Gold GOLD PRO WEEKLY, March 22 - 26, 2021

Sive Morten

Special Consultant to the FPA
Messages
14,727
Fundamentals

For the gold market recent Fed meeting also has become a central event, as well as for FX market. And, actually meeting brings the same results and same fears that dovish policy and rising interest rates keep their negative impact on gold market, reducing its attractiveness because of non interest-bearing gold feature. Recently we have taken in-depth view on possible Fed logic, why they follow this policy and what could go wrong in their plans. Everything that we've said is applicable to Gold market at the same degree as for FX market, and hurts a lot bullish ambitions, making them phantom. Here we just provide the overview of investors opinion on perspectives of the gold market in near term.

Gold prices rose over 1% on Wednesday after the U.S. Federal Reserve reiterated its accommodative monetary policy which also weakened the dollar. The Federal Reserve on Wednesday repeated its pledge to keep the benchmark overnight interest rate near zero for years to come. The central bank sees the economy growing 6.5% this year, the most since 1984, and unemployment falling to 4.5% by year's end.

"One of the key takeways is the that Fed needs to see results in terms of economic growth, inflation and employment before they move to hike rates and not forecasts and that should support gold in the near-term," said Edward Moya, senior market analyst at OANDA.

"The one fly in the amber is that the bond market is so far not that impressed, which could help support the dollar and put a lid on the gold rally," Tai Wong, a trader at investment bank BMO in New York said, pointing to elevated U.S. Treasury yields. Benchmark yields remained high after the Fed projected a jump in economic growth with no rate hikes through 2023.

Gold is less appealing to investors as yields are being driven by nominal rates instead of inflation expectations, TD Securities commodity strategist Daniel Ghali said.


"The 10-year rates have dropped a little bit and the dollar which was higher has also come off. We could see gold do a little bit better if the rates situation start to stabilize," said ED&F Man Capital Markets analyst Edward Meir.

The U.S. 10-year yields eased after hovering near a more than one-year peak scaled in the last session. The dollar retreated from the session peak, which was its highest in more than a week.

"The expected growth prospects, continuation of the relatively low interest rate environment does bring about some fears of inflation," which is gold supportive, said David Meger, director of metals trading at High Ridge Futures.

On the technical front, "in the near term gold faces resistance around the $1,765/oz level," said Standard Chartered analyst Suki Cooper.

Meanwhile, the first high-level U.S.-China meeting of the Biden administration got off to a fiery start on Thursday, with both sides leveling sharp rebukes of the others' policies.

"The fact that the talks did not go well could be a little bit supportive... (but) right now it is mainly a war of words," Meir said, pointing to the tit-for-tat tariffs the two sides had exchanged in the past.

So, as you can see the headlines were very limited on gold market. It seems that investors are loosing interest to the gold gradually, as very weak activity stands on the market. The same we see in recent COT report

COT Report

This week we have almost no change in positions and open interest. Net long position slightly has increased for 4K contracts, while short was decreased approximately at the same amount. This could be preparation for Fed statement but next week everything could change.

1616326246693.png


The same thing we have on SPDR Fund statistics. Recent puny bounce makes no effect on reserves:
1616330038299.png


So, as you could see we do not have any specific drivers for the gold market - it goes in the same flow as all others, including FX, and consequences will be the same. The fact that gold shows no reaction as on Biden's 1.9 Trln pack, as on recent dovish Fed statement makes us think that it is insensitive to it and market just ignores them. That, in turn, leads us to conclusion that investors do not believe in efficiency of taken measures. As we've said yesterday, we gravitate more to idea that Fed will have to review their assessment of very soon and agree with Black Rock manager conclusion - Fed would likely be able to taper asset purchases “sooner than most expect: perhaps before the end of the year, which suggests to us that communicating the plan could come as early as the June meeting.”

It means that major bullish trend for gold supposedly is over. Recent upside action was very weak compares to the scale of happened events. Only some extraordinary political events, tensions or other things of this kind could change situation. But in this case it will have no relation to economy tendencies and hardly we could foresee any changes of that sort. As usual they come unexpectedly. So, it seems currently we could trade upside pullbacks here and there from strong support levels, as gold still could show meaningful pullbacks, while interest rates are relatively low by far. But long positions should be long-term and treated only as retracement type of action, as major tendency is changing.

Technicals

Monthly

Long term picture barely has changed as market still stands in reaction to strong K-area on monthly chart. Long term MACD trend stands bearish, price is below YPP and downside action shows acceleration on CD leg. Still, as price shows the first touch of strong support area - we're in tactical bounce environment. As we've said gold keeps ability of propriate reaction on meaningful technical conditions by far, 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 that has not been hit yet. This is the reason why we do not exclude chance that gold could drop to the new lows before major upside reaction starts. But anyway this price behavior has to be reflected on lower time frames in a way of some pattern.

gold_m_22_03_21.png


Weekly

Overall upside reaction stands weak. MACD is bearish as well, but now context is based on directional pattern - weekly DiNapoli "Stretch", that pushes gold higher, although at very slow pace. Another difficulty with Stretch is its dynamic target. Normally, Stretch is treated as done when DOSC returns to zero level. It is good if reaction is strong but if it is flat - DOSC could return back while price just stands flat. Here, we see that DOSC is almost at zero again and Stretch has very small rest of potential.

If you trade on weekly chart, you have to take care on OP target and place stop order below it. Because reaching of OP doesn't mean the breakout of K-area and failure of the retracement scenario. Very often with major OP's just below the K-areas market could form short-term spike to hit it. And every time when we see this, we have to take it in consideration. For conservative approach it would be better to consider long entry only when OP will be reached.

gold_w_22_03_21.png


Daily

Daily picture is well-known to us as it changes very slow. Our major concern stands around multiple targets below the market that have not been completed yet - major XOP @ 1669, weekly OP @1648 and butterfly target around 1643. All of them stand in relatively narrow range. The fact that downside action shows acceleration and upside bounce is very slow and heavy makes downside continuation just a question of time. Even without mentioning fundamental background.

Thus, for upside action we consider two levels. First one is around 1752, where market stands right now, next is K-area of 1784-1800. Other levels stand above daily overbought area and not important by far.
gold_d_22_03_21.png


Intraday

Here potentially market could finalize action to first resistance and OP target around 1960, forming upside butterfly. But, to be honest, I wouldn't be surprised, if downside action starts right from here. Reason for that - downside reversal swing that we've discussed on Friday. Upside action after this swing looks very choppy and heavy with no signs of strength and wish to upside continuation.

Thus, combination of butterfly and Agreement resistance around 1760$ indeed looks perfect and this is no doubts the scenario to consider for short entry. But reversal might be already in action. It makes sense for those who prefer gradual position taking - few times around key level. Next, XOP target also makes Agreement resistance with 1800 daily K-resistance, but currently it is unclear what driving could deliver gold there.

gold_4h_22_03_21.png
 
Last edited:

Sive Morten

Special Consultant to the FPA
Messages
14,727
Greetings everybody,

So, as on the EUR - major background stands not in favor of the Gold market, but in short-term upside bounce from strong monthly support area could last a bit more. We keep the same trading plan by far and watching for a bit higher levels where intend to consider reasons to go short.

Daily picture confirms that some upside continuation could happen indeed, as price stands tight under resistance, which is a bullish feature:
gold_d_23_03_21.png


On 4H chart we're mostly watching for the same patterns - combination of AB-CD target and upside butterfly's extension. This is good combination that potentially provides reasons to consider short entry around 1763-1765 area. Only, if we do not get straight upward action, of course. It should be gradual:
gold_4h_23_03_21.png


Another reason to suspect upward continuation stands on 1H chart, where price takes the shape of accurate triangle, that looks bullish being forming under daily resistance.
gold_1h_23_03_21.png


Thus, we're mostly watching for 1763-1765 for short position taking, while scalp traders could consider intraday upward setup, based on butterfly, triangle and other stuff.
 

Sive Morten

Special Consultant to the FPA
Messages
14,727
Greetings everybody,

Despite negative news flying fast and furious - gold has limited impact as most of them relates to EU, which is new lockdown and problems with A-Z vaccine. In the US we have some news as well, such as possible tax hike, but situation is still unclear and this question is not been discussed in government yet.

That's they reason why gold drops a bit recently but significantly less degree than EUR. As it has supportive factors as well - China tensions and started retracement on US interest rates, they could support gold and let it to reach finally our 1762-1765 area. Thus, we're mostly following the same plan by far:
gold_d_24_03_21.png


Despite recent drop, gold keeps valid our butterfly. We have no intention to buy the gold right now as we 're mostly watching for target cluster as an area where could think about taking the short position. It just means that overall gold performance is not as worrying. Scalp traders could consider buying gold with butterfly pattern. It is attractive from stop placement - as it could be placed very close. But, this trade cares a lot of risk as upward action is heavy and fragile. This choice is up to you.
gold_4h_24_03_21.png
 

Sive Morten

Special Consultant to the FPA
Messages
14,727
Greetings everybody,

Today guys, again we take a look at GBP instead of Gold. The latter shows anemic action in tight range and it seems it needs some driver that could push it out from this condition.

Meantime, yesterday we talked on GBP and come to conclusion that while in short-term perspective it could bounce up due daily "Stretch" pattern, in perspective of 1-2 weeks downside action could continue.

Indeed for us is perfect situation to get GBP around 1.35 K-area and completed OP around it:
gbp_d_26_03_21.png


If we're correct with this scenario, then GBP should turn down around nearest Fib levels of 1.38 and 1.3870:
gbp_4h_26_03_21.png


Otherwise, action to 1.40 again might become the first sign that cable turns bullish, as reverse H&S pattern could be formed.

On 15 min chart upward action started from Double Bottom pattern and few different targets point on the same 1.3790 level that agrees with 4H resistance area. So, if you've taken long position recently - this is the moment to protect/book result, to do something with position.
gbp_1h_26_03_21.png
 
Top