Gold GOLD PRO WEEKLY, March 08 - 12, 2021

Sive Morten

Special Consultant to the FPA
Messages
14,742
Fundamentals

This week gold market was mostly single-sided, as only one factor was important - interest rates, which is confirmed by all headlines through the week. By taking a look at medium-term interest rates perspective, we could say nothing positive to the gold market. J. Powell recently makes the double impact on gold and other dollar rivals. First is, he has ignored rising yields, giving the green light for further growth, second - recent NFP just added more fuel to the fire, showing that economy stands on the way of recovery.
The only hope for the bulls that we see now is mostly short-term, making possible not reversal but some bounce - it is based on coming Fed meeting in March, that hopefully there J. Powell tells something. Technically, dollar has untouched long-term target while interest rates stand at resistance. If сhips fall correctly - all three factors could come together and finally trigger some bounce. Actually gold is coming to strong support area as well.

Gold prices slipped, falling for a sixth session in seven, as expectations that U.S. Treasury yields would move higher on further economic stimulus kept non-yielding bullion under pressure.

"As long as fiscal stimulus keeps getting pumped into the U.S. economy and the Federal Reserve remains reticent about doing something to quash yields, gold prices will struggle," said IG Market analyst Kyle Rodda. Prices can receive a reprieve if "the Fed comes out and says that it'll control yields or we get an outbreak in inflation
expectations that implies that it's going to move out of the Fed's control," Rodda said, adding that until then it's "the worst of all worlds for gold."


Benchmark U.S. Treasury yields have held near 1.4% levels despite coming down from a one-year high reached last week. While gold is viewed as a hedge against inflation, higher yields have of late threatened that status, since they increase the opportunity cost of holding bullion, which pays no interest.

"We anticipate recent headwinds to intensify again into the second half of this year, particularly as greater U.S. stimulus raises the prospect of an earlier-than-planned Fed rate hike," UBS analysts wrote in a note.

Fed officials maintain they will keep their easy money plans in place even in the face of a potential bout of inflation this spring in an economy boosted by vaccines and government spending.

U.S. President Joe Biden said on Saturday that Senate passage of his $1.9 trillion coronavirus aid bill means that $1,400 payments to most Americans will start to go out this month and the bill’s provisions will speed up manufacturing and distribution of vaccines.

Biden, speaking at the White House after the American Rescue Plan bill passed the Senate on a party-line 50-49 vote, said that over 85% of American households will receive payments, with a couple with two children making $100,000 annually receiving about $5,600.

The partisan victory was made possible by Democrats winning two Senate seats in Georgia special elections in January, giving them narrow control of the chamber.
The final bill includes $400 billion in one-time payments of $1,400 to many Americans, with a phase-out starting for those with annual incomes above $75,000.
It also includes $300 a week in extended jobless benefits for the 9.5 million people thrown out of work in the crisis.

The measure comes as an increasing number of states have relaxed restrictions designed to curb the pandemic. Texas earlier this week allowed most businesses to operate at full capacity and California saying it would soon allow Disneyland and other theme parks as well as sports stadiums to reopen at limited capacity.

The market remained volatile as it was on Thursday when Federal Reserve Chairman Jerome Powell showed little alarm about a rise in bond yields. Top Federal Reserve officials backed that message. “(W)e are not seeing much movement in real yields” but rather an increase in what bond investors are demanding, Minneapolis Federal Reserve Bank President Neel Kashkari noted.

Treasury yields pulled back from session highs as buyers stepped in after the benchmark 10-year note yield hit its highest in over a year following the payrolls report.
The yield on 10-year Treasury notes was up 2 basis points to 1.570%. The yield climbed as high as 1.625%, its highest since Feb 13, 2020. Rising Treasury yields fed demand for the dollar. The strong dollar sank gold prices to a nine-month low as investors sold the precious metal to reduce the opportunity cost of holding the non-yielding asset.

1615111815730.png


Yields are signalling "that by mid-year, inflationary pressures will mean that global central banks would have to tighten their policy, while central banks suggest that will not be the case ... if inflation rises, they'll have very little choice," McCarthy said.

"At current levels, (gold's) bull run is not over. It is challenged by the changing rates environment," said Nicholas Frappell, global general manager at ABC Bullion, adding that prices could test the $1,670-$1,690 level.


Goldman Sachs Commodities Research has raised its forecast for returns on commodities to 15.5% over the next 12 months and said they remained the best inflation hedge. The Wall Street bank also forecast returns of 6.2% and 15.1% on commodities over three- and six-months respectively on the S&P/GSCI Goldman Sachs Commodity Index (GSCI) in a note dated Monday.

Spot-priced commodities have benefited from higher-than-anticipated economic activity as it has created sharp deficits regardless of the growth rate, Goldman said.
In January, the bank had forecast returns of 5.8%, 9.5% and 10.2% on commodities over three-, six- and 12-month periods, respectively.

Goldman said it saw a return of 19.3% for energy, 19.1% for industrial metals, 15% for precious metals, 4.8% for agriculture and a negative 0.6% return on livestock over the 12-month period.

It said the pandemic represented a structural shift in the way governments interact with the economy and commodity demand would be further boosted by redistributional and environmental policies, as well as supply chain initiatives.



“Diversification out of fixed income into gold can continue, especially if the focus around inflation overshoot risks increases,” it said.

The bank added real rates were unlikely to return to pre-crisis levels for a long time due to residual slack in the economy and a dovish change in the reaction function of the Federal Reserve.

Gold declined to a near nine-month low on Friday and was set for a third straight weekly decline, as the dollar and bond yields rose after Federal Reserve Chair Jerome Powell's remarks that the rise in yields were not "disorderly." Powell on Thursday repeated his pledge to keep credit loose and said although the rise in yields was "notable", he did not believe the Fed will have to intervene to bring them down.

"Clearly, Powell wasn't dovish enough for markets overnight and, in some ways, greenlighted higher U.S. yields by saying he was comfortable with that," said OANDA senior market analyst Jeffrey Halley. All signs point to the bond tantrum continuing," Halley said, adding it seems inevitable that gold will break below the current levels and lodge deeper losses to the $1,600 region.

The U.S. 10-year yields held above 1.5%, while the dollar surged to three-month highs. Higher yields increase the opportunity cost of holding non-interest paying
bullion.

"Powell's remarks just reinforce the sense that the Fed is slowly moving in the direction of acclimating markets toward there not being substantial further policy support," said DailyFX currency strategist Ilya Spivak. Markets are also starting to take into account that with the ramp up in vaccines, another U.S. fiscal package and increasing inflation expectations, the Fed might consider tightening sooner than they expected, Spivak said.

"This optimism in regards to the economy moving forward continues to drive bond yields higher and that certainly has been taking the wind out of the sails of many commodity markets, including gold," said David Meger, director of metals trading at High Ridge Futures.


Data showed U.S. jobs increased more than expected in February, raising hopes around a quick economic rebound driven by massive fiscal stimulus and vaccination drives. The strong economic data lifted benchmark 10-year Treasury yields to their highest since February 2020, while the dollar also jumped.

U.S. Federal Reserve Chair Jerome Powell disappointed gold investors who expected him to act on the recent surge in the U.S. 10-year Treasury yield, which has sent bullion below $1,700 per ounce.

"The gold market is giving back the pandemic gains. The drop below $1,700/oz leaves the market looking fragile," HSBC analysts said in a note. Powell's comments – while not new – have extinguished for the moment any possibility that the Fed will act on rising yields further out the curve. Further yield gains could throw gold and the other precious metals lower."

COT Report

CFTC data also shows nothing good to the bulls. We see solid drop of net bullish positions across the board - as among speculators, as hedgers. Even non-reportable positions follow the same direction. As a result, with open interest moving higher - long position is dropping. This is the typical dynamic for bearish market.

1615113051941.png


1615113115287.png

Source: cftc.gov
Charting by Investing.com


SPDR Fund also shows poor reserves dynamic.
1615113332733.png


So, currently we have few major questions. In fundamental sphere, we have contradiction even among big whales. Thus, USB, HSBC tell that Fed probably will have to act quicker to tight the rate, or at least, make some verbal interventions to control interest rates rally, while Goldman tells the opposite thing, suggesting that no change in real rate comes soon, and this is the reason why gold should show 15% appreciation this year.
Comments from the other Fed representative also suggest that recent nominal rates rally is just demand of investors, their fair valuation of risk reward, rather than indication of inflation. Where is the truth? Right now indeed, real rates shows flat dynamic and do not follow to nominal 10-year US yield. In general it could mean the only one thing - either bond investors are wrong as they push yields higher without sufficient fundamental background for that, or - they are right and just anticipate coming changes as in real interest rates as in Fed policy. If bond market is wrong, then rally should fizzle soon, because it is difficult to sell the good that is not exist. In fact bond market demands the same reward as stocks one - as 10 year yields challenge S&P dividend yield of 1.5%. What the reasons for that, if, supposedly, real rates are near zero and inflation expectations are low.
But, at the same time - what about statistics, showing improving of sentiment, consumption, employment, what about 25-30% of GDP liquidity injections this year? So, it seems that we do have the reasons to suggest rising inflation and demand higher yields when money has become cheaper and government wants to lend from us. This is the reason, by the way, why recent US bonds auctions had so low demand.
Taking its all together, if US interest rates will not collapse in March, after Fed meeting, by the way, I would bet on further rally, especially if we keep getting positive statistics.
Still, despite our view on trend changing in global economy and gold is not an exception - pullbacks, and solid pullbacks are could happen, and probably should to, as bullish momentum is still strong and gold stands in first drop out from the top. In short-term, technically we have the combination of targets that strongly suggests some gold supportive event. Take a look - gold is coming to very strong 1650-1680$ weekly support and oversold, dollar index has untouched long-term 87.40 target, 10-year interest rates stand at historical resistance around 1.40-1.50 area. Minor assistance form the Fed on its March meeting could make all markets to hit their goals. Gold - to show pullback and response, to support, dollar - to hit major target, and interest rates to show the pullback. All these movements stand in harmony. Now we think that this scenario has high probability to happen within 2 weeks. But after that - major trend should get more energy.

Technicals

Monthly

So, currently all questions are off the table concerning direction, even on long-term charts. Price stands below yearly pivot, MACD trend is down and market is under way to major support area.

Based on the monthly chart next area where gold could show some bounce is 1685-1690$ K-support and oversold. As interest rates are just started upward action, it is not very strong and stable. It means that gold should keep ability of propriate reaction on meaningful technical conditions, such as strong K-areas on long-term charts.

Almost in the same area, around 1655$ we have an OP target of monthly AB-CD pattern so 1655-1685$ is next area to watch on monthly chart. That's what we're talking above.

gold_m_08_03_21.png


Weekly

Picture is bearish here as well. Market hits oversold area and even Agreement support last week but this has not become a reason for meaningful pullback. Mostly area was ignored. Commodities react different to OB/OS area compares to financial markets, which are more sensitive. It means that gold could stay oversold easier and creep with the one's level lower. Thus, despite that now price is at oversold, we suspect it should keep creeping lower, until it hits OP target. Maybe action will be a bit slower than previously.
Second thing for longer term perspective is acceleration. Take a look at CD leg is speeding up, which means that XOP of the same AB-CD pattern might become a reality later.
gold_w_08_03_21.png


Daily

Another sign that market is strongly bearish we could see on daily chart. Usually we prepare to major targets trying to use potential reaction out from it, and this large butterfly is not an exception. But, price just ignored 1.27 butterfly target, even with oversold level. In current circumstance it is difficult to find reasons to go long until major 1650 target will not be met.
Take a look that 1.618 target stands very close, so maybe this daily butterfly puts the foundation for upside reaction on weekly time frame.
gold_d_08_03_21.png


Intraday

So, as we do not consider bullish setups by far, the only direction that we could focus on is bearish. Currently we do not have something interesting here, so it is not needed even to post the chart, but appearing of bearish patterns such as "222" or B&B could be used with targets around previous lows as gold stands oversold.
On 1H chart we have our wedge consolidation and divergence, but with OP around 1650, and lack of events that could make impact on gold prices, we do not see the way how to effectively use it. Nothing interesting stands inside the pattern as well.
gold_1h_08_03_21.png
 
Last edited:

RogerTC

Special Consultant to the FPA
Messages
328
I liked what i see on below charts.


Market is sitting on weekly confluence right at TDST support line and TD sequential Buy (9th bar) is coming this week. Expect 3 up bars from these levels as a minimum. (You can see how the market reacted on 9th and 13th bar signals on the chart)

XAUUSDWeekly.png


If you look at the gold daily chart, TD Sequential Buy signal is coming most probably on Tuesday. Expect 3 bars to the north from these levels as a minimum.

XAUUSDDaily.png


And looking at Dollar index; Weekly is testing confluence+ agreement resistance.


dollar index.PNG


And daily is oversold at agreement.
dollar index2.PNG


Buy combining all the charts above; we are around really good levels to long the gold market.

Regards

R.
 

Sive Morten

Special Consultant to the FPA
Messages
14,742
Greetings everybody,

So, gold hits major K-support area and oversold level that potentially looks exciting for long position taking. Still, as with EUR - we suggest that any response here will become just a retracement, because CD leg shows acceleration as well , which increases chances of action to XOP after some time.

On intraday charts we do not have something special yet. On weekly - we could use the trick of AB-CD target calculation, using different "A" point that forms OP not around 1648 but around 1673 and currently, as you could see - it is mostly done. This is useful trick for long entry that save you from orders' competition around 1650 area. Besides, gold very often response on "proper" A point ignoring the OP, based on absolute "A".
gold_w_09_03_21.png


On daily chart we have the butterfly with 1.618 target around 1643 - this is good area to hide the stop under.
gold_d_09_03_21.png


Still, as we said in today's EUR update - before position taking it would be better to wait clear reversal signs on intraday chart...
 

Sive Morten

Special Consultant to the FPA
Messages
14,742
Greetings everybody,

Here is again - just minor update today. So, recently we saw the first bounce in an area of wide K-support on monthly chart. Still, it doesn't mean that gold can't form the new low before major reaction starts. Thus, on daily it makes sense to keep an eye on MACD Predictor today. Appearing of the grabber suggests another low. It doesn't break setup as we have few targets around 1645-1650, which are very close to monthly 1685 K-area. Drop to 1650 could mean, for example, that we could get reverse H&S as major pattern:
gold_d_10_03_21.png


On 1H chart market has formed bullish reversal swing:
gold_4h_10_03_21.png


And on 1H chart it might be reverse H&S - if price holds above 5/8 support and no grabber will be formed today. Direct upward action is possible as well, if interest rates drop more, and DRPO "Sell" pattern will be confirmed.
It means, that as on EUR currency, since we stand around wide and long-term support - it makes sense to consider gradual position taking, based on different patterns that could be formed here.
gold_1h_10_03_21.png
 

Sive Morten

Special Consultant to the FPA
Messages
14,742
Greetings everybody,

Gold shows the positive performance, forming very small patterns on intraday charts by far, as the first sign of upside reaction. This is not the one that we were hoping for, of course, and reaction on monthly K-support has to be stronger, which could happen later. Meantime, on intraday charts we also have few moments to keep an eye on, especially, if you trade intraday.

On daily chart the first resistance is 1752 and near standing Overbought level:
gold_d_11_03_21.png


Take a look that our a kind of H&S pattern stands in progress and its OP target stands precisely around 1752, which is also K-resistance. This is at least the reason about stop tightening or, even think about profit taking. Probabilities suggest downside pullback out from 1752. As we expect larger bullish pattern to be formed on daily chart - we can't exclude, say, Double Bottom or even some patterns with new lows created. Recall what we've talked about 1645-1650 targets. Thus, think about risk minimizing and/or result protection:
gold_4h_11_03_21.png
 

RogerTC

Special Consultant to the FPA
Messages
328
I liked what i see on below charts.


Market is sitting on weekly confluence right at TDST support line and TD sequential Buy (9th bar) is coming this week. Expect 3 up bars from these levels as a minimum. (You can see how the market reacted on 9th and 13th bar signals on the chart)

View attachment 62833

If you look at the gold daily chart, TD Sequential Buy signal is coming most probably on Tuesday. Expect 3 bars to the north from these levels as a minimum.

View attachment 62832

And looking at Dollar index; Weekly is testing confluence+ agreement resistance.


View attachment 62830

And daily is oversold at agreement.
View attachment 62831

Buy combining all the charts above; we are around really good levels to long the gold market.

Regards

R.
A good illustration showing how we make money in this business.

Not finding out only correct levels to trade but also exact timing which is very difficult to predict for traders. See below chart and compare with forecast I made on sunday.

Regards

XAUUSDDaily.png
 

Sive Morten

Special Consultant to the FPA
Messages
14,742
Greetings everybody,

so, as EUR - Gold also has shown the first upside reaction, although it was a bit smaller that we've suggested recently. 1952 level was nice upside target but price was not able to reach it. Still, this is normal, as gold is just preparing the background for reaction, is just forming the shape of potential upside reaction. This is the reason, why we said - do not worry to catch the first bounce, there will be a lot more chances to enter.

10-year yields are also rising today and potentially there 3-Drive Sell might be formed. As on gold market we have untouched targets around 1645-1650 - we can't deny this scenario here as well.
gold_d_12_03_21.png


On 4H chart our upside AB-CD most probably will be vanished, so, keep an eye on 1700 support area and whether we get "222" Buy there. If not - then we should prepare for return back to the lows and appearing of some different pattern:
gold_4h_12_03_21.png
 

soul rebel

Sergeant
Messages
137
A good illustration showing how we make money in this business.

Not finding out only correct levels to trade but also exact timing which is very difficult to predict for traders. See below chart and compare with forecast I made on sunday.

Regards

View attachment 62961
Thanks Roger for posting your charts, if I follow you correctly long entry is anticipated on 9th bar making a new low and placing stops below 1646 0.618 support level?
 
Top