GOLD PRO Weekly June 29-03, 2015

[Sive Morten]

Fundamentals

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

Reuters reports Gold was little changed on Friday, after falling to a three-week low, on short-covering at the end of the week and caution ahead of crunch talks on Greece this weekend, while concerns over the longer-term outlook for the metal provided price pressure.

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

"It's just drifting higher," said one U.S. trader, adding that end-of-the-week short-covering combined with a lack of offers as the end of the quarter approaches, helped prices turn slightly higher.

Signs of possible agreement soon between Greece and its creditors steadied world stock markets and sent U.S. bond yields to nine-month highs by curbing demand for safe-haven U.S. debt.

Expectations that U.S. interest rates will rise for the first time in nearly a decade this year, lifting the U.S. currency and boosting the opportunity cost of holding non-yielding bullion, have pressured gold, keeping it in a 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.

It has drawn some support from a rise in holdings of gold-backed exchange-traded funds, which issue securities backed by physical metal, this week after outflows earlier this year.

Holdings of the biggest gold ETF, SPDR Gold Shares , rose 6.9 tonnes on Thursday, their biggest one-day increase since Feb. 2.

Silver was down 0.6 percent at $15.77 an ounce, having briefly touched a three-month low of $15.50. Platinum was down 0.5 percent at $1,075.99 an ounce, while palladium was up 0.1 percent at $678.22 an ounce.

"The industrial demand is light and there's a lot of recycling," the U.S. trader said, noting chart-based weakness as well.

Palladium fell to a two-year low at $666.82 in earlier trade and fell for the seventh straight week.

"While short-term moves are driven by many factors and the metal faces a number of challenges, we think the underlying weakness is due to a sharp slowdown in global auto sales growth," Macquarie said in a note.

Recent CFTC data shows increase in open interest and this increase mostly stands not in favor of peaceful compromise in Greek question. Speculators have increased long position, while short one mostly stands flat and even has decreased slightly. SPDR Fund also shows solid inflow last week. Although it is not necessary will lead to gradual upside trend, it could be just fast short-term reaction. But it also shows that investors see that agreement between EU and Greece is not as close as it is shown in mass media.

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Summary:

As Gold also depends significantly on Greece solution, we suggest you to read our thoughts on this subject here:
https://www.forexpeacearmy.com/forex-forum/sive-morten-analysis/40833-forex-pro-weekly-june-29-03-2015-a.html

Technicals
Monthly
Last week shows no impact on monthly chart. 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. Last week data shows increasing as net long position as storages, but they are mostly driven by Greece hazard and investors are trying to hedge some risks, but not some drastical and fundamental reversal on gold market.
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
Situation on weekly chart also has changed rather fast. Only last week we’ve discussed upside potential and how far market could move to the upside.
But on previous week trend has turned bearish again. Sometimes I call this kind of action as “2-day stop grabber”. This is not invention of DiNapoli, but I saw many times when market shifts trend and on next candle return it back – it very often works as grabber. This is easily could be explained – if you will increase time frame for 2 times you’ll get the grabber there. Anyway, here we could get something of that sort. Besides, take a look at action April. Trend mostly holds bullish, but price action is not, gold can’t start upside action. This could be the sign of market’s weakness.
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
Trend is bearish here. Daily picture barely has changed and we have said everything on Friday. Our short-term target is still the same and it is based on large evening star pattern that points on 1160 level. At the same time this level will be important by many reasons. This is, in fact, an edge between upside and downside AB-CD’s. If market will drop below it – it will erase the former and trigger the latter. Any target below 1160, which is 1150, 1130 – they are just temporal, since market is returning back to them second time within a year. It means that all of them probably will be broken and real destination of the market is our long-term target 1050-1080.
Meantime, if there will be no peaceful solution on Greece we assume that gold turn to short-term upside rally, but hardly this rally will lead to major reversal on the market. For example we could get butterfly “Sell” based on most recent swing down, or even action of shyer scale. As we said in our FX research – before taking any position, it will be better to wait result on Greece question. It should come on Monday.

4-hour
If market will not be able to form large butterfly, and reaction on Greece demarche will be mild, in this case gold could try to form this butterfly and show upside action just to WPR1. The failure of H&S that we’ve discussed last week, also looks as bearish sign that decreases chances on upside reversal. Still, all scenarios that we’ve discussed here are mostly just an assumption, because real driving factor right now is Greece.

Conclusion:
Long-term picture remains bearish and major patterns stand mostly intact. Our long-term target still stands at 1050-1080 area. We do not exclude scenario with possible upside action if Greece default will happen on Monday but we think that hardly this event drastically will change the tendency. Other words speaking, we accept idea of possible upside action, may be it even could be significant, but this action hardly will break long-term bearish trend and sentiment. Reaction on Greece default could be strong, but probably it will not be long-term. Greece problem was discussing for a long period already and negative result probably partially was priced in already.
On short-term charts market could show different reaction in a case of Greece default. It could be stronger and lead to big butterfly on daily chart or, vice versa, it could be shyer and price could stop around WPR1… Anyway, as Greece situation should be resolved on Monday, despite the way how it will be resolved, we mostly call to not take any position until it will happen.

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 30, June 2015

Good morning,


Reuters reports Gold dipped on Tuesday as it failed to garner strong safe-haven bids even with Greece heading for a debt default later in the session, while a robust dollar and a recovery in stock markets also weighed.

"Surprisingly, the safe-haven bids haven't materialised," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. "Maybe they will once we see the impact of a Greek default spreading to other countries in Europe and elsewhere."

"Gold price could possibly move sharply after the Sunday referendum," he said.

Greece is just hours away from defaulting on a 1.6 billion euro loan from the International Monetary Fund. Talks with creditors broke down over the weekend, with Prime Minister Alexis Tsipras calling for a bailout referendum on July 5.

Tens of thousands of Greeks rallied on Monday to back their leftwing government's rejection of a tough international bailout.

The breakdown of talks has pushed the European Union and euro zone into uncharted terrain. The Athens stock exchange was closed like the banks, but other financial markets fell on fears that Greece could be heading out of the euro. In overnight trading on Wall Street, all three major stock indices tumbled.

Despite the risk-averse sentiment in the markets, bullion pared some of its gains on Monday, in what MKS Group traders said was a "relatively disappointing day for the precious complex considering the turmoil and uncertainty surrounding the Greek situation."

Though gold is usually seen as an alternative investment during times of financial and economic uncertainties, the safe-haven gains tend to be short lived.

Gold has been weighed down this year on expectations the Federal Reserve will hike U.S. interest rates later this year. Higher rates could dent demand for non-interest-paying bullion.

The fallout from Greece in the United States is expected to be modest and not enough to throw the Fed's likely September rate hike off course, said former Fed officials and analysts.

Technically, gold still remains weak, and could likely test $1,163, analysts at ScotiaMocatta said.



So, no drastical reaction has happened on gold. Mostly because we can't call it as unexpected. The fact of default probably also could lead to some upside splashes on gold, but recent action shows real weakness in gold market and significantly increases further downward action. Because once gold has opened with gap up, it wasn't able to keep it and returned right back down to 1180's level.
on daily chart we still expect reaching of 1160 area - our short-term target:

On 4-hour chart we've got this upside reaction that could become a part of butterfly, that we've discussed recently. If you remember our concern was about the degree of gold reaction on Greece default. Monday open shows that reaction is not as strong as it could be, that confirms gold's weakness and increases chances on bearish continuation. And butterfly could become part of this action:

As you can see gold wasn't able to reach even WPR1. It could get chance to do it, if it will form bullish grabber here. In this case we could upside AB=CD right to WPR1. But anyway, this will be tactical action that will not change the butterfly's shape.

