Morten]

Fundamentals

Gold rose more than 1 percent on Friday, supported by a softer dollar and cautious interest rate comments by a voting U.S. Federal Reserve policy member, and was headed for a third week of gains. The U.S. dollar made its biggest drop against a basket of major currencies in two weeks, making dollar-denominated assets such as gold cheaper for holders of other currencies.

Spot gold was up 1.2 percent at $1,293.80 an ounce at 3:02 p.m. EDT (1902 GMT). Bullion has risen 1.5 percent so far this week. U.S. gold for August delivery settled down 0.3 percent at $1,294.80 an ounce, well below Thursday's peak of $1,315.55, the highest since August 2014.

"Gold is reverting to its safe-haven role, in a situation where euro zone government bonds are in negative yield territory and investors have fewer safe assets to choose from," Mitsubishi Corp strategist Jonathan Butler said. St. Louis Fed President James Bullard said the central bank's "dot plot" of projected interest rate policy "appears to be too steep."

"Fed funds futures markets do not seem to believe it. They are priced for a much shallower pace of increases," Bullard said, arguing that the central bank may need to only increase rates once between now and the end of 2018. Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding the precious metal. "His comments were clearly bullish," said Bill O'Neill, co-founder of commodities investment firm Logic Advisors. "A July rate hike is virtually out of the question. I think gold is looking at that."
Traders said that market dealings could be volatile next week ahead of the June 23 referendum when Britain will vote on whether to remain in the European Union or to leave.

The Bank of England escalated its warnings about fallout from the vote, saying it could harm the global economy and that sterling looked increasingly likely to weaken further if "Leave" wins.
"Over the next week until the British referendum, there could be a further upward move in gold ... as investors will use it as a hedge against various financial risks," Commerzbank analyst Daniel Briesemann said.

Reflecting renewed optimism towards gold, holdings in SPDR Gold Trust, the world's largest gold-backed
exchange-traded fund, rose to 902.53 tonnes on Thursday, the highest since October 2013.

COT Report

Gold again shows extreme levels for speculative net-long positions. Now they stand even slightly higher than 2 weeks ago. But pay attention to open interest - it has less value compares to previous extreme level. It means that upside action in speculative position was reached due closing of some shorts. May be this particular reason why gold has turned down on Friday - as longs have reached their ceil. It seems that right now this is more bearish sign rather than bullish. Anyway, hardly it will help us much in prediction of Brexit results. By itself this situation warns us to not go long right now.

Technicals
Monthly

Due to last events in UK, gold has made another attempt to move higher and confirmed our expectation. Still, as we see on chart - 1285-1330 is strong resistance and gold has stuck inside of it. At the same time, gold has completed pivot target - it has touched YPR1.

Current upward action is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Probably it should happen but this potential downward action has a great chance to become just a retracement. Overall political and financial situation in the world probably will not give a chance to relax. Thus, we have a positive long-term view on gold market.

At the same time we have to acknowledge that when market stands at the eve of big events normal “technical” behavior could be broken and adjusted. Something of this kind we could see now. Anticipation of Brexit voting and rising fears on “out” result support demand on gold. As a result we've got significant jump above 1300, if results indeed will be negative, but retracement also could come after this jump, because by COT report – gold has not big potential of upside action. It means that we could get some kind of W&R of 1300 top. Currently it has happened, now we need better confirmation of our thoughts.

Meantime currently recent action mostly looks like bullish flag pattern that suggests some upside action.

That's being said, market sould get some relief after Brexit will happen. Our analysis of FX market in common and GBP in particular mostly points that UK will stay in EU. Because on gold we do not see very clear hints on this.
But staying in EU interestingly coincides with overload of speculative positions that should be off-load and this should happen soon. We think that potential to grow is limited in short-term perspective and we assess chances on drop as greater compares to chances on further upside action.
It means that if you have a bullish view on market - do not take long position right now.

Weekly

Trend has turned bearish on weekly time frame. Now market is neither OB nor OS. Right now we could recognize just widening triangle by far. Broadening top or bottom usually indicates growing volatility and uncertainty and very often becomes a reversal pattern. In general this agrees with events that now stand.

Last week we've said that we do not know whether this triangle will turn to, say, diamond, or some other reversal pattern, but any of them let's market to form new top above 1300, but at the same time apearing of this pattern does not promise any significant upside continuation. This, in turn, coincides with COT numbers.

Our conclusion was correct as well - "That's being said in current situation we should take conservative position, i.e. expect probably short-term upside jump above 1300 area but do not rely on long-term upside continuation. "

Now it's done. Technical picture mostly suggest drop to 1180 area - lower border of this triangle. Again, here we will have to take into consideration strong resistance area, COT numbers and pattern.
It's obvious that "out" result on voting will bring adjustment, that's why we do not talk about it again. But at what degree this will impact on gold - it's difficult to say. Weekly OscP indicator shows borders at 1355 and 1200 areas. Jump up could happen only by short covering, but what potential still stands there?

Here we could say on technical picture only - it looks bearish. What really will happen - we will see on Thursday.

Daily
So, anyway, weekly chart has too large scale to trade it directly. That's why our primary attention will be on daily picture. Because if any mess will start it first will appear here. Right now we have background for possible DiNapoli trades but we still have no completed setups. Friday action was drammatic. First, when rumors have appeared on possible postponing of voting - gold has dropped miserably. Later when it has become clear that this was just a rumor - it has started to return back lost positions.

Still, technically we have revesal session that will be valid until its not, i.e. until gold will climb above its top. Currently this is hardly possible by natural market action. Thus, we probably should get some pattern that wil trigger downward action, especially if UK will stay in EU.

Mostly we will watch for tactical setup, that is short term, because now we still follow our tactic - do not marry any possition, trade only short-term setups. They could be either B&B "Buy" or DRPO "Sell". But DRPO could become precisely the pattern that will trigger strong bearish action. Make a popcorn guys, it will be interesting week...

Hourly

Here guys, we do not see any criminal yet. Upward action currently still could be treated as normal retracement after drop down. Market stands around 5/8 Fib leve @ 1300 area. Overall, upside action doesn't look like new thrust and mostly still reminds retracement shape.

WPP's envelop current action, so, market will open around WPP. Here we could get first clarity where it could go. But anyway - our major object to watch for - pattern on daily chart. It will clarify in what direction gold will follow

Conclusion:
We continue to keep long-term bullish view on gold market. Coming Brexit voting significantly increases degree of nervousness and uncertainty. This also could be seen in price fluctutations that have become more noisy and volatile. Brexit results and its anticipation could skew normal market behavior. At the same time we do not exclude deep retracement down in perspective of 1-2months.

In short-term perspective we mostly will be focused on tactical setups, say, as DiNapoli B&B, DRPO on daily chart. This is best choice right now.

The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.

 

[Sive Morten]

Good morning,

(Reuters) Gold was down for a second session on Tuesday as Asian shares extended a rally on growing
expectations that Britain would opt to remain in the European Union in a referendum later this week.
Two opinion polls on Monday suggested support for Britain staying in the European Union had recovered some ground following the murder of a pro-EU lawmaker.

Betfair betting odds have also shown Britain's "Remain" option gaining traction, with the implied probability of such an outcome at 78 percent on Monday, up from 60-67 percent on Friday.

Spot gold fell 0.5 percent to $1,283.50 an ounce by 0644 GMT, after earlier rising as high as $1,294.
It dropped 0.7 percent on Monday.

U.S. gold was down 0.4 percent at $1,286.50. "Should the UK exit poll show the 'Remain' camp maintaining
its edge, we suspect that global equities will likely continue to do better over the course of the next two days," said INTL FCStone analyst Edward Meir.

"This will likely continue to pressure gold unless the UK vote tightens once again." A vote on June 23 by Britain to leave the 28-member EU, dubbed "Brexit," could tip Europe back into recession, putting more pressure on the global economy and thereby boosting the safe-haven appeal of gold.

Spot gold may drop into a range of $1,275-$1,280 per ounce, as suggested by a wedge and a Fibonacci projection analysis, Reuters technical analyst Wang Tao said. "We think that gold is under short-term volatility, but longer-term factors driving the gold demand are still intact," said Richard Xu, fund manager of China's top gold exchange-traded fund (ETF) HuaAn Gold.

"We think that gold could be a very good buying opportunity if it pulls back a little bit," Xu said.
Asian shares rose after a tentative start on Tuesday, while the British pound set a three-week high against the dollar.

Federal Reserve Chair Janet Yellen's testimony before the Senate Banking Committee starts later on Tuesday, and she may offer clues on the timing of the next U.S. interest rate hike.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.10 percent to 908.77 tonnes on Monday, the highest since September 2013.

So guys, gold still stands in tight consolidation at the top and currently is nothing to do there. All that we need here is clear pattern. We suggest that it should be reversal one. Bremain gets the lead over Brexit and this could become the last factor in addition to technical ones that will trigger deep retrcement on gold. Technical situation is ready for this retracement for long time already and only brexit tension was keeping gold in tension. Now relief could come...
We hope that we will get DRPO "Sell" pattern. If gold will close as it stands now - we will get first close below 3x3:

On intraday chart we also have nothing really interesting, some kind of triangle is forming that could be broken down. Gold right now has no potential to show strong upside trend. And something really outstanding should happen to make gold do this.

That's being said - let's keep watching for reversal pattern here and hope that we will get it in place slightly before voting results .

 

[Sive Morten]

Good morning

(Reuters) Gold touched its lowest in two weeks on Wednesday as Asian stocks rose amid indications
Britain would vote to remain in the European Union.

Spot gold inched down 0.2 percent to $1,266 an ounce at 0705 GMT, touching a low of $1,261.01, its worst since June 9. U.S. gold was down 0.3 percent at $1,268.30 an ounce.

Bullion fell nearly 2 percent on Tuesday in its biggest one-day loss in a month, after two opinion polls on Monday suggested it was increasingly likely Britain would choose to stay in the EU.

A vote on June 23 by Britain to leave the 28-member EU, dubbed "Brexit," could tip Europe back into recession, putting more pressure on the global economy, thereby increasing the safe-haven appeal of bullion. "With the Brexit vote now less than 48 hours away, participants seem to be positioning for a 'Remain' vote, however, if the 'Leave' does win there could be a '+3 figure' gain in gold," MKS Group trader James Gardiner said in a note, referring to a possible rise of at least $100.

Some analysts said it was too early to completely rule out a British exit from the European Union.
"We still remain nervous about the accuracy of British polls and so would not read too much into current ones showing the "Remain" camp being in the driver's seat," said INTL FCStone analyst Edward Meir in a note.

According to an opinion poll published on Tuesday, the campaign for Britain to stay in the EU has seen its lead over the rival "Out" camp cut to just one point. "In case we see a 'Leave', we probably would see the upper end of our trading range which would be $1,350. But if we see a 'Stay' I think gold will see further uncertainty and may fall back towards the $1,200 level," said Dominic Schnider of UBS Wealth Management in Hong Kong.

Spot gold may drop more to $1,252 per ounce, as suggested by its wave pattern and a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao.

Asian stocks edged up on Wednesday even as Federal Reserve Chair Janet Yellen's cautious tone on future rate hikes added to a subdued mood in markets. Yellen said Fed's ability to raise interest rates this year may hinge on a rebound in hiring that would convince policymakers the U.S. economy is not faltering.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.39 percent to 912.33 tonnes on Tuesday, the highest since September 2013.

Today guys, as on FX market we will focus on tactical trading setup. We continue to follow our own recomendations to not marry any position and try to deal with very short-term patterns. Finally we've got B&B "Buy" on daily chart that has 1294 target:

As you can see thrust up is good, market has dropped below 3x3 DMA and has reached 1260 Fib support area.

On intraday charts we also see that this is AGreement support, as gold has completed AB=CD pattern there. Also it is confirmed by Butterfly "Buy" pattern. But this is not all yet, guys. here, on hourly chart we have DRPO "Buy" pattern right at the bottom:

It means that B&B really could start from 1260 level. Also it has a chance to be completed even prior the official voting results will be published.

 

[Sive Morten]

Good morning,

(Reuters) Gold edged up after touching a fresh two-week low early on Thursday on cautious optimism that
British voters would opt to stay in the European Union.

A vote to leave the 28-member bloc could tip Europe back into recession, putting more pressure on the global economy and increasing the appeal of bullion as a counter-cyclical asset.

Polling will take place between 0600-2100 GMT on Thursday, with the results expected early on Friday.

Spot gold was up 0.3 percent at $1,269.60 an ounce by 0644 GMT. Bullion touched a low of $1,260.36 earlier in the session, its worst since June 9. U.S. gold was up 0.2 percent at $1,272.

"In the near term, gold appears heavily focused on the United Kingdom referendum vote and will likely move according to the results," HSBC analyst James Steel said in a note. "Once the effects of the referendum results pass, we would expect that gold will eventually focus back on other price drivers and fundamentals. There is a good argument that in the near term gold may be overbought."

The poll verdict aside, the medium- to long-term view for the yellow metal, which has risen about 20 percent this year, is still bullish and $1,250 to $1,315 an ounce is likely to be the range in the immediate future, said Mark To, head of research at Hong Kong's Wing Fung Financial Group. "I believe the major factor affecting gold (in the long term) is not a single risk event like Brexit," he added.
William Wong, assistant head of dealing for Wing Fung's precious metals desk, said gold prices could drop down to $1,230 an ounce if Britain chooses to continue being a part of the European Union.

Ahead of the UK vote, gold investors sought to protect themselves by increasing their options positions on Wednesday. Implied volatility, a measure of options activity, in Comex July gold calls and puts with strike prices that are as much as $50 higher or lower than current prices soared to record highs on
Wednesday. The sterling rose and Asian stocks crept higher in cautious trade on Thursday though many investors sought shelter in safe-haven assets such as the yen and government debt.

Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.39 percent to 915.90 tonnes on Wednesday, the highest since September 2013.

So, today we will continue discussion of our B&B "Buy" setup on daily chart. Yesterday we've explained why this trade has good chances to start right from 1260 area. Now we see that some upside bounce indeed has happened, although it doesn't show yet any acceleartion:

On 4-hour chart recent action takes the shape of falling wedge, that theoretically is upide reversal pattern.

On hourly chart gold also has turned up as soon as it has completed AB=CD target. Since we will know results only tomorrow morning - this B&B trade has chances to be completed.

Still, taking in consideration exceptional situation, it would be better to move stop to breakeven ASAP, if you will decide to trade it.

 

[Sive Morten]

Good morning,

(Reuters) Gold soared the most since the global financial crisis in 2008 on Friday, after Britons shocked markets by voting to leave the European Union, fueling market turmoil that drove investors toward safe-haven assets.

The precious metal jumped as much as 8 percent to its highest in more than two years, tracking the rally in other safe havens, such as bonds, as risky assets were dumped from stocks to sterling.

Complete results from a British referendum showed a near 52-48 percent split for the UK leaving the EU. The vote created the biggest global financial shock since the 2008 crisis, this time with interest rates around the world already at or near zero, stripping policymakers of the means to fight it.

Spot gold was up 5.1 percent at $1,319.60 an ounce by 0639 GMT, after earlier peaking at $1,358.20, the strongest since March 2014. Gold soared nearly 11 percent in September 2008.

Britain would be the first country to leave the European Union, the biggest blow to the 28-nation bloc since its foundation. Some analysts say that could tip Europe back into a recession, piling more pressure on the global economy, and burnishing the appetite for gold.

"It's certainly going to retard the kind of recovery momentum we've seen shaping up in Europe and for the UK it will probably negate a lot of the stimulus effects," said Vishnu Varathan, a senior economist at Mizuho Bank.

U.S. gold for August delivery rose 4.7 percent to $1,322.80.

Gold could build on these gains if the resulting uncertainty in Europe "leads to an environment where the Federal Reserve is not going to hike rates so dramatically and everybody throws in more liquidity," said Dominic Schnider of UBS Wealth Management in Hong Kong.

Before Friday's new high, bullion also topped $1,300 on June 16 after the Fed signaled a less aggressive monetary tightening stance. Rate hikes increase the opportunity cost of holding the non-interest yielding metal.

Gold priced in other currencies also surged. In terms of sterling and euro, gold hit the highest since April 2013. In Australian dollar terms, gold touched a record high.

Gold on the Shanghai Futures Exchange climbed to the highest since September 2013. Trading volumes soared nearly three times normal levels, said Richard Xu, fund manager at HuaAn Asset Management, China's top gold exchange-traded fund.

Brexit would "have repercussions not only on the currency markets but also on the political landscapes and that will have a lasting impact on economic growth assumptions," said Xu, adding gold could hit around $1,600.

So, guys, public opinion has changed drastic and in a blink of an eye. Here we see again confirmation of our tactic in periods of turmoil - trade only clear and tactical, very short term setups. This is always safer than trying to catch the big luck.

As a result, although we thought on Bremain mostly, but trade gold long - based on short-term B&B "Buy" pattern. Thus, B&B has worked perfectly and we correctly have estimated the level, from which it could start.
Another target also has been hit - Brexit has led gold to 1350 level. We've marked it as potential ceil:

So, as situation is still hot, may be it makes sens to not trade any more today. This was superb trade recenently on gold and we deserve the rest.

Still, fo trade-o-holics we could point another B&B "BuY", but right now on hourly chart. Brexit momentum is still strong, thus, market easily could show upward retracement to 1330. This trade probably will be finished till the end of today's session.

 

[viktor256]

Dear Sive,

I have had long position on gold yesterday according to your recomandations at 1266 but with stop at 1255... is was any way to find a lower stop and to avoid loss? What confirmation I needed to wait in order to open position.?..Thanks very much

 

[Sive Morten]

Dear Sive,

I have had long position on gold yesterday according to your recomandations at 1266 but with stop at 1255... is was any way to find a lower stop and to avoid loss? What confirmation I needed to wait in order to open position.?..Thanks very much

Hi Viktor,
well, we should understand that yesterday, still, was not quite "ordinary" situation. In most cases your 10$ stop should be enough probably. Usually you could apply some methods.
All of them are different from each other mostly by the simplicity of application. First one calls as "bushes". It suggests placing stops below next level. It means that you should place stop below 1248 - 5/8 Fib support on daily chart.
Other methods are more sophisticated and it would be better if you will read them by yourself in DiNapoli book. They call as "Minesweeper A and B". In 2 words - they let you to take position not at extreme point and not trying to catch the bottom, but when upside action has started - you enter on small retracement on 30-min chart for example.

Another ways, without relation to DiNapoli, is to try to catch some patterns on small time frames, as 15-30 min charts.
Here is the chart how upside action has started - 15 min. Right before reversal market has formed butterfly buy. If even butterfly will fail - you loss still will be less.
Second is Minesweeper A technique. Take a look that as market has turned up, trend has turned bullish - you enter at first minor 3/8 retracement. I've marked it by red circle.

Of course, all these talks are backmind and it is always simpler, but this is just example of different ways how safer to deal with B&B trades.