GOLD PRO Weekly March 02-06, 2015

[Sive Morten]

Fundamentals

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

Gold rebounded on Friday as mixed U.S. data tempered expectations of a U.S. Federal Reserve rate hike this year but was still set for its biggest monthly loss since September on a steady dollar and multiyear highs for European shares.

Gold has fallen about 7 percent from a five-month high above $1,300 an ounce hit in January as expectations of a U.S. rate increase hurt its appeal as an insurance against risk.

Data released on Friday showed U.S. economic growth braked more sharply than initially thought in the fourth quarter amid a moderate increase in business inventories and a wider trade deficit, but strong domestic demand brightened the outlook.

"The revision of the GDP to 2.2 (percent) versus expected 2.1 helped, so we have some short-covering going on," said George Gero, precious metals strategist for RBC Capital markets in New York. "We may see some higher prices next week."

U.S. consumer sentiment data fell from an 11-year high in February, while contracts to purchase previously owned U.S. homes rose to their highest level in 1-1/2 years in January.

We had two sets of data showing a generally weak U.S. economy and one more constructive," said Societe Generale analyst Robin Bhar.

"Any data coming in weak plays into the view that rates stay lower for longer and vice versa," he added. "Generally, we are stuck in a $1,200/$1,220 range ... and the market will continue to look at U.S. economic releases for clues over future trading direction."

China's gold imports from Hong Kong rebounded in January from a three-month low in December, reflecting increased demand ahead of the Lunar New Year holiday.

Premiums on the Shanghai Gold Exchange remained around $4 an ounce over the global spot price on Friday, down slightly after Chinese buyers returned to the market following the Feb. 18-24 break.


Recent CFTC data shows contraction of positions as in terms of open interest as in terms of net long position for 5 week in a row. Speculative shorts, oppositely, has grown a bit. Our long-to-total position ratio has dropped even more and this should be sufficient correction for upside continuation. Other worlds, ratio right now stands at levels that do not prevent market from further upside action.
SPDR fund reports on stable storages and amount of gold has not changed since previous week and stands at 771 tonnes. This tells that it is probably too early to treat current move down as new long-term bear trend and breaking of all hopes of the bulls.

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Technicals
Monthly
So, drop on recent couple of weeks looks significant. Here 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$. At the same time February still stands as inside month and we need 1130 breakout to start clearly speak on 1050 target.
Since the beginning of the year market shows solid upside action. Market was able to exceed yearly pivot, passed half way to Yearly Pivot resistance 1 but right now has turned to retracement and right now has closed below YPP. From technical point of view this is bearish sign. This could be very significant moment and next logical destination will be yearly pivot support 1 around 1083$.
At the same time the major driving factor for Gold is inflation. Previous data has shown anemic pace of it or even decreasing. But last NFP data has value not just because of increasing of employment but increasing of cost of labor. Data has shown 12 cent growth and this is approximately 2,2% of annual inflation Currently this numbers have negative effect on gold, since they simultaneously increase chance of rate hike, but when rate will be increased and inflation will show gradual upside pace – this will be supportive factor for gold. Especially if this will be accompanied by reversal on crude oil. But this is future talks and currently we do not see reasons yet to cancel our 1050$ target or at least possible big AB-CD down.
Shortly speaking gold now will fluctuate in difficult period. If coming data will be gradual and supportive for rate hike – NFP will continue show upside trend, inflation will grow, GDP will keep high pace – gold will remain under pressure till first rate hike. After that inflation will be supportive factor for gold.
If data will be mixed as it was recently – then it could lead to local strength on gold market. This is in fact, what we see from 1200 level – slightly dovish comments from Yellen, downward revision of GDP and worse consumption data and gold has turned to upside retracement.
Still, 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.
That’s being said, economical data supports further gold decreasing but geopolicy could bring significant adjustment. Unfortunately the geopolicy is sphere where we can’t do much. Right now our major attention will stand on 1200 level that could become a clue to medium-term perspective of gold market. Although bounce up that we’ve discussed has started, but right now it does not look like it will be sustainable.

Weekly
On previous week we’ve agreed to watch for possible bullish grabber. But I have to say that we’ve got any – trend just has turned bearish. Theoretically, if market will skyrocket on coming week we could get 2-period grabber, but to be honest, guys, it is very difficult to believe that this will happen. So, drastical breakout has not happened yet, but bounce up does not look as stable and sustainable.
So, as previously we think that 1200 area has major importance. Gold likes to show deep retracements and now it comes down from overbought. 1200 is MPS1 and 5/8 Fib support. Until pivot support holds retracement – previous trend is valid and MACD confirms this by far. Also do not forget about former big ratio of CFTC data that was supportive for retracement down. Conclusion here is as follows – bulls has lost nothing yet, at least until market stands above 1200. Breaking through 1200 will suggest changing in weekly trend. Now we are coming to culmination that will clarify trend direction for gold.

Daily
Based on reaction that we now see on daily chart – we could suggest very interesting action. First is, recall bearish grabber that we’ve discussed on Thursday. This grabber is still valid and it suggests taking out of recent lows. At the same time grabber will not necessary lead to downward continuation. It could become just W&R.
This possibility leads us to second thought. Green line on the chart is 3x3 DMA and we already have first crossing of it by price. As we know – 1200 level is rock hard support and it could take more time for market response on it. Thus, if we will get grabber action and this will be just W&R – we could get DRPO “Buy” here. This combination will be primary object that we will be watching for on gold market on coming week.

1-hour
On hourly chart we also have alternative scenario, but concern will be resolved fast probably. Thus, we have bullish grabber here that suggests taking out of previous highs and we also have not quite completed AB=CD pattern. Potentially this could lead to appearing of butterfly “sell” pattern with upside potential at 1225 area – right around WPR1.
But if grabber will fail and market just will continue move down – we will be watch for 1205 butterfly lows. Breakout through it probably will cancel upside scenario and trigger bearish grabber on daily chart.

Conclusion:
From technical point of view we have no reasons yet to abandon possible long-term downward AB-CD as VoB (Volatility breakout) development. Fundamental background is not very supportive for gold right now and one cluster of events that could bring unexpected bullish surprise is geopolitical tensions.
In short-term perspective our task is mostly tactical and we will continue to twist around possible upside retracement. Current situation on gold looks promising and could give us nice patterns for short-term trading.

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 03, March 2015

Good morning,


Reuters reports Gold edged higher on Tuesday, recovering from early losses that pulled it briefly below $1,200 an ounce, as the dollar came off an 11-year peak against a basket of currencies.

But expectations for a U.S. interest rate hike limited bullion's gains, keeping it below Monday's two-week high. Gold fell the most in five months in February, with the Federal Reserve seen to be set to lift rates this year for the first time since 2006 amid a generally strengthening U.S. economy.

Firm Chinese demand had kept gold above $1,200 since last week, climbing to a two-week top of $1,223.20 on Monday.

The greenback eased from the day's highs versus a basket of major currencies, making dollar-denominated assets such as gold cheaper for investors holding other currencies.

"Despite the fact that most people are swaying back and forth on the timing of the U.S. rate hike, there is still consensus that it will happen this year," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

Seven of the Fed's current 17 members have now said they at least want the option of an interest rate hike in June on the table, or have pushed in general for an earlier increase in expectation that wages and inflation will turn higher.

To said he expects gold to trade between $1,180 and $1,220 in the short term, and does not see demand from top consumers China and India providing any lasting support.

"We should not have any fantasy that physical gold demand can pull gold out (from low levels)," said To. "In China and India, we can see that the peak for physical gold demand has passed."

Structural reforms in China aimed at a more sustainable pace of economic growth would keep gold demand in check, he said. Most analysts expect China's gold imports via main conduit Hong Kong to recover this year, but to stay below the record 1,158.16 tonnes seen in 2013.

India kept the gold import duty at a record 10 percent in a setback for jewellers when it unveiled its budget over the weekend.