 

[Sive Morten]

Gold Daily Update Tue 01, July 2015

Good morning,


Reuters reports Gold struggled close to its lowest in nearly four weeks on Wednesday, as the dollar stood tall after Greece missed a loan payment to the International Monetary Fund.

The Greek debt crisis has failed to spark robust safe-haven bids, with bullion investors still worried over an expected U.S. rate hike later this year after more strong economic data.

Greece made last-minute overtures to its international creditors for financial aid on Tuesday, but it was not enough to save the country from becoming the first developed economy to default on a loan with the IMF.

With its missed payment to the IMF, Greece is on a path out of the euro with unforeseeable consequences for both the EU's grand currency project and the global economy.

"We are seeing some beginning-of-the-month buying for gold which is pushing up prices slightly today," said a precious metals trader in Hong Kong.

"But the Greek situation itself has been disheartening for gold. People don't seem to be worried about the contagion effect and that is clear in the gold price," he said.

Bullion typically sees safe-haven bids during times of financial and economic uncertainties. But gold's underperformance points to much broader weakness as investors gear up for rising U.S. rates this year.

There is still scope for the crisis to drive more risk-averse money into gold, if it worsens to the point where Greece leaves the euro zone, or if there is contagion into other economies in the bloc, such as Italy, Portugal or Spain.

With the euro on the defensive on Wednesday, the dollar index edged higher for a second straight session.

The Federal Reserve is on track to raise interest rates this year, with September still "in play", a top central bank official said on Tuesday, despite growing market volatility and anxiety in the wake of Greece's debt default.

St. Louis Fed President James Bullard shrugged off the impact of Greece's economic problems and said the Fed will remain data dependent on its view about when to raise rates.

Data on Tuesday showed U.S. consumer confidence increased solidly in June, supporting expectations the Fed was on track to hike rates this year.



On daily chart we do not see any significant changes. As major Greece event will happen in weekend, markets probably will drive on its own and gold has chances to reach finally 1160 area. Also, this week will be short due Independence day celebration in US. So, hardly something drasticall will happen till the end of the week:

ON 4-hour chart we could add just minor detail. Yesterday we've said that market could show AB=CD to WPR1, as reaction on probable Greece demarche. But as Gold has dropped below former lows, this AB-CD has been cancelled. It means that gradually market could drift to 1160 area till the end of the week:

 

[Sive Morten]

Gold Daily Update Thu 02, July 2015

Good morning,


Reuters reports Gold fell to a four-week low on Thursday, extending losses into a third straight session due to a strong dollar and the prospect of higher U.S. interest rates, with the market eyeing U.S. economic data due later in the day for further trading cues.

With the Greek debt crisis failing to trigger strong safe-haven bids for gold, markets turned their focus to data on U.S. nonfarm payrolls and durable goods due later in the day for clues on the strength of the economy and how that will affect Federal Reserve monetary policy.

"Gold's appeal as a safe-haven asset, clearly, has not really shone through in the past half-week. Not aiding gold's cause has been a rapidly strengthening dollar," said Howie Lee, an analyst at Phillip Futures.

Given the recent strong U.S. economic data, "there may be a good chance gold could further decline today", Lee said. "We expect a strong U.S. labour market report to send gold prices downwards to $1,150."

The ADP National Employment Report on Wednesday showed 237,000 private-sector jobs were created in June, beating the median expectation among economists surveyed by Reuters of a gain of 218,000 jobs. The gain was the biggest in six months.

More encouraging data could prompt the Fed to raise rates sooner rather than later, hurting demand for non-interest-paying bullion. Gold prices have been hamstrung by the prospect of higher U.S. interest rates this year.

The focus in the Greek crisis is on Sunday's referendum.

Prime Minister Alexis Tsipras has urged Greeks to reject an international bailout deal, wrecking any prospect of repairing relations with European Union partners before the referendum, which may decide Greece's future in Europe.

There is scope for the Greek crisis to drive more risk-averse money into gold if it worsens to the point where Greece leaves the euro zone, or if there is contagion into other economies in the bloc, such as Italy, Portugal or Spain, traders said.



So, guys, as we've suggested, to gold and other market was given to drive on it's own by far since important geopolitical issues were postponed on weekend and next week. Thus, fundamental data has come on first stage and starts to impact markets. As result, gold continues drop lower and almost has hit our short-term 1160 target:

On 4-hour chart we have major short-term pattern that is butterfly. Moving to 1160 is only half way, since butterfly has lower target and also it has inner AB=CD pattern with the same distination point:

On hourly chart we have minor AB-CD right to 1160 and this is also WPS1 on current week. So, as tomorrow gold market probably will be thin or even closed, hardly we will get any drastical action.

 

[Sive Morten]

Gold Daily Update Fri 03, July 2015

Good morning,


Reuters reports Gold ticked up above a 3-1/2 month low on Friday, as sluggish U.S. jobs data tempered expectations for a September rate hike by the Federal Reserve and hurt the dollar.

For the week, bullion is still down 0.6 percent, its second straight weekly loss, due to gains in the dollar earlier in the week from the Greek debt crisis.

"The soft U.S. employment data has helped gold for the moment but I don't see much more upside here unless the dollar drops sharply," said a precious metal trader in Hong Kong.

"Liquidity will likely be thin today with the U.S. markets out, so the next trigger could be Sunday's referendum in Greece," the trader said.

U.S. markets will be closed on Friday in observance of Independence Day.

Data on Thursday showed nonfarm payrolls rose 223,000 last month, below expectations. Payrolls growth in April and May was also revised downwards. At least 432,000 people dropped out of the labour force.

Before the data, there had been strong expectations that the Fed would raise interest rates for the first time in nearly a decade in September, given recent strong data on consumer spending and housing.

Gold has been under pressure all year from uncertainty over the timing of a rate hike as higher rates could dent demand for non-interest-paying bullion and boost the dollar.

SPDR Gold Trust, the top gold-backed exchange-traded fund, said its holdings fell 0.25 percent to 709.65 tonnes on Thursday, not too far from a near-six-year low hit last month.

Despite Thursday's losses, the greenback is on track for a second straight weekly gain as the Greek debt crisis hurt the euro, capping gains in bullion.

Athens defaulted on a loan repayment to the International Monetary Fund this week. Greece's left-wing government called a referendum for Sunday after five months of acrimonious talks with its official creditors over an aid-for-reforms deal broke down without a deal.

The crisis could drive more risk-averse money into gold if Greece leaves the euro zone, or if contagion reaches other economies in the bloc, such as Italy, Portugal or Spain, traders said.


So, while there was some silence on Greece direction, markets mostly were driven by fundamentals. At first glance data was not bad, just 10K below expectation, but if we will dig deeper, then we will see first - significant revision down of May and April numbers, second - low participation rate (at the level of 1977), and finally, that production and manufacturing do not create any jobs. Vast part of NFP comes from services. This is poor tendency and if you remember Fed particularly was speaking on problems in participation rate...
So, on daily chart, as we've suggested market has hit our 1160 target. And also taking out of previous lows - erased chances on upside butterfly and AB-CD pattern. Lazy action could be explained mostly by low activity at the eve of long holidays in US. As market will back to life, we probably could get stronger move down. On long term charts situation looks bearish and we still think that 1160 is temporal destination, as well as all other targets, such as 1150-1140-1130. Major bearish target still stands at 1050-1080 area.

On 4-hour chart market has stopped right at WPS1 and completed some intraday target, but keeps valid butterfly and inner AB=CD that suggest deeper action on next week:

On hourly chart we see reasons of upside retracement - AB=CD right at WPS1. Upside action looks choppy that confirms retracement quality of upside action. Probably it should stop somewhere around current level, since market has met previous consolidation and re-tested it. It is logical to suggest downward continuation somewhere from current level: