GOLD PRO Weekly March 09-13, 2015

[Sive Morten]

Fundamentals

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

Gold fell nearly 3 percent to a three-month low on Friday after stronger-than-expected U.S. non-farm payrolls fueled expectations the Federal Reserve will raise rates sooner rather than later, and the dollar jumped to an 11-1/2 year high.

U.S. employers stepped up hiring in February and the unemployment rate fell to nearly a seven-year low, putting further pressure on the Fed to raise interest rates in June. An increase in U.S. interest rates would further boost the value of the dollar, in turn hurting demand for non-interest-bearing assets such as gold.

"The market may be reading too much into one data release," said Frances Hudson, global thematic strategist at Standard Life Investments in Edinburgh.

"When the central bank tells you the move is going to be data dependent, I'm pretty sure they're not going to say that particular data release will be the tipping point because payroll figures are quite often subject to pretty substantial revisions."

A stronger U.S. currency makes dollar-denominated gold more expensive for holders of other currencies, while a rise in yields on U.S. bonds is negative for the metal, whose holders earn no interest.

"We continue to forecast a further strengthening of the U.S. dollar, which will keep gold under pressure," Deutsche Bank said in a note.

On the physical market, 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 to $5 an ounce higher than the global benchmark.


Recent CFTC data shows end of open interest drop. Long positions has not changed mostly but shorts have increased and open interest has increased correspondingly. During the week SPDR fund reports on solid drop of storages – from 771 tonnes on 27th of February to 756 tonnes on Friday.
Also it makes sense to remind that gold is entering into bearish seasonal trend. All these moments obviously do not support bullish reversal on gold. It looks like bulls have failed the test on quality and recent upside action on gold mostly was respect of support and butterfly pattern, rather than reversal.

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$. At the same time February still stands as inside month and we need 1130 breakout to start clearly speak on 1050 target.
Since the beginning of the year market shows solid upside action. Market was able to exceed yearly pivot, passed half way to Yearly Pivot resistance 1 but right now has reversed down and closed below YPP. From technical point of view this is bearish sign. This could be very significant moment and next logical destination will be yearly pivot support 1 around 1083$.
Recent NFP data shows impressive growth, but labor cost not as stably good as unemployment. Many investors concern about anemic wage growth, although in recent time this indicator shows improving. So, it seems that gold will remain hostage of dollar value and US economical data in nearest perspective.
Thus gold will fluctuate in difficult period. If coming data will be gradual and supportive for rate hike – NFP will continue show upside trend, inflation and cosumption 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 – 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. As gold has passed through 1200, our next destination point is previous lows at 1130, but since gold is returning to them again – this is temporal destination and we should prepare for further downward action.

Weekly
Trend has turned bearish. So gold was not able to hold above 1200 strong support and moved below not just Fib level, but also MPS1. This tells that previous upside trend has failed. If you will take a look at weekly chart closely you will find a lot of different targets – AB-CD’s, couple of butterflies etc. But right now it makes sense probably to focus on most close target that is based on most recent AB-CD pattern. 1130 level is very close and it makes sense to take a look a bit lower. This AB-CD points on 1095-1100 destination point. All other targets stand significantly lower – 1080, 1050 and even 990$.

Daily
After Friday’s drop market almost has reached oversold. That’s why some upside bounce could happen. Applying harmonic swing we could estimate possible re-testing of 1200 level. This also will be Fib resistance, and in general, re-testing of broken levels is a habit of gold market. Overall situation looks like on EUR in our current weekly research. Only if gold will show fast upside return back to 1220 area – chances on reversal will appear. Any other action will suggest downward continuation for 1130. So, our primary task in the beginning of the week – wait for bounce up out from oversold and watch for its nature. Gradual rally will be just retracement and we will try to sell it. While fast and furious return back (although we have no idea on reasons for such action) to 1220 could chance situation and resurrect bullish sentiment. Still it is reasonable just to watch for 1200 re-testing as potential possibility for short entry.

1-hour
Since drop just has finished – intraday charts do not give us a lot information, no patterns have been formed yet. Here we just see weekly pivots and previous lows stand very close to WPP. This is most probable destination of short-term retracement.

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.
Market has dropped below key level of 1200 and if it will not return back to 1220 area somehow – road to 1130 will be open.

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 10, March 2015

Good morning,


Reuters reports Gold fell to a fresh three-month low on Tuesday on renewed expectations of a mid-year hike in U.S. interest rates and as the dollar scaled a 11-year peak.

Gold took a hit from Friday's strong U.S. nonfarm payrolls data that boosted expectations the Federal Reserve would begin increasing interest rates by the middle of the year.

The Fed, which has kept rates at near zero since December 2008, has signalled that it is prepared to raise rates later this year, with June to September the expected time frame.

Higher rates could dent demand for assets that do not pay interest such as gold, and boost the dollar, which on Tuesday climbed to its highest since September 2003 against a basket of major currencies, denting bullion's safe haven appeal.

"Gold will continue to be weighed down near term by the strong U.S. payrolls from Friday," said ANZ analyst Victor Thianpiriya.

Comments from a top Fed official added to worries over a rate hike. Richard Fisher, president of the Dallas Federal Reserve Bank, said the U.S. central bank should promptly end its easy monetary policy and press ahead with an interest rate hike.

Charts were also not in favour of gold, with technical analysts predicting the next support level for gold at $1,150.

For further trading cues, investors were eyeing talks over the Greek debt crisis, where prolonged uncertainty could help safe-haven bullion.

Finance experts from Greece will open talks about economic reforms on Wednesday with officials from the European Union, the European Central Bank and the International Monetary Fund.

The ECB's Governing Council is set to hold a teleconference on Thursday to discuss extending emergency liquidity assistance for Greek banks.

"Unless the situation surrounding Greek's debts take a huge turn for the worse, the bearish sentiment engulfing gold currently will likely triumph over any mild safe haven appeal the precious metal is exhibiting," said Howie Lee, analyst at Phillip Futures.

Investor positioning indicated a bearish outlook. Holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.43 percent to 753.04 tonnes on Monday, their lowest in more than a month.


Changing in recent CFTC data and continuing outflow from SDPR fund relatively confirm shifting in sentiment. Technical breakout through major level also tells about re-establishing of bear trend. Reuters technical analysts point on the same level as we do - 1130-1150 previous lows.
Right now daily picture shows that gold stands in "free area". It is room till 1146 support level - WPS1 and oversold. Probably, nothing will happen until market will reach it:

On hourly chart we see butterfly "Buy" is forming. Situation on daily chart suggests that this butterfly will either fail or hit just minimum target. So, if you plan to trade it - take profit fast and do not merry long positions. Minimum target means 3/8 Fib resistance of butterfly swing.

As we've said in our weekly research - only geopolicy could bring surprising upside impulse on gold. Fundamentally and economically situation is not supportive for gold and long-term picture suggests moving to 1080-1090 area first but in perspective to 1050. This is our target of long term VOB pattern that we mention every time in our weekly researches.

 

[Sive Morten]

Gold Daily Update Wed 11, March 2015

Good morning,


According to recent Reuters news Gold hovered near its lowest in over three months on Wednesday, hurt by consecutive losses in the last seven sessions as a robust dollar and expectations of higher U.S. interest rates curbed appetite for the metal.

Bullion has taken a hit from stronger-than-expected U.S. nonfarm payrolls data on Friday that renewed expectations the Federal Reserve would begin to increase interest rates in June.

Higher rates could dent demand for assets that do not pay interest such as gold, and boost the dollar, which was trading at its highest in over 11 years against a basket of major currencies.

"The possibility of further dollar gains is weighing on gold but Asian demand is emerging and may lend support for prices," said HSBC analyst James Steel.

A robust dollar tends to dent the yellow metal's safe-haven appeal, while also making it more expensive for holders of other currencies.

However, the drop in gold to multi-month lows has attracted some bargain hunters in Asia, the top bullion consuming region.

In China, the metal was traded at a premium of about $5 an ounce more than the global benchmark, an indication of good buying interest.

Sustained physical buying could provide a floor for falling gold prices.

Another factor that could support prices is further weakness in global equity markets that could boost safe-haven bids.

Asian stocks fell to a two-month low on Wednesday as nervous markets recoiled on worries about an earlier U.S. interest rate hike, while the S&P 500 posted its worst decline in two months overnight.

Other precious metals have also taken a hit along with gold.

Platinum slumped to its lowest since July 2009 on Tuesday, while silver fell to a two-month low in the same session, though both the metals were a tad firmer on Wednesday.



So, no drastical external news by far. On daily chart price action is rather tight. As we've said yesterday - market has no support and has relatively free space till 1130 lows. This is logical destination and if nothing drastical will happen - market should pass it soon.

Our short term butterfly has worked nice and even showed greater upside bounce. And take a look - market has formed multiple bullish grabbers that suggest further upward action above most recent highs. May be this action will take shape of butterfly with 1170 destination point.
This does not change anything for daily traders, but if you're scalper you can take a look at this setup, especially if market will create another grabber with most recent candle. Risk/reward ratio looks attractive, since stop should be somewhere below formed grabbers. If market will return right back down to 1150 lows - this probably will mean that retracement is over and gold will continue move down:

 

[Sive Morten]

Gold Daily Update Thu 12, March 2015

Good morning,


Reuters reports Gold gained 1 percent on Thursday on short-covering after eight days of losses and as the dollar slipped from a near 12-year peak, but increasing concerns over a near-term interest rate rise in the United States kept the metal under pressure.

Sentiment towards bullion had taken a big hit on Friday, when strong U.S. nonfarm payrolls data stoked expectations the Federal Reserve would end its near-zero rate policy soon.

The dollar stood tall, boosted by diverging global monetary policies that sent the greenback to its highest since April 2003 against a basket of six major currencies on Thursday, though it gave up some of its sharp gains later in the session.

Investors believe higher U.S. rates could dent demand for assets that don't pay interest such as gold. A stronger dollar also dents bullion's safe-haven appeal.

"The dollar strength is really blowing everyone out of the water," said a Hong Kong-based precious metals trader, adding that demand for physical bullion was not strong enough to support prices.

"It is really tough after the jobs data to get bullish on gold. Equities have given back a little bit but the money is going into other instruments offering better yields," he said.

Any small rallies in gold would be sold into, the trader said.

Some Fed officials have hinted that the Fed might act soon on rates. Markets are expecting an increase in June.

Richard Fisher, president of the Dallas Federal Reserve Bank, said this week the U.S. central bank should promptly end its easy monetary policy and press ahead with a rate rise, followed by a set of gradual moves higher.

Bullion wasn't getting much support from weaker equity markets as the combination of a robust dollar, weak technicals and bearish investor positioning took its toll.

Chartists say gold prices are bound to go lower.

Reuters technical analyst Wang Tao said gold could revisit its November 2014 low of $1,131.85, as it has broken support at $1,156.

With the nine-day losing streak, gold has erased all of its gains from early 2015 and is showing a loss of nearly 3 percent for the year.

Investors have been pulling out of bullion, given the bullish outlook for the dollar. SPDR Gold Trust , the world's top gold-backed exchange-traded fund, saw its holdings drop to the lowest in over a month earlier this week.


As you can see we have the same kind of thoughts on gold perspective as Reuters analysts is. Our nearest destination is previous lows at 1130. Right now market stands at support - WPS1 and daily oversold so, some upward bounce is possible. But there is indeed greate probability that this rally will be sold out:

On 4-hour chart we could get different scenarios. Instead of upside butterfly that we've discussed yesterday - we've got downward butterfly and whole action down looks like 3-Drive "Buy" pattern that suggests moving above 1170 top, at minimum. Also market could take shape of H&S - this is another possibility.
Despite what scenario wil prevail - we think that our primary level where we should think about short entry is 1180 K-resistance. If market will get there - this could be not bad oportunity to sell the rally with 1130 target:

 

[Sive Morten]

Gold Daily Update Fri 13, March 2015

Good morning,


Reuters reports Gold firmed above $1,150 an ounce on Friday as the dollar nursed losses after an extended rally, but the metal was still headed for its sixth weekly dip in seven on concerns that U.S. interest rates would increase soon.

Despite the short-covering rally on the back of a softer dollar, traders were cautious about bullion's outlook.

"Gold looks to be finding some support around $1,150 although the short-to-medium term bias is still to the downside," MKS Group trader James Gardiner said.

Bullion could see some more gains but will face resistance at $1,166, said Phillip Futures analyst Howie Lee.

Gold has taken a beating since a stronger-than-expected U.S. jobs report last week that stoked speculation the Federal Reserve would hike interest rates soon. Higher rates usually dent demand for assets that don't pay interest such as bullion.

Adding to the concerns was strength in the dollar, which climbed to its highest in nearly 12 years this week before profit-taking prompted a pause. The dollar index is still on track to end the week up more than 1 percent, extending last week's 2.5 percent rally.

In a reflection of bearish sentiment, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.28 percent on Thursday to 750.95 tonnes, the lowest since late January. It has been three weeks since the fund has seen any inflows.

Other precious metals have also taken hits. Silver is on track for a second straight weekly fall, while palladium is on course for its worst week since mid-January.

Platinum prices, which fell to their lowest since 2009 this week, were poised for a seventh weekly fall in eight.


So, there is no anything special in news today and we also can't add something extraordinary. On daily chart if any upside retracement will happen - we probably should apply harmonic swing as maximum potential. It points on ~1175 area:

But right now we do not have even any patterns on daily chart.

On 4-hour chart potentially market could form some patterns that could lead gold to destination, but currently action looks very heavy and we're not sure that we will see gold at 1175 K-resistance. Among these patterns could be 1.618 AB=CD, butterfly or even H&S pattern... Right now gold has shown just minor retracement and deep dive back down after it. This is the sign of weakness. Breakout through recent lows we lead market to our short-term target at 1130. If somehow we still get rally - we will try to sell it. If of cause it will not be triggered by some breaking geopolitical news or event: