GOLD PRO Weekly June 22-26, 2015

[Sive Morten]

Fundamentals

Weekly Gold Tading Report prepared by Sive Morten exclusively for ForexPeaceArmy.com

Reuters reports euro declined against other major currencies on Friday, weighed down by anxieties Greece may soon default on debts that also drove safe-haven buying of the dollar.

Greece is days away from potentially missing debt repayments of 1.6 billion euros to the International Monetary Fund, and investors are looking to an emergency meeting next week where euro zone leaders will try to find a way to unlock aid for Athens.

Germany, the biggest European contributor to bailout programs that have kept Greece afloat for five years, insisted it still was not too late for Athens to come to terms with its creditors at the EU and IMF.

The European Central Bank on Friday raised the ceiling on emergency liquidity that Greek banks can draw from the country's central bank for the second time this week, a banking source told Reuters.

Bankers told Reuters that about 4.2 billion euros had flooded out of Greek bank accounts this week despite central bank efforts to restore calm.

"Greece remains highly combustible, and that's a recipe for dollar strength and risk aversion," said Richard Franulovich, senior currency strategist at Westpac in New York.

The dollar has been rallying for nearly a year but this week was on track for a third consecutive week of losses. Some analysts still see the dollar climbing.

"When we get to where we can see the white of the eyes of the Fed rate hike, we will have a second wave of the dollar rally," said Greg Anderson, global head of FX strategy at BMO Capital Markets in New York.

Recent CFTC data shows increase in open interest again mostly due increasing of speculative short positions. Although longs also has increased, short positions has increased on greater value. The same has happened with hedgers’ position. Longs has increased greater than shorts and this data mostly supports existing bear trend on the market, despite most recent upside action.
SPDR fund has lost another 3 tonnes on storages last week. Now they stand around 702 tonnes. This progress stands in the same stream as CFTC numbers. Although the pace of decreasing has slowed a bit, but still fund is losing value even on upside gold action that we’ve seen last week.

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Technicals
Monthly
Last week shows no impact on monthly chart despite solid upside action on daily time frame. Gold stands rather flat on monthly chart within 4 months in a row. Currently bearish dynamic pressure becomes very clear on this chart. It seems that gold just waits for some push. It means that as bearish dynamic pressure as VOB pattern are still valid.
On long-term horizon we still have last big pattern in progress that is Volatility breakout (VOB). It suggests at least 0.618 AB-CD down. And this target is 1050$. At the same time we need 1130 breakout to start clearly speak on 1050 target.
But what action market should show to break huge bearish patterns on monthly? Dynamic pressure is a tendency of lower highs within bullish trend. Hence, to break it, market should show higher high. I’ve marked it with arrow. It means that market should take out 1308 top to break this pattern and make investors doubt on bearish perspectives of gold market in long term. That’s why action that we have on daily and intraday charts right now is not an action of monthly one yet. Early bell of changing situation could be moving above YPP.
Overall picture still remains mostly bearish. In the beginning of the year market showed solid upside action. Gold was able to exceed yearly pivot, passed half way to Yearly Pivot resistance 1 but right now has reversed down and closed below YPP. From technical point of view this is bearish sign. This could be very significant moment and next logical destination will be yearly pivot support 1 around 1083$.
Currently, despite rare upside splashes in CFTC data, we couldn’t say yet that situation has changed drastically. We need to get few weeks of net long position increasing, to get positive dynamic on SPDR storages to get confidence with upside action. Other words, we need to get some proves that recent changes is not occasion. But right now we do not see any. Even more we see opposite signs.
Still right now gold mostly is hostage of dollar value and US economical data (mostly inflation) in nearest perspective. Approximately the same was announced by Fed in forecast on inflation and had become a reason of dovish approach to rate hiking. Another concern right now is too strong dollar that becomes a problem per se for economy growth and kills inflation. Prices are fallen so no needs to hike rates. Last week was a rumor about the same problem – it seems that Obama administration unsatisfied with too strong dollar and IMF was asking Fed to postpone rate hike on next year. We do not know whether these moments were become a reason of dovish tone in Fed comments or not, but result is the same. Fed has announced some worrying on employment and inflation and said that they need to get more strength in this data…
If we will take into consideration geopolitical situation and risks that have appeared recently, it could happen that situation will change, especially if situation in Ukraine will escalate and peaceful regulation will fail. Day by day we see worrying geopolitical news – Macedonia, Yemen, and Syria are to name some. Unfortunately the geopolicy is sphere where we can’t do much.
That’s being said, as gold has passed through 1200 and until it stands below 1308 top, our long-term next destination point is previous lows at 1130, but if gold will return to 1130 for second time – this is temporal destination and we should prepare for further downward action. Current upside action we should treat as retracement, although it could be really significant on lower time frames.

Weekly
Weekly chart is not very important for us. Yes, trend has turned bullish here, but small white candle is too small event and it can’t make any valuable impact on overall picture. It gives no new patterns or signals. Mostly because market stands below 1232 level. If gold somehow will exceed it – then picture here also could change, while right now our analysis mostly stands the same.
Our major pattern here is still big butterfly. Speaking on targets, we have three different patterns that point on the same level. They are butterfly “buy”, AB=CD and the part of this AB-CD that takes “222” Sell shape.
Thus, all these patterns point at the same destination around 1080$. This level is special, because it coincides with YPS1.

Daily
As long-term picture has not been changed by upside action, and probably will not be changed until gold will not exceed 1230 level, we should focus on daily and lower time frames. Here again we have to warn you on fragile background of current rally. This rally mostly stands on short covering and is not supported by any real purchases from investors. It means that it could stop on any time. And this, in turn, means that we should not marry any position, take fast profits on clear patterns and setups.
Here we need to estimate how far this retracement could go to upside. Daily picture shows that we have big AB-CD in progress and its nearest target stands around 1218 area. 1225 is MPR1 and daily overbought. Recent acceleration was nice, so may be market will reach it.

4-hour
This time frame finalizes our analysis. As we’ve discussed on Friday, we could get reverse H&S pattern. Head looks a bit skewed, but this pattern shows good holding of 1.618 ratio between head and shoulder. If our suggestion is correct then right shoulder should appear somewhere around 1180 area. Thus, this is major point in our trading plan – wait for retracement down and watch for bullish reversal patterns there. This pattern also is useful from failure point of view. If, say, market will break through 1180 and H&S will fail – this will be definite signal of downward trend continuation. H&S target points at the same 1220 area, as daily targets.

Conclusion:
Long-term picture remains bearish and major patterns stand mostly intact.
On short-term charts market has turned to upside retracement as reaction on Fed dovish comments and Greece tensions. Technical picture suggests that retracement could continue a bit higher. But we can’t rely on it too much, since this upside action is not supported by real gold purchases from investors.

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]

Gold Daily Update Tue 23, June 2015

Good morning,


Reuters reports Gold retained sharp overnight losses on Tuesday as its safe-haven appeal was diminished by increasing hopes that Greece would reach a deal with its creditors to avoid a default, and strength in equities.

Bullion, often seen as an alternative investment during times of uncertainty, had seen modest support in the last few days as Greece struggled to strike a deal with its international creditors to avoid a default that could have seen it exit the euro zone.

But Greece took a step back from the abyss on Monday with the presentation of new budget proposals that euro zone leaders welcomed as a basis for a possible agreement in the coming days.

European Council President Donald Tusk said the aim was to have the Eurogroup finance ministers approve a cash-for-reform package on Wednesday evening and put it to euro zone leaders for final endorsement on Thursday morning.

"It seems that barring some last-minute surprises, the Greek talks will likely result in an agreement that would kick the can down the road, but which would avoid a default," said INTL FCStone analyst Edward Meir, adding this could mean further selling pressure on gold.

"With the removal of the 'Greek irritant' as a bullish issue, gold will likely revert to trading more on its own fundamentals, which at this stage, do not look that inspiring," Meir said.

He pointed to sluggish physical demand and the recent trend of outflows from exchange-traded funds (ETFs).

Assets in SPDR Gold Trust, the top gold-backed ETF, are near their lowest since September 2008, though they did post a small jump in holdings on Monday to 705.48 tonnes, the first increase since May 26.

Physical demand in top consuming region Asia has been sluggish as monsoon concerns weighed on demand in India and a better-yielding stock market kept buyers away in China.

The predominant factor weighing on gold is the expectation that the Federal Reserve will hike U.S. interest rates later this year.

Data on Monday showed U.S. home resales surged to a 5-1/2-year high in May as first-time buyers stepped into the market, the latest indication that housing and overall economic activity were gathering steam in the second quarter.



So, gold has appeared around 1180 much faster than we've expected to see. Anyway, downward action could be very fast as market is not supported by any real purchases from investors. So, now we will be watching what will happen around 1180. It's obvious that only drastical news or even could trigger upside action of reverse H&S pattern here. If nothing of that sort will happen, and gold will stay one-to-one with its fundamentals, then downward aciton will continue, since fundamental picture, expecially recent US home sales jump are not in favor of gold market.
Although trend is bullish, but daily picture does not look attractive for taking long position, especially with this huge evening star pattern. I would say even vice versa:

On 4-hour chart market has not destroyed yet H&S shape, but fast drop on the slope of right shoulder is bearish sign and makes H&S weaker:

Now we will be watching for 1180 area. This is WPS1 as well. Market could form here, say, Butterfly "Buy" or DRPO "Buy" pattern that potentially could trigger upside action. But you have to understand that if you would like to take long position here - this will be pain or gain situation, since you will make bet on unexpected drastical event. This is mostly gambling. Technically, picture looks bearish:

 

[Sive Morten]

Gold Daily Update Wed 24, June 2015

Good morning,


Recent Reuters comments - Gold slid to a one-week low on Wednesday, down for a fourth consecutive session as the dollar strengthened and global stock markets continued to rally on expectations of a Greek debt deal.

Asian shares were near to eking out a sixth session of gains on Wednesday as investors strove to stay optimistic on the chance of a Greek debt deal, while the dollar held firm as the prospect of U.S. rate rises swung back into view.

"Investors reacted to enhanced hopes of a Greek debt deal by liquidating or shorting gold," HSBC analyst James Steel said in a research note.

"Gold has absorbed a lot of 'bad' news recently and we wonder just how much lower the market is likely to go. Physical EM (demand in emerging markets) still appears sluggish, notably but not exclusively in India, an important gold-consuming country. This opens the way for lower prices but we think declines may be modest."

The precious metal, often seen as an alternative investment during times of financial and economic uncertainties, has come under pressure after Greece's leftwing government expressed confidence that parliament would approve a debt deal with lenders.

Gold is vulnerable to pressure from other factors such as the prospect of the first U.S. interest rate rise from the Federal Reserve in nearly a decade. That would boost the opportunity cost of holding non-yielding bullion.

Fed Governor Jerome Powell said on Tuesday he was prepared to raise interest rates twice this year, once in September and once in December, as long as the economy performs as expected.

Later in the day, the Atlanta Fed's GDPNow forecast model showed the U.S. economy is on track to grow 2 percent in the second quarter.

Strength in the dollar, which is benefiting from upbeat U.S. data, further dragged on gold, which is priced in the greenback and tends to gain when the currency is weak.

Physical demand in top consuming region Asia has been sluggish as monsoon concerns weighed on demand in India and a better-yielding stock market kept buyers away in China.

In other news, China is expected to receive approval from its central bank for a yuan-denominated gold fix "anytime now", with more details about the scheme potentially set to emerge at a major industry conference this week, sources told Reuters.


So guys, miracle has not happened - as we've said yesterday only something special could turn gold up. Now it seems that gold stands at eve of 1180 downside breakout and moving to 1130 lows. On daily chart we could use huge evening star pattern to estimate the target:

It points right now area at MPS1~1160. Of cause, Greece still could bring surprises, but as it has not happened, yet, gold is continuing move down.

On 4-hour chart gold stands 5$ below perfect bottom of H&S pattern. Theoretically it still could hold here, but as we've said yesterday, the speed of drop, that gold is showing, does not really support idea of soon upside reversal:

Market also has passed through WPS1. On hourly chart there are levels that we will be looking for possible short entry, if, of cause, no Greek surprises will come:

 

[Sive Morten]

Gold Daily Update Thu 25, June 2015

Good morning,


Reuters reports today Gold edged up on Thursday, after sliding for the past four sessions to a two-week low, with investors awaiting news on Greece's talks with its international lenders to avert a default for further trading cues.

Asian shares edged down on Thursday and the dollar eased, with investors on ice ahead of a meeting of European Union leaders later in the session as Greece continued last-minute efforts to avert a default.

"Gold looks to range trade between $1,169-$1,180 over the short term with the risk to the downside should positive news come out of the Greek debt negotiations," Samuel Laughlin, a metals dealer at MKS Group said in a note.

The dollar steadied after giving back gains against the yen early as debt negotiations to avert a Greek debt default hit a bump, while the euro treaded water after showing a more limited response.

Athens' talks with creditors bogged down on details, with next week's deadline to repay 1.6 billion euros to the International Monetary Fund looming and threatening to trigger the country's removal from the euro zone.

The outlook for the dollar, however, remained upbeat amid expectations U.S. interest rates in the world's largest economy would rise sooner than later.

Speculation that the U.S. Federal Reserve will raise rates for the first time in nearly a decade has weighed on gold prices this year. Higher rates lift the opportunity cost of holding non-yielding bullion.

Wednesday's data on U.S. gross domestic product confirmed the improving outlook. The final figure for the first quarter showed contraction in the economy was less than previously estimated.



Now we do not see a lot of new stuff on gold market. Daily trend has turned bearish and our short-term target @ 1160 still stands valid. We do not know how negotiations around Greece will finish, but at least now market is bearish.
1160 probably will be just temporal target on the way down to 1130.

On 4-hour chart market stably holds below 1180 - theoretical bottom of right shoulder and shows no attempt to move back again. This is bearish sign and increases chances on downward continuation:

 

[Sive Morten]

Gold Daily Update Fri 26, June 2015

Good morning,


Reuters reports Gold edged higher on Friday, recovering from its lowest in more than two weeks as Greece failed to reach an agreement with its international creditors, although gains were capped by expectations of a U.S. interest rate hike.

"Eurozone finance ministers ended their meeting without agreement after the three creditor institutions put forward a final cash-for-reform proposal," HSBC analyst James Steel said in a research note.

"Despite the possible gold-bullish ramifications of a Greek default, gold prices did little, indicating investors are not yet focused on gold as a safe haven as regards the Greek crisis."

Asian stocks fell as Greece failed again to reach an agreement with its creditors and stumbled towards a default, while major currencies like the euro and dollar drifted in narrow ranges as the debt saga sidelined investors.

Greece failed again to clinch a deal with its international creditors on Thursday, setting up a last-ditch effort on Saturday to either avert a default next week or start preparing to protect the euro zone from financial market turmoil.

The yellow metal, which is often seen as a safe haven during times of financial and economic uncertainties, has lost ground for the past five sessions on hopes of a Greek debt deal.

Expectations that the Federal Reserve is set to increase interest rates for the first time in nearly a decade, boosting the opportunity cost of holding non-yielding bullion, have pressured gold this year, keeping it in a narrow range.

Gold has held largely between $1,160 and $1,230 since mid-March, struggling to break higher despite an ostensibly bullish rise in tensions over Greece.

Demand in Asia's physical market remains slow despite a revival of Indian monsoon rains. "The Indian market is still sluggish regarding gold demand, with discounts to London reported on the key Mumbai market," Steel said.

SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.97 percent to 713.23 tonnes on Thursday from 706.37 tonnes on Wednesday.


So, no solution on Greece - no action on Gold. The one thing that hints on possible troubles is SPDR storages. Investors probably decide to add some physical gold on some case. What if Greece really will default?
Currently guys, there is no exit for Tsipras, despite what Greece will choose. EU needs to keep Greece under control and if Tsipras will accept EU offer and bring new unpopular reforms and social spending contraction - this will be an end fo Syriza and Tsipras as Prime Minister. If they will deny EU offer - this will be an end for Greece economy, at least in short term. For Syriza this also hardly will be positive... So, it's difficult choice.
On daily chart trend is bearish but market has taken some pause in downward action. 1160 level will be very important for us by many reasons - not only as target of evening star pattern, but as breakeven between two different AB-CD's. IF market wll drop below 1160 - it will erase upside big AB-CD and start downward AB-CD... and this could be important:

On 4-hour chart we see market's attempt to move higher. But currently, appearing of bearish butterfly looks more probable rather than rally up. As market stably stands below 1180 - we probably will not get H&S pattern. Current upward action could become second part of big butterfly. Currently its better avoid any bets until we willn't get solution on Greece.