On Gold market we continue to watch for bearish grabber and mostly DRPO "Buy" that could appear on very important 1200 support area. Market could show respect to this level by deeper ratracement that particularly could be triggered by DRPO "Buy" pattern:

But situation has become more complex since then. Recall our discussion of H&S pattern on Friday:

We've said that if market will hold around 1205 it could take shape of H&S pattern. This level is also WPS1 of current week. And this is an action that we see right now. So, the complexity stands not in direction - both patterns are pointed up. But around level where upside action could start. Thus, H&S suggests that upside action already has started while DRPO suggests deeper move down first, may be even W&R of previous lows (recall bearish daily grabber) and only after that upside retracement. So, let's see what will happen.
Actually guys, as we've expected deeper downward action on dollar-related currencies, then it seems that DRPO scenario looks more probable...

 

[Sive Morten]

Gold Daily Update Wed 04, March 2015

Good morning,

Reuters reports Gold snapped a two-day losing streak on Wednesday as a dip in the dollar supported the metal, although caution prevailed ahead of major U.S. economic data and a European Central Bank meeting.

Despite the gains, the metal could remain under pressure due to expectations of robust U.S. economic data and higher U.S. interest rates, plus investor outflows from bullion funds.

"In the short term, the mood is still bearish though we might trade in a tight range until the jobs data on Friday," said a trader in Hong Kong.

"Exchange-traded funds are seeing some big outflows, so that could also add to the pressure if U.S. data is better than expected," he said.

Gold is likely to trade in a $1,200-$1,220 range leading into the jobs data, according to MKS Group.

Holdings in SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.35 percent to 760.80 tonnes on Tuesday, the second straight day of outflows. That followed a near-8-tonne fall on Monday, the biggest outflow this year.

The bullion market is closely following U.S. data to gauge when the Federal Reserve might raise rates. A U.S. Institute for Supply Management services report is due later in the day, ahead of the February nonfarm payrolls report on Friday.

A robust economy could prompt the Federal Reserve to raise interest rates soon, which could hurt non-interest-bearing bullion and boost the dollar.

Seven of the Fed's 17 members have said they want the option of a rate rise in June on the table, or have pushed in general for an earlier increase in the expectation that wages and inflation will turn higher.

Traders were also keeping an eye on the euro, which has been subdued over the past few sessions ahead of a European Central Bank policy meeting on Thursday and the implementation of its government bond buying programme due to start this month.



So, Gold market mostly expects some driving factor. Abscence of solid events makes market flirt in tight range. Technically, on daily chart we still be watching for resolving of the riddle between possible DRPO "Buy" pattern and intraday H&S pattern. Anything is possible still, but picture on intraday chart does not look really supportive for H&S:

On 4-hour chart theoretically gold has chances on H&S but based on recent action - probability has reduced significantly. Take a look - market has started upside action pretty nice out from right shoulder's bottom, but later has failed and moved below WPP. Today again - has tried to return back but was not able to do this. This shows sign of weakness and suggests further drop. THus, appearing of butterfly - either big or small and W&R of previous lows looks very probable:

 

[Sive Morten]

Gold Daily Update Thu 05, March 2015

Good morning,


Reuters reports Gold edged above $1,200 an ounce on Thursday after a three-day losing streak as equities weakened, but gains were limited by robust U.S. economic data and strength in the dollar.

Spot gold had ticked up 0.2 percent to $1,201.75 an ounce by 0706 GMT, after losing 1 percent in the last three sessions, as Asian stocks slipped after Wall Street continued to pull back from record highs.

However, with the dollar at an 11-1/2-year peak after strong U.S. data and the technical picture looking weak, analysts expect gold to head lower.

The next support for gold currently comes in at $1,195, said technical analysts at ScotiaMocatta.

"We expect a further test of this level, and should we see it break, it would be bearish for gold and open a test of the $1,131-low (reached in November 2014)," they said.

Gold is on shaky ground on the back of robust U.S. economic data, fears of an interest rate hike in the near future and waning investor sentiment.

Data on Wednesday showed U.S. private employers added 212,000 private-sector jobs in February. Separately, the Institute for Supply Management said its services index was 56.9 in February, up slightly from 56.7 in January.

A robust economy decreases the appeal of bullion, often seen as an alternative investment during times of economic and geopolitical uncertainty. A stronger dollar makes gold more expensive for holders of other currencies.

Investors are now waiting for U.S. nonfarm payrolls data on Friday for more clues about the economy.

The data is also being eyed to see how it could impact the timing of the Federal Reserve's move to hike interest rates. Higher rates could hurt demand for non-interest-bearing assets such as gold.

SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, saw its holdings drop to a one-month low earlier this week, after posting its biggest one-day outflow this year.

For trading cues on Thursday, traders will be eyeing the European Central Bank's policy meet. The ECB, which starts its quantitative easing, or bond-buying, programme of more than 1 trillion euros this month, is expected to detail the plan after the meeting.


Major information right now stands on daily chart. Market is still flirting around 1200 area. As you can see from comments above - investors mostly expect the same. If gold will break through 1200 - road to 1130 will be open.
Right now situation becomes clearer about bullish patterns. On daily chart gold is forming bearish dynamic pressure that suggests at least W&R of 1188 lows. This, in turn, will lead improve chances on daily DRPO "Buy" but break 4-hour H&S. That's why, if we want to take long bet at all - better focus on DRPO. May be we will get this action on ECB, may be tomorrow - on NFP release:

On 4-hour chart recent action just confirmed that H&S mostly has failed and butterfly "buy" probably will be formed. This mostly stands in agreement with DRPO daily scenario.

Let's hope that we finally will get chance to take position on gold. We need just a little patient and situation will be resolved.

 

[Sive Morten]

Gold Daily Update Fri 06, March 2015

Good morning,


Reuters reports Gold held below $1,200 an ounce on Friday and was headed for a fifth weekly decline in six, with the dollar near 11-year highs on expectations of strong U.S. jobs data and an interest rate hike.

All eyes were on the U.S. nonfarm payrolls (NFP) report due later in the day to gauge the strength of the economy and how that will affect the timing of any interest rate hike by the Federal Reserve.

Analysts polled by Reuters expect U.S. payrolls to have increased 240,000 last month and the jobless rate to have ticked down to 5.6 percent from 5.7 percent.

"Strong NFPs may send gold falling sharply and swiftly, possibly to $1,180, followed by a slight dead cat bounce. Any number above 250,000 would likely have this effect," said Howie Lee, investment analyst at Phillip Futures.

But the metal could rally to $1,230 if the figure comes in below 230,000, Lee said.

Markets believe a strong report could prompt the Fed to soon increase U.S. interest rates, a move that could hurt demand for non-interest-bearing assets such as gold and further boost the dollar.

The dollar hovered at 11-year highs against a basket of major currencies early on Friday in anticipation of a strong report.

It was also helped by weakness in the euro, which stayed under pressure after the European Central Bank said it would kick off its 1-trillion euro bond-buying programme next week.

There seems to be a slight bias to the downside in gold prices at the moment, said James Gardiner, a trader at MKS Group.

"Gold is likely to trade either side of $1,200 in Asia today ahead of the NFP report. Asia has been a buyer at these levels, however if they are not on the bid you'd expect the $1,190 area to be tested later in the day," Gardiner said.

Prices on the Shanghai Gold Exchange suggested physical demand for gold in China, the second biggest bullion consumer, remained at healthy levels.

Chinese gold prices were about $4-$5 an ounce higher than the global benchmark.

Sustained interest for physical bullion typically puts a floor under prices.


So, as we can see nothing drastically has changed yet. On daily chart slowly but stably gold drifts lower. Still, in short term perspective NFP will resolve everything, probably.
Recent action makes us totally denied from possibility of H&S pattern that we've talked about yesterday and focus on possible DRPO "Buy" on daily chart. This is the only pattern that we have in short-term perpsective:
All other issues are in place as well - bearish dynamic pressure, and market gradually approaches to low of high wave pattern. This tells that at least W&R of former lows is possible:

On 4-hour chart market is forming a lot of bearish grabber. Right now downward action does not look like thrust - too much pullbacks, choppiness and mostly looks like retracement. But NFP could change everything. So let's see what will happen. Currently it is too early to take short position, but it is not time yet to go long, since we do not have completed as DRPO "Buy" as butterfly on 4-hour chart: