GOLD PRO WEEKLY, June 27-01, 2016

[Sive Morten]

Fundamentals


(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.

COT Report

Here we do not have many changes since reports has been released 1 day before Brexit voting. Real changes of positions we probably will get next week.
Still, here we have interesting nuance. Although net longs still stand at all time highs - open interest has decreased. Other words speaking here we have some kind of divergence between speculative position line and open interest.
In ordinary circumstances, extreme levels of speculative positions is a sign of possible reversal - either short term or long term. That's why we still expect to see retracement down as major rush around Brexit voting will end

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.

Assumption that we've made last time was filled acurately:
"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."
Now we still keep this thought.

Meantime currently recent action mostly looks like bullish flag pattern that suggests some upside action. On Brexit results gold has pierced it slightly but now has dropped right back inside of it's body. Currently it is too early to speak about it, but potentially it could become a "bullish trap" as false consolidation breakout and it could lead to downward action. This also was an attempt to break strong resitsance area - YPR1 + monthly K-resistance.

Market sould get some relief after Brexit will happen. 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 in nearest 1-3 weeks, especially if we will get good NFP numbers.

It means that if you have a bullish view on market - do not take long position right now.

Weekly

Trend has turned bullish again here, but in addition to strong monthly resistance we've got weekly overbought. In fact, since monthly levels are valid on weekly chart as well, we've got weekly bearish "Stretch pattern by DiNapoli.
Widening triangle that we've recognized previosly has become even sharper. 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.

As we've acknowledged last week - we do not know whether this triangle will turn to, say, diamond, or some other reversal pattern, but any of them let 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. That has happened, 1350 level has been reached, but at the same time market looks really heavy and drop almost half way back.

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.

Here we could say on technical picture only - it looks bearish. What really will happen - we will see on Thursday. Anyway, market will have to break out of triangle to specify further direction. Upside breakout has failed by far. And even this one event looks bearish. Finally we have some hint on bearish divergence is starting to appear..

Daily

So, both of our trades have completed. I mean major B&B "Buy" right before voting and Friday's another one, minor B&B...
Currently as market just calm down a bit after voting turmoil we do not have much to discuss on daily chart. OscP indicator shows us OB/OS level. 3/8 retracement already has done by market. Gold will open around WPP. If it will start drop further, there are 2 major levels here - 1197-1200 K-support and middle of thrusting candle and next one is WPS1 and 1260 major Fib support (again 1260). This last level is especially important, because this is also the bottom of gaint upside candle. If market will take it out - this will be bearish sign and downward acceleration could follow.

Another thing that we could say here is gold could turn for consolidation for 1-2 weeks, may be even till NFP release. This type of price action very often happens when market forms huge candles. Its range could keep price action for some time.

Right now we do not have any setup here, that we could trade within coming week. Since our 2 trades, as we've said - just have been completed. May be we will get something on intraday charts - keep looking our daily videos...

5-min

We rare take a look at 5-min chart, but today it shows overall situation better. On Friday we've traded scalp B&B "Buy" on daily chart. This pattern has started well, but has not quite reached its target which was 1338 Fib resistance while upside action has stopped at 1332.
Gold has started to form AB=CD pattern, but has stopped on 0.618 minor extension and didn't move higher.
Another attempt was even worse - you can see this rounding action down. This shows the weakness and exhausting of gold market.
Thus, it really could lead to further drop on Monday. We could get butterfly pattern that has targets right around daily K-support area around 1195. So, it confirms our expectaiton on possible downard action.

Conclusion:
We continue to keep long-term bullish view on gold market. But now chances on deep retracement are very high. It is interesting how this riddle will be resolved - overload of long positions and negative voting results.

In short-term perspective we mostly will be focused on tactical setups. Right now we expect some fluctuations inside of 1260-1300 area and first leg on Monday probably will be to 1195 area.

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 fell on Tuesday as investors booked profits, two days after the yellow metal rallied to its highest since March 2014 thanks to safe-haven demand in the wake of Britain's decision to exit the European Union.

Gold soared as much as 8 percent to $1,358.20 on Friday, the highest since March 2014, and had ended up 4.8 percent, its biggest one-day gain since January 2009 as the British vote drove investors toward safer assets.

Investors, however, scooped up beaten down assets on Tuesday as sterling and Asian emerging market currencies regained some footing and crude oil bounced, bringing down the demand for gold. The safe haven asset is often perceived as a hedge against economic and financial risk.

Spot gold was down 0.7 percent to $1,315.16 an ounce by 0719 GMT. It rose 0.7 percent on Monday.
U.S. gold slipped 0.5 percent at $1,318.50.

"So far it has mainly been Chinese selling. They have been good sellers the whole way up, especially when we passed $1,300. We continue to see decent selling from them," said MKS Group trader Alex Thorndike.

"It seems like the market is pausing here a bit now considering the moves we have seen since Friday. But in a couple of weeks I think we could see prices in the $1,375-$1,400 range."

British bank Standard Chartered, however, said the gold rally has lost its momentum and it would be difficult for the metal to float above $1,300 an ounce.

"Once the immediate short-run rush to safety subsides and assuming effective policy responses to allay capital market concerns, we think gold will struggle to stay above $1,300/oz during Q3, and will push back down towards USD 1,250/oz," the bank said in a note.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.40 percent to 947.38 tonnes on Monday, the highest since July 2013.

So, on gold market we do not have significant changes just yet. On daily chart long upside candle has become most important tool. Because depending on direction of breakout of it's range - market will follow the same. For some time price could stands inside of this range, as investors should go in habit to new reality and understand what to do next.
We see with this overall situation preliminary steps to solid downward retracement. First important important level on daily chart is 1195 K-support that market should reach today probably:

On 4-hour chart we have interesting ratio - top was formed right at 1.618 extension of our wedge. Currently it is unclear whether it will help us somehow or not, but it could be important later, may be some pattern will be formed...

On hourly chart we have mostly the same picture - expect completion of Butterfly "buy" that has target right around daily K-support area:

That's being step, lets go step by step, and the first one is down to 1195 area.

 

[Sive Morten]

Good morning,

(Reuters) Gold rebounded on Wednesday from its losses in the previous session on investor demands for
safety as uncertainty due to Brexit vote continued to pressure financial markets.

Bullion fell 0.9 percent on Tuesday as investors booked profits after a Brexit-driven rally that pushed prices up to their highest since March 2014. Gold, which hit a high of $1,358.20 on Friday, has risen 24 percent so far this year.

Spot gold rose 0.6 percent to $1,319.75 an ounce by 0632 GMT, up for a third session in four. U.S. gold was up 0.4 percent at $1,323.50

"Despite Tuesday's impressive bounce in global equity markets (leading to gold's modest retracement), we are not sure whether these patterns will stay in place over the rest of the week and would not be surprised to see more weakness in equities going into Wednesday's session," said INTL FCStone analyst Edward Meir.

"As a result, gold could recover the ground it lost on Tuesday, with geo-political headlines outside Europe possibly providing an additional element of support." Spot gold was at its highest relative to platinum on
record this week as institutional and retail investors have piled into bullion following the shock referendum verdict.

Jiang Shu, chief analyst at Shandong Gold Group, said gold could trade between $1,400 to $1,450 an ounce in the next 2-3 weeks provided Brexit is not seen as a long-term threat to global economic development.
"If Brexit is seen severely impacting the market, central banks will step in to calm the markets, which would not be good for gold," he added.

European leaders have asked Britain to act quickly to resolve the political and economic confusion unleashed by its vote to exit the European Union, after the IMF said the uncertainty could pressure global economic growth.

Britain's vote to leave the bloc could pose a new drag on the U.S. economy at a time when momentum in the U.S. job market may already by slowing, Federal Reserve governor Jerome Powell said on Tuesday.

Asian shares were swept up in a global relief rally on Wednesday, while a semblance of stability helped the pound and the euro hover above their post-Brexit lows, though the battered European currencies remain hampered by longer term uncertainty.

So, guys, on Gold market we do not have a lot of changes. Yesterday downward action really has started but terrorist attack in Turkey has brought some adjustment and gold after touching WPP has moved slightly higher.
Actually we suspect that hardly we will get any daily setup within 1-2 weeks. It is unclear still how precisely UK is going to leave EU, markets will need to understand what's really going on and this probably could become a reason that gold will stay in gaint white candle range.
Thus, we probably will get the same patterns that we usually trade, but all of them will be on intraday charts:

Thus, right now we have the same butterfly, it is still valid, later may be it will shift to 3-Drive, who knows...
But we still keep our expectation on reaching daily K-support area around 1195 in near term.
Our suspicious is Brexit will be negative for gold because it will strongly impact on economies as EU as UK and this will lead to another spiral of economy slowdown.

 

[Zilvinas]

Our suspicious is Brexit will be negative for gold because it will strongly impact on economies as EU as UK and this will lead to another spiral of economy slowdown.

I didn't quite understand this statement. Shouldn't it be that if EU and UK economies go bad, colapse etc. then gold go up, because of uncertainty and turmoil, so positive for gold?

 

[Sive Morten]

I didn't quite understand this statement. Shouldn't it be that if EU and UK economies go bad, colapse etc. then gold go up, because of uncertainty and turmoil, so positive for gold?

I think not. This is not a turmoil and uncertainy. This is just stagflation. Any drop in inflation is negative for gold. Crisis has started in 2008 and gold stands in downtrend since then.
Only if depression will lead to some economy distruction processes - this could support gold, I suppose. (For example, if US will announce national debt default or something of that sort. )
But now this is hardly possible. In early times, any crisis was acompanied by lack of money, poverty, etc. Right now is different situation - it's oversupply of liquidity.

 

[Sive Morten]

Good morning,

(Reuters) Gold fell on Thursday after rising as much as 1 percent during the previous session, with
safe-haven demand easing as the shock of Britain's decision to leave the European Union began to fade.
Asian stocks rose on Thursday, tracking an overnight rally on Wall Street, while the dollar remained steady against a basket of currencies as global markets regained a semblance of calm.

Spot gold had fallen 0.4 percent to $1,313.36 an ounce by 0714 GMT. It closed about 0.5-percent higher on
Wednesday, rising for three out of four sessions. U.S. gold was down 0.8 percent at $1,316.20.
"It seems that the market has now turned away from the Brexit saga for the moment, given that there are no major developments in terms of what it (Britain) plans to do next," said Vyanne Lai, analyst, National Australia Bank.

"The general feeling is that the U.S. Federal Reserve might not be in a rush to increase interest rates in the coming months." Credit Suisse on Wednesday raised its short-term and long-term price forecasts for gold and silver, citing prolonged macro and political uncertainty following the Brexit vote.

"We forecast the gold price to increase through 2016 and believe the $1,500/oz mark could be tested by late 2016 or early 2017 as the macro implications of the Brexit vote are clarified, and the Nov. 8 U.S. election weighs on sentiment," the bank said.

J.P.Morgan raised its 2016 and 2017 gold and silver price forecasts, while lifting its bullion forecast for the second half of the year by 11 percent to $1,365 per ounce. ANZ too raised its short term target for gold to $1,375 an ounce, with further upside expected in 2017.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.28 percent to 950.05 tonnes on Wednesday, the highest since July 2013.

So, on gold market as we've said, right now w do not need daily chart as market forms almost inside sessions and stands in tight range:

Meantime, situaiton in short-term perspective has changed. On 4-hour chart we see some kind of flag consolidation and signs of bullish dynamic pressure, that suggests some upside action, at least to 1340-1350 area:

On hourly chart we have even more signs - triangle is forming and take a look - right now market has not reached the bottom but turned up again. Usually it happens before upside breakout. Breakout itself could take shape of butterfly. Our former butterfly has lost it's normal shape:

That's being said - if you're scalp trader, you could think about this setup. Also it warns against taking short position for awhile...

 

[Sive Morten]

Good morning,

(Reuters) Gold rose on Friday and was headed for its fifth straight weekly gain, boosted by a weaker
dollar as the safe-haven asset continued to be in demand despite an increase in risk appetite post the Brexit vote.

The dollar pulled back against the yen and also fell against a basket of six currencies, even as Asian stocks rose on Friday as risk appetite continued to recover from last week's Brexit shock.

Spot gold was up 0.6 percent at $1,329.66 an ounce by 0418 GMT. The yellow metal registered its biggest monthly rise since February in June and was up 1 percent for the week so far.

U.S. gold rose as high as 1 percent to touch a session best of $1,334.10. "It seems that investors are pushing both equities and gold higher simultaneously. One of these will eventually have to give, but for the moment, they each seem to be trading on their own dynamics," said INTL FCStone analyst Edward Meir.

ANZ analyst Daniel Hynes said bullion's upward rise was just a continuation of its movement following the Brexit vote. "The shock has actually passed but expectations of a rate hike by the U.S. Federal Reserve for the short term has actually fallen quite significantly in combination with the apparent loosening of the monetary policy in Europe driving investor demand," he added.

Societe Generale on Thursday raised its gold price forecasts on fears over the ongoing political, financial and economic fallout of Britain's vote last week to leave the European Union. "Looking ahead, it seems that gold will remain one of the major beneficiaries in the current backdrop, as heightened volatility and lingering uncertainty will keep investors' risk appetite in check," the bank said in a note.

World stocks rose on Thursday after Bank of England Governor Mark Carney said the central bank would probably need to pump more stimulus into Britain's economy over the summer after the shock of last week's decision by voters to leave the European Union.

"Gold has been on an uptrend and silver tends to catch up," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central.

On gold market today we even do not need daily chart. Our yesterday's suggestion on possible upside action was confirmed and has reached the target. Thus, on 4-hour chart we've talked on bullish dynamic pressure and now market has completed it's minimum destination point:

On hourly chart it has taken a shape of butterfly that is accompanied by inner AB-CD pattern. As a result we've got 2 targets - ~1340, which includes AB-CD, 1.27 butterfly and Fib resistance and 1350 is 1.618 as AB-CD as butterfly.

So, if you've taken a long position yesterday - think about taking profit. For those who are wathing for scalp short entry - 1350 level could interesting. Despite these fluctuations inside of daily huge candle range - we still think that technically gold right now has a limitations on upside action. Although we keep up with our thoughts on long-term bullish view on gold.
That's being said, while market will not specify further direction by some daily pattern - do not marry any position, take profit fast, as today...