Sive Morten
Special Consultant to the FPA
- Messages
- 18,869
Fundamentals
According to Reuters news, gold rose to a six-month high on Friday as investors turned to bullion as a safe-haven from East-West tensions before a vote planned for Sunday on whether Ukraine's Crimea region should join Russia. Moscow shipped more troops and armor into Crimea on Friday and repeated its threat to invade other parts of Ukraine, showing no sign of heeding Western pleas to back off from a Cold War-style confrontation. Russia's stock markets tumbled and the cost of insuring its debt soared on the last day of trading before pro-Moscow authorities in Crimea hold a referendum on joining Russia, a move all but certain to lead to U.S. and European Union sanctions on Monday.
"There are people here with possible concerns that you will see a heavy price spike (in gold) if this vote does go in," said Thomas Capalbo, a precious metals trader at Newedge, a brokerage in New York. "Gold is up on situational buying." The metal has gained 3 percent this week, also helped by China's first corporate bond default and fears of slowdown in the world's second-largest economy. Gold was also supported by Friday's data showing U.S. consumer sentiment weakened in early March.
FED WATCH
The market was awaiting the U.S. Federal Reserve's policy meeting on March 18-19. The central bank is expected to announce another $10 billion cut to its bond-buying stimulus. .S. economic data showing that growth has been hurt by severe cold weather has recently hit the dollar, which fell 0.2 percent against a basket of currencies after weak U.S. producer prices on Friday. Global uncertainties sent investors looking for gold, with holdings in SPDR Gold Trust - the world's largest gold-backed exchange-traded fund - rising 2.1 tonnes to 813.30 tonnes on Thursday.
Monthly
On previous week market has created couple of moment that could have important consequences in long-term perspective. First is – price has moved above Yearly Pivot point and this has happened almost without any struggle. Second moment – monthly trend could turn bullish in March. At least right now price stands above MACD Predictor. This situation also could shift to stop grabber, right? But anyway, despite what it will be either bullish or bearish result – this will be very important.
From fundamental part of view there two opposite opinions. Some analysts tell about 1050-1100 level and point that current action comes from negative US data, but this data is a result of heavy winter. As spring will come – data will improve and rally will be over. Others have opposite opinion. In general, here is excellent article on bloomberg, dedicated to gold, I’ll keep it here for another week:
Top Two Gold Forecasters Remain Bearish After 2014 Rally - Bloomberg
Second opinion comes from UBS – it opositely has increased forecast on gold:
Gold Losing Stigma for UBS as Tully Increases Forecasts for 2014 - Bloomberg
(But guys, to be honest, I suspect that both forecasts could be reached. Recall our long-term expectation – two leg retracement down. Now we expect deep retracement and later return to previous lows. Hence, first forecast of higher prices has relation to current retracement, while second one – to second leg, when gold due bearish momentum should return right back down to current lows.)
Let me add just two cents from my own to fundamental picture. Shortly speaking – I think that situation around Ukrain will become tougher in nearest months. It will not get any relief soon. If even all events will stop right now and will not change at all – this is a big host of problems that will require to dig out. But situation becomes tougher. Now South-East Ukraine fall in chain reaction on Crimea referendum. Mass strikes and separation calls sound louder and louder. This hardly will stop very soon and consequences could be really terrible. I’m afraid that we will get spike up on Monday’s morning. And current events do not let me stay on bearish view on gold market right now.
Next long term target yearly PR1 is also very significant. We know that gold likes to re-test previously broken lows and consolidations. 1540 area is monthly overbought, YPR1 and low border of broken long-term rectangle. As market was strongly oversold, very often it has tendency to reach overbought. Market is a impulse substance and reaction equals to counter reacion.
As another application of significantly oversold we’ve suggested retracement up. Thus, we’ve made an assumption of possible deeper upward retracement that could take a shape of AB=CD, and invalidation for this setup is previous lows around 1170s. Market right now is forming something like double bottom. Currently we should keep a close eye on move up.
That’s being said – nearest target here is 1430 resistance level, while taking in consideration golds’ habits, geopolitical tension and technical issues, now we treat probability of reaching 1540 level as very high.
Weekly
Trend is bullish here, market is not at overbought. Currently market shows very important information. Market has confirmed bullish ambitions by fast and furious breakout through AB=CD minor 0.618 target and Agreement. This area was passed by market as it was no exist. This just tells us how strong market is. As market is not at overbought and, in fact it has no technical barriers till 1430 level – we probably should search possibility to take long position. From that standpoint we have nice thrust up here that is suitable for some DiNapoli patterns. As market has no significant barriers as we’ve said – I would probably bet on appearing on B&B “Buy”.
Daily
As you can see, daily chart is growing and growing and… well, you see it by yourself. No chances for entry on long side on at least single meaningful retracement. Now price stands at overbought. Recent thrust up here is also suitable for DiNapoli direction pattern. May be overbought condition will give us some chances for entry on long side of the market. If this will happen there are two levels to watch for – 1330 Fib support and 1295-1310 K-support area. Trend is bullish as on weekly as on daily chart.
1-hour
Well, here I can tell only one thing. We have bullish grabber and it suggests taking out of previous highs. Thus, before any retracement if it will happen at all, of cause some upward action should happen.
Conclusion:
Market currently stands extremely bullish. Geopolitical tensions and fast changes in world political situation do not let market show reaction on situation on short-term charts. When market just starts retracement due technical issues – it breaks by some new political or fundamental events.
Thus our major analysis mostly stands on monthly and weekly charts. On lower time frames we can point only potential issues that could help us to join with upward action. But no one potential pattern has been formed yet there.
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.
According to Reuters news, gold rose to a six-month high on Friday as investors turned to bullion as a safe-haven from East-West tensions before a vote planned for Sunday on whether Ukraine's Crimea region should join Russia. Moscow shipped more troops and armor into Crimea on Friday and repeated its threat to invade other parts of Ukraine, showing no sign of heeding Western pleas to back off from a Cold War-style confrontation. Russia's stock markets tumbled and the cost of insuring its debt soared on the last day of trading before pro-Moscow authorities in Crimea hold a referendum on joining Russia, a move all but certain to lead to U.S. and European Union sanctions on Monday.
"There are people here with possible concerns that you will see a heavy price spike (in gold) if this vote does go in," said Thomas Capalbo, a precious metals trader at Newedge, a brokerage in New York. "Gold is up on situational buying." The metal has gained 3 percent this week, also helped by China's first corporate bond default and fears of slowdown in the world's second-largest economy. Gold was also supported by Friday's data showing U.S. consumer sentiment weakened in early March.
FED WATCH
The market was awaiting the U.S. Federal Reserve's policy meeting on March 18-19. The central bank is expected to announce another $10 billion cut to its bond-buying stimulus. .S. economic data showing that growth has been hurt by severe cold weather has recently hit the dollar, which fell 0.2 percent against a basket of currencies after weak U.S. producer prices on Friday. Global uncertainties sent investors looking for gold, with holdings in SPDR Gold Trust - the world's largest gold-backed exchange-traded fund - rising 2.1 tonnes to 813.30 tonnes on Thursday.
Monthly
On previous week market has created couple of moment that could have important consequences in long-term perspective. First is – price has moved above Yearly Pivot point and this has happened almost without any struggle. Second moment – monthly trend could turn bullish in March. At least right now price stands above MACD Predictor. This situation also could shift to stop grabber, right? But anyway, despite what it will be either bullish or bearish result – this will be very important.
From fundamental part of view there two opposite opinions. Some analysts tell about 1050-1100 level and point that current action comes from negative US data, but this data is a result of heavy winter. As spring will come – data will improve and rally will be over. Others have opposite opinion. In general, here is excellent article on bloomberg, dedicated to gold, I’ll keep it here for another week:
Top Two Gold Forecasters Remain Bearish After 2014 Rally - Bloomberg
Second opinion comes from UBS – it opositely has increased forecast on gold:
Gold Losing Stigma for UBS as Tully Increases Forecasts for 2014 - Bloomberg
(But guys, to be honest, I suspect that both forecasts could be reached. Recall our long-term expectation – two leg retracement down. Now we expect deep retracement and later return to previous lows. Hence, first forecast of higher prices has relation to current retracement, while second one – to second leg, when gold due bearish momentum should return right back down to current lows.)
Let me add just two cents from my own to fundamental picture. Shortly speaking – I think that situation around Ukrain will become tougher in nearest months. It will not get any relief soon. If even all events will stop right now and will not change at all – this is a big host of problems that will require to dig out. But situation becomes tougher. Now South-East Ukraine fall in chain reaction on Crimea referendum. Mass strikes and separation calls sound louder and louder. This hardly will stop very soon and consequences could be really terrible. I’m afraid that we will get spike up on Monday’s morning. And current events do not let me stay on bearish view on gold market right now.
Next long term target yearly PR1 is also very significant. We know that gold likes to re-test previously broken lows and consolidations. 1540 area is monthly overbought, YPR1 and low border of broken long-term rectangle. As market was strongly oversold, very often it has tendency to reach overbought. Market is a impulse substance and reaction equals to counter reacion.
As another application of significantly oversold we’ve suggested retracement up. Thus, we’ve made an assumption of possible deeper upward retracement that could take a shape of AB=CD, and invalidation for this setup is previous lows around 1170s. Market right now is forming something like double bottom. Currently we should keep a close eye on move up.
That’s being said – nearest target here is 1430 resistance level, while taking in consideration golds’ habits, geopolitical tension and technical issues, now we treat probability of reaching 1540 level as very high.
Weekly
Trend is bullish here, market is not at overbought. Currently market shows very important information. Market has confirmed bullish ambitions by fast and furious breakout through AB=CD minor 0.618 target and Agreement. This area was passed by market as it was no exist. This just tells us how strong market is. As market is not at overbought and, in fact it has no technical barriers till 1430 level – we probably should search possibility to take long position. From that standpoint we have nice thrust up here that is suitable for some DiNapoli patterns. As market has no significant barriers as we’ve said – I would probably bet on appearing on B&B “Buy”.
Daily
As you can see, daily chart is growing and growing and… well, you see it by yourself. No chances for entry on long side on at least single meaningful retracement. Now price stands at overbought. Recent thrust up here is also suitable for DiNapoli direction pattern. May be overbought condition will give us some chances for entry on long side of the market. If this will happen there are two levels to watch for – 1330 Fib support and 1295-1310 K-support area. Trend is bullish as on weekly as on daily chart.
1-hour
Well, here I can tell only one thing. We have bullish grabber and it suggests taking out of previous highs. Thus, before any retracement if it will happen at all, of cause some upward action should happen.
Conclusion:
Market currently stands extremely bullish. Geopolitical tensions and fast changes in world political situation do not let market show reaction on situation on short-term charts. When market just starts retracement due technical issues – it breaks by some new political or fundamental events.
Thus our major analysis mostly stands on monthly and weekly charts. On lower time frames we can point only potential issues that could help us to join with upward action. But no one potential pattern has been formed yet there.
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.
