Sive Morten
Special Consultant to the FPA
- Messages
- 18,695
Fundamentals
First, I would like to remind you our talks on geopolitical situation and that now US pays to EU countries for following it's external policy:
http://sputniknews.com/business/20160320/1036618662/germany-repatriation-gold.html
Of course, there could be some pure financial reasons, but this is definitely step to Germany independence.
(Reuters) - Gold edged lower on Friday, as the dollar steadied above a five-month low, but the metal remained on track for a weekly gain after the Federal Reserve scaled back rate increase expectations.
"Since the Fed statement, gold's been backing off the highs," said Phillip Streible, senior commodities broker at R.J. O'Brien in Chicago.
"The way we would see this rally build is if you saw more statements like one from ECB. We continue to see countries dig deeper in the red."
The dollar rose 0.3 percent against a basket of major currencies but was still near a 17-month low against the yen and set to end the week 1.2 percent lower against the currency basket.
The U.S. central bank held interest rates steady on Wednesday and indicated it would tighten policy this year, but fresh projections offered by the Fed showed policymakers expect two quarter-point increases by year-end, half the number forecast in December.
Expectations the Fed would raise rates steadily this year had faded since the bank's initial hike in December, as concerns about global growth roiled financial markets.
A low interest rate environment tends to decrease the opportunity cost of holding non-yielding bullion.
Silver rose more than 1 percent to $16.13, the highest since late October, before falling 0.43 percent to $15.81. It was up 2.2 percent on the week.
"We saw the added interest moving into silver and that could be due to the fact that gold is up 18 percent this year and although investors are still looking for upside potential, they are also starting to look for relative value," Saxo Bank senior manager Ole Hansen said.
"You can argue the fundamentals in silver potentially improving over the year, with supply being reduced from the mining of other metals."
Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.50 percent to 807.09 tonnes on Thursday from 795.20 tonnes on Wednesday.
CFTC shows typical action for retracement - net long position has dropped a bit simultaneously with contraction of open interest. This moment points on some profit taking action, closing of long positions. But this close was not massive. And it is too early to speak on sentiment change probably:
Technicals
Monthly
Last week gold has shown quiet action that mostly made no impact on monthly chart. Existence of untouched YPR1 around 1315 area significantly increases chances on further upside action soon and makes us treat current pause as retracement only. Thus our analysis on monthly chart mostly stands the same.
Since New Year gold stands in upside action. Reasons could be different - geopolitics, investors' assets distribution in the beginning of the year. Upside action currently has not changed situation drastically yet on but we will monitor how situation will change.
We still think that currently gold should be mostly driven by geopolitics, rather than economics. This driving factor creates absolutely new scale of uncertainty and leads to very fast changes on Globe political situation. That's why we suspect that gold market hardly will fall dramatically, since we're just in the beginning of Middle East tensions. The fact that gold was dropping recently on a background of Middle East turmoil looks a bit artificial and this situation already is changing. Thus, recently gold has risen even on strong NFP data, compares to other assets. Recent reaction on GDP revision also was as strong as it could be or as it was some time ago. Demand on safe haven assets starts to increase - just take a look at JPY, CHF and gold, SDPR and other gold funds stats.
Not just Middle East stands in our focus. We see that fumes of this conflict spread over planet. Recall Paris terrorist attack, refugees tensions in EU, Brexit voting, a lot of contradiction inside EU as political as economical - North Stream-2, mutual sanctions, Ukraine membership voting in Netherlands, Montenegro NATO membership and a lot of others. China's financial turmoils is isolated theme for discussion. All these stuff is happening on a background of reducing population wealth and solvency. So, we see that entropy is growing. Currently we could just gamble what game stands under curtain of political meetings among major leaders.
As market gradually starts to come to the same conclusion as gradually situation on gold market starts to change in positive area. International banks purchase gold in big volumes, mostly PBoC and Russian Central Bank. Besides, as now we see clear signs of currency war - gold will get support here either. Germany stands on a way of own gold repatriation from US and UK, as we've mentioned above. Soon probably will follow other countries, say, Netherlands and others.
Speaking on breakeven points between bullish and bearish sentiment - market should show significant upside action and form bullish reversal swing to destroy current bearish domination. It means that gold has to exceed 1380 area.
At the same time gold needs to move above 1308 to break current bearish trend by forming upside reversal swing.
So, on long-term charts it could happen, that we will not get yet clear tendency and gold could turn to some wide range action. Because right now it is too many sources that could initiate impact on gold market. They will push market in one and other sides. Geopolitical situation in the World has reached very high degree of uncertainty and we believe that sooner rather than later it will become a dominating factor for gold market and already it's becoming.
Anyway, gold's shift from downward action to flat one, even it will be wide - already will be significant moment.
Monthly chart trend has turned bullish.
As you can see upside action has started right after butterfly "Buy" has been completed. Currently market has reached 5/8 resistance of butterfly 's swing. Gold has exceeded Yearly Pivot and this tells on existing bullish trend on monthly chart. As gold is not at overbought here - next logical destination is 1314 area of Yearly PR1.
In general, guys, coming area of 1300-1320 will become a real test of bullish strength. Monthly overbought, YPP and Fib level... hardly market will pass it easily and without solid reactions. Could we get here wide reverse H&S pattern? What d'you think?
Weekly
So within past week we have appealed to weekly levels many times, finally major resistance has been hit. We not occasionally have said that the ceil for last week is 1285 area - Fib level and overbought on weekly chart. Thus, even on recent rally market was not able to exceed it. Last week brings shy add-on since it was mostly inside one.
Our suggestion on 5$ rally has been completed - market indeed has shown minor upside jump, completed daily target. Still, 2nd week in a row we tell on possible retracement and now all conditions for it have been met. Gold has formed something like bearish Stretch pattern on weekly chart. Reversal was prepared by forming butterfly "Sell" on daily time frame. Still, as we've estimated last week, daily picture could show different reversal patterns, and one of them is 3-Drive "Sell" in this case market could form new top, but it barely will change weekly picture. Anyway this will be the same fluctuations around the same resistance.
We suggest minimum weekly destination point is 1180-1200 area. As you can see it includes trend line support, Yearly Pivot and major 3/8 support level. MPP also stands close. This level is also interesting from perspective of large weekly reverse H&S pattern. 1180 is precise bottom of possible right shoulder.
Although at first glance it seems that 1180 area is too deep, in fact this is just 30% retracement. Trend holds bullish on weekly chart.
Daily
On daily chart, guys, last week we've got new inputs and specific price behavior which makes us thing about different pattern. This is 3-Drive "sell" that could finally trigger retracement down.
Mostly we've discussed reasons already, why we've changed our mind in our daily updates. On daily chart market shows clear signs of bullish dynamic pressure. Although trend has turned bearish - gold continues to form higher lows tendency and this usually leads to another leg up.
Still we do not expect some superb upside breakout, since gold at the same time stands at strong weekly resistance. Thus, 1300-1310 area is a ceil for short-term probably.
We have other reasons to think so as well, but some of them stands on intraday charts. Recall the failure of Double Top pattern on hourly chart. But this "Failure" has not reached the target yet. Usually market should erase is totally, which means action above the top. Also, downward action from 1285 was short-term, but gold has completed butterfly "sell" pattern and this was enough to start greater retracement down.
As soon as this has not happened - leads us to conclusion that currently another leg up is very probable.
4-hour
The final part of this 3-Drive pattern could take the shape of butterfly. Besides this butterfly could give us another important information. Say, if market will drop below 1225 area and erase it - it will mean that hardly we will get 3-Drive "Sell" and gold could turn down immediately after 1225 breakout.
Hourly
On Monday we will continue to monitor our H&S pattern and should get an answer where right wing of butterfly will start. Right now it seems that 5/8 FIb support is more probable.
On Friday market has achieved our first target - AB=CD and Agreement around Fib level. But reaction does not show any signs of thrust. Mostly it reminds standing on support. Also we have hear bearish grabber that suggests downward breakout of this area.
As a result, it seems that we should see gold around 1240 Agreement area and if gold indeed bullish in short-term, here it should turn up to confirm butterfly and daily 3-Drive pattern. It means that any break below 1240 will put the shadow on short-term bullish perspective.
Conclusion:
We think that fundamentally gold stands somewhere near bottom and situation is starting to change. But this bottom could be "extended" in time.
In short-term perspective gold has reached important barrier and completed important targets. Logically it could turn to meaningful retracement on daily-weekly charts.
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.
First, I would like to remind you our talks on geopolitical situation and that now US pays to EU countries for following it's external policy:
http://sputniknews.com/business/20160320/1036618662/germany-repatriation-gold.html
Of course, there could be some pure financial reasons, but this is definitely step to Germany independence.
(Reuters) - Gold edged lower on Friday, as the dollar steadied above a five-month low, but the metal remained on track for a weekly gain after the Federal Reserve scaled back rate increase expectations.
"Since the Fed statement, gold's been backing off the highs," said Phillip Streible, senior commodities broker at R.J. O'Brien in Chicago.
"The way we would see this rally build is if you saw more statements like one from ECB. We continue to see countries dig deeper in the red."
The dollar rose 0.3 percent against a basket of major currencies but was still near a 17-month low against the yen and set to end the week 1.2 percent lower against the currency basket.
The U.S. central bank held interest rates steady on Wednesday and indicated it would tighten policy this year, but fresh projections offered by the Fed showed policymakers expect two quarter-point increases by year-end, half the number forecast in December.
Expectations the Fed would raise rates steadily this year had faded since the bank's initial hike in December, as concerns about global growth roiled financial markets.
A low interest rate environment tends to decrease the opportunity cost of holding non-yielding bullion.
Silver rose more than 1 percent to $16.13, the highest since late October, before falling 0.43 percent to $15.81. It was up 2.2 percent on the week.
"We saw the added interest moving into silver and that could be due to the fact that gold is up 18 percent this year and although investors are still looking for upside potential, they are also starting to look for relative value," Saxo Bank senior manager Ole Hansen said.
"You can argue the fundamentals in silver potentially improving over the year, with supply being reduced from the mining of other metals."
Holdings in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.50 percent to 807.09 tonnes on Thursday from 795.20 tonnes on Wednesday.
CFTC shows typical action for retracement - net long position has dropped a bit simultaneously with contraction of open interest. This moment points on some profit taking action, closing of long positions. But this close was not massive. And it is too early to speak on sentiment change probably:
Technicals
Monthly
Last week gold has shown quiet action that mostly made no impact on monthly chart. Existence of untouched YPR1 around 1315 area significantly increases chances on further upside action soon and makes us treat current pause as retracement only. Thus our analysis on monthly chart mostly stands the same.
Since New Year gold stands in upside action. Reasons could be different - geopolitics, investors' assets distribution in the beginning of the year. Upside action currently has not changed situation drastically yet on but we will monitor how situation will change.
We still think that currently gold should be mostly driven by geopolitics, rather than economics. This driving factor creates absolutely new scale of uncertainty and leads to very fast changes on Globe political situation. That's why we suspect that gold market hardly will fall dramatically, since we're just in the beginning of Middle East tensions. The fact that gold was dropping recently on a background of Middle East turmoil looks a bit artificial and this situation already is changing. Thus, recently gold has risen even on strong NFP data, compares to other assets. Recent reaction on GDP revision also was as strong as it could be or as it was some time ago. Demand on safe haven assets starts to increase - just take a look at JPY, CHF and gold, SDPR and other gold funds stats.
Not just Middle East stands in our focus. We see that fumes of this conflict spread over planet. Recall Paris terrorist attack, refugees tensions in EU, Brexit voting, a lot of contradiction inside EU as political as economical - North Stream-2, mutual sanctions, Ukraine membership voting in Netherlands, Montenegro NATO membership and a lot of others. China's financial turmoils is isolated theme for discussion. All these stuff is happening on a background of reducing population wealth and solvency. So, we see that entropy is growing. Currently we could just gamble what game stands under curtain of political meetings among major leaders.
As market gradually starts to come to the same conclusion as gradually situation on gold market starts to change in positive area. International banks purchase gold in big volumes, mostly PBoC and Russian Central Bank. Besides, as now we see clear signs of currency war - gold will get support here either. Germany stands on a way of own gold repatriation from US and UK, as we've mentioned above. Soon probably will follow other countries, say, Netherlands and others.
Speaking on breakeven points between bullish and bearish sentiment - market should show significant upside action and form bullish reversal swing to destroy current bearish domination. It means that gold has to exceed 1380 area.
At the same time gold needs to move above 1308 to break current bearish trend by forming upside reversal swing.
So, on long-term charts it could happen, that we will not get yet clear tendency and gold could turn to some wide range action. Because right now it is too many sources that could initiate impact on gold market. They will push market in one and other sides. Geopolitical situation in the World has reached very high degree of uncertainty and we believe that sooner rather than later it will become a dominating factor for gold market and already it's becoming.
Anyway, gold's shift from downward action to flat one, even it will be wide - already will be significant moment.
Monthly chart trend has turned bullish.
As you can see upside action has started right after butterfly "Buy" has been completed. Currently market has reached 5/8 resistance of butterfly 's swing. Gold has exceeded Yearly Pivot and this tells on existing bullish trend on monthly chart. As gold is not at overbought here - next logical destination is 1314 area of Yearly PR1.
In general, guys, coming area of 1300-1320 will become a real test of bullish strength. Monthly overbought, YPP and Fib level... hardly market will pass it easily and without solid reactions. Could we get here wide reverse H&S pattern? What d'you think?
Weekly
So within past week we have appealed to weekly levels many times, finally major resistance has been hit. We not occasionally have said that the ceil for last week is 1285 area - Fib level and overbought on weekly chart. Thus, even on recent rally market was not able to exceed it. Last week brings shy add-on since it was mostly inside one.
Our suggestion on 5$ rally has been completed - market indeed has shown minor upside jump, completed daily target. Still, 2nd week in a row we tell on possible retracement and now all conditions for it have been met. Gold has formed something like bearish Stretch pattern on weekly chart. Reversal was prepared by forming butterfly "Sell" on daily time frame. Still, as we've estimated last week, daily picture could show different reversal patterns, and one of them is 3-Drive "Sell" in this case market could form new top, but it barely will change weekly picture. Anyway this will be the same fluctuations around the same resistance.
We suggest minimum weekly destination point is 1180-1200 area. As you can see it includes trend line support, Yearly Pivot and major 3/8 support level. MPP also stands close. This level is also interesting from perspective of large weekly reverse H&S pattern. 1180 is precise bottom of possible right shoulder.
Although at first glance it seems that 1180 area is too deep, in fact this is just 30% retracement. Trend holds bullish on weekly chart.
Daily
On daily chart, guys, last week we've got new inputs and specific price behavior which makes us thing about different pattern. This is 3-Drive "sell" that could finally trigger retracement down.
Mostly we've discussed reasons already, why we've changed our mind in our daily updates. On daily chart market shows clear signs of bullish dynamic pressure. Although trend has turned bearish - gold continues to form higher lows tendency and this usually leads to another leg up.
Still we do not expect some superb upside breakout, since gold at the same time stands at strong weekly resistance. Thus, 1300-1310 area is a ceil for short-term probably.
We have other reasons to think so as well, but some of them stands on intraday charts. Recall the failure of Double Top pattern on hourly chart. But this "Failure" has not reached the target yet. Usually market should erase is totally, which means action above the top. Also, downward action from 1285 was short-term, but gold has completed butterfly "sell" pattern and this was enough to start greater retracement down.
As soon as this has not happened - leads us to conclusion that currently another leg up is very probable.
4-hour
The final part of this 3-Drive pattern could take the shape of butterfly. Besides this butterfly could give us another important information. Say, if market will drop below 1225 area and erase it - it will mean that hardly we will get 3-Drive "Sell" and gold could turn down immediately after 1225 breakout.
Hourly
On Monday we will continue to monitor our H&S pattern and should get an answer where right wing of butterfly will start. Right now it seems that 5/8 FIb support is more probable.
On Friday market has achieved our first target - AB=CD and Agreement around Fib level. But reaction does not show any signs of thrust. Mostly it reminds standing on support. Also we have hear bearish grabber that suggests downward breakout of this area.
As a result, it seems that we should see gold around 1240 Agreement area and if gold indeed bullish in short-term, here it should turn up to confirm butterfly and daily 3-Drive pattern. It means that any break below 1240 will put the shadow on short-term bullish perspective.
Conclusion:
We think that fundamentally gold stands somewhere near bottom and situation is starting to change. But this bottom could be "extended" in time.
In short-term perspective gold has reached important barrier and completed important targets. Logically it could turn to meaningful retracement on daily-weekly charts.
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.
