Sive Morten
Special Consultant to the FPA
- Messages
- 18,664
Fundamentals
Gold market also was involved in the same processes as FX market. Two major driving factors that seriously disturbed investors were Fed statement and Brexit news. They have become the reason of volatility on gold, especially on intraday charts. Our Brexit and Fed policy discussion you could find in our FX report.
In two words, despite Fed statement, situation in US economy is not as bad as it seems and possible rate increase still stands on the table. Indeed, despite poor recent NFP data - wage inflation has jumped to 0.4 level - highest in recent few months. Brexit situation is more complicated, because sides are driven by opposite interest. Additionally, inside the UK, relation to Brexit and EU Agreement differs as well, and domestic political forces are busy not with Brexit itself but in using this situation in their political favor.
Speaking on gold, both factors are supportive in short-term - as Reuters reports, prices rose on Friday as weak economic data from the euro zone exacerbated fears of a global slowdown, weighing on risk sentiment and putting bullion on track for its best week in nearly two months.
“There is some safe demand that has surfaced,” said Jim Wyckoff, senior analyst at Kitco Metals.
“The U.S. Federal Reserve suggested U.S. economic growth was slowing, which has spilled over into notions that the rest of the world economy might be experiencing slower growth. That was highlighted by the PMI data out of the European Union, auguring for some trepidation in the world’s stock markets.”
Businesses across the euro zone performed much worse than expected this month as factory activity contracted at the fastest pace in nearly six years, hurt by a big drop in demand, a survey showed.
“It is about the weakness in the economy in the euro zone and outlook for interest rates which makes holding gold more attractive,” said Quantitative Commodity Research analyst Peter Fertig.
“The data...was weaker than the consensus. This is weighing on interest rates in the euro zone and bond yields,” Fertig said.
Germany’s benchmark 10-year government bond yield turned negative for the first time since October 2016, while European stocks wiped out early gains after the data was released.
European stocks suffered after the weak data, while U.S. stocks opened lower.
“Price action in gold continues to lend strength to our view that expected data deterioration will help spark a gold rally as interest rates continue to fall in the context of a slowing global economy,” analysts at TD Securities wrote in a note.
Earlier this week, the Fed brought its three-year drive to tighten monetary policy to an abrupt end, abandoning projections for any interest rate hikes this year.
Lower interest rates reduce the opportunity cost of holding non-yielding gold and weigh on the dollar.
Gold prices rose to their highest since Feb. 28 on Thursday at $1,320.22. Despite paring some of those gains, they were still on track for a third straight weekly gain, up about 1 percent so far.
“Gold could not break above $1,320 on the upside and saw a correction. The current trading range seems to be between $1,305-$1,320,” said Afshin Nabavi, senior vice president at MKS SA.
“With the geopolitical and the (uncertain) Brexit situation, we may still be heading higher.”
EU leaders have given Prime Minister Theresa May a two-week reprieve, until April 12, before Britain could lurch out of the EU if she fails to persuade lawmakers to back the withdrawal treaty she concluded with Brussels.
COT Report
Recent CFTC data doesn't show something new. Net position stands long and slightly has increased for 10K contracts to 88.4K. At the same time, it is far from saturation and has a lot of room to grow. It means that here we do not have any limitations for further gold's growth. Second - long position mostly stands the same, it means that no sell-off has happened and investors still keep positions.
SPDR fund also shows nice performance and its gold reserves increased in March from 769 to 781 tonnes - that approximately equals numbers of the February.
Source: cftc.gov
Charting by Investing.com
Technical
Monthly
As gold market hit major target on weekly chart, it fluctuates inside major swings and mostly is driven by shorter-term factors. It makes minor impact on monthly picture and our long-term view. Recent fundamental and sentiment analysis shows that no big changes have happened and gold still stands positive. Despite technical retracement, we do not have reasons yet to cancel our long-term positive view on gold.
As we've said earlier, we're watching for our so called "symmetrical" model. It could be clear symmetry in market action, and we have suggested that future action could be a reflection of previous downside action shape.Now market has moved more above the trend line, which was a crucial level for long-term technical picture.
Gold shows good performance in December- February, which could put the foundation of new long-term upside trend. We still keep our harmonic technical model on monthly chart as primary tool of analysis.
Fundamental reasons for gold rising mostly relate to changing of global political and economical situation. Strong global shifts never could happen without big political events. This should provide big support to gold market. Now it is widely suggested that these processes should accelerate closer to 2020 year, or even in second half of 2019. For example, here is report by Fathom Consulting and their expectations to see world crisis around 2020.
Here is explanation of our "symmetrical" model and scenario. Recent action on gold market reminds reverse H&S shape but very choppy and extended in time. Important COP target has been hit and upside action has started. In fact we have mirror action to the right and to the left from COP point. Market forms approximately equal lows on both sides. The speed is also similar. Is it possible that reversal is forming? Why not.
On monthly chart we keep watching whether gold will be able to hold above trend line. Now price stands above YPP as well, but it has not been tested yet by price. As meaningful retracement stands under way - YPP should work as nearest destination point.
Weekly
Here on weekly, our first setup has been completed - B&B "Buy" trade. Once XOP target has been hit, we've mentioned two patterns - "222' Sell and B&B "Buy".
By Dinapoli framework, we've got B&B "Buy" pattern and it has done well as gold has completed 5/8 Fib resistance level after upside bounce from 3/8 Fib support here, on weekly.
At the same time we have "222" Sell which suggests drop at least to 1275 Fib support, but I would say it should be somewhere 1270, as YPP stands at 1269. As B&B is completed, now we watch AB=CD action down here and completion as "222" pattern as normal reaction on XOP target and weekly OBght.
Daily
On Friday gold has formed inside session guys, and all that we've said in daily update is still valid here. Daily chart forms bearish setup as B&B trade is done and price forms "222" Sell pattern here. Upside action was gradual, bars are of moderate range and overall action matches to conditions of retracement type of price behavior.
Thus, we focus on downside continuation in a shape of AB-CD pattern. It should lead market somewhere to 1260 area. At the same time our signal level is 1322. Any fast action above it will mean immediate upside continuation. Do not forget that our long-term view is bullish and we're just in a pause of longer term upside trend. Pause could finish unexpectedly.
Thus, bears could use "222" pattern to go short with stops above 1322 Fib level and upside AB-CD target. While bulls should wait either 1260 destination point or downside setup failure, if price jump above 1322.
Intraday
Although setup mostly stands in place - it still has some uncompleted moments. On 4H chart our upside AB=CD has not been completed totally yet. It means that before taking short position we should wait for completion of the pattern. Final upside leg still could be formed. Besides, we have valid bullish stop grabber that points on the same thing:
For example, upside action could be finalized by another butterfly at the top. We even could treat this action together as 3-Drive "sell" pattern:
Conclusion:
Long-term sentiment on gold market still stands positive and we expect re-establishing of upside trend as soon as retracement will be over.
On coming week we keep an eye on 1322 area, which should give us a signal whether we get second retracement leg to 1260 or gold re-establish upside longer-term trend.
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.
Gold market also was involved in the same processes as FX market. Two major driving factors that seriously disturbed investors were Fed statement and Brexit news. They have become the reason of volatility on gold, especially on intraday charts. Our Brexit and Fed policy discussion you could find in our FX report.
In two words, despite Fed statement, situation in US economy is not as bad as it seems and possible rate increase still stands on the table. Indeed, despite poor recent NFP data - wage inflation has jumped to 0.4 level - highest in recent few months. Brexit situation is more complicated, because sides are driven by opposite interest. Additionally, inside the UK, relation to Brexit and EU Agreement differs as well, and domestic political forces are busy not with Brexit itself but in using this situation in their political favor.
Speaking on gold, both factors are supportive in short-term - as Reuters reports, prices rose on Friday as weak economic data from the euro zone exacerbated fears of a global slowdown, weighing on risk sentiment and putting bullion on track for its best week in nearly two months.
“There is some safe demand that has surfaced,” said Jim Wyckoff, senior analyst at Kitco Metals.
“The U.S. Federal Reserve suggested U.S. economic growth was slowing, which has spilled over into notions that the rest of the world economy might be experiencing slower growth. That was highlighted by the PMI data out of the European Union, auguring for some trepidation in the world’s stock markets.”
Businesses across the euro zone performed much worse than expected this month as factory activity contracted at the fastest pace in nearly six years, hurt by a big drop in demand, a survey showed.
“It is about the weakness in the economy in the euro zone and outlook for interest rates which makes holding gold more attractive,” said Quantitative Commodity Research analyst Peter Fertig.
“The data...was weaker than the consensus. This is weighing on interest rates in the euro zone and bond yields,” Fertig said.
Germany’s benchmark 10-year government bond yield turned negative for the first time since October 2016, while European stocks wiped out early gains after the data was released.
European stocks suffered after the weak data, while U.S. stocks opened lower.
“Price action in gold continues to lend strength to our view that expected data deterioration will help spark a gold rally as interest rates continue to fall in the context of a slowing global economy,” analysts at TD Securities wrote in a note.
Earlier this week, the Fed brought its three-year drive to tighten monetary policy to an abrupt end, abandoning projections for any interest rate hikes this year.
Lower interest rates reduce the opportunity cost of holding non-yielding gold and weigh on the dollar.
Gold prices rose to their highest since Feb. 28 on Thursday at $1,320.22. Despite paring some of those gains, they were still on track for a third straight weekly gain, up about 1 percent so far.
“Gold could not break above $1,320 on the upside and saw a correction. The current trading range seems to be between $1,305-$1,320,” said Afshin Nabavi, senior vice president at MKS SA.
“With the geopolitical and the (uncertain) Brexit situation, we may still be heading higher.”
EU leaders have given Prime Minister Theresa May a two-week reprieve, until April 12, before Britain could lurch out of the EU if she fails to persuade lawmakers to back the withdrawal treaty she concluded with Brussels.
COT Report
Recent CFTC data doesn't show something new. Net position stands long and slightly has increased for 10K contracts to 88.4K. At the same time, it is far from saturation and has a lot of room to grow. It means that here we do not have any limitations for further gold's growth. Second - long position mostly stands the same, it means that no sell-off has happened and investors still keep positions.
SPDR fund also shows nice performance and its gold reserves increased in March from 769 to 781 tonnes - that approximately equals numbers of the February.
Source: cftc.gov
Charting by Investing.com
Technical
Monthly
As gold market hit major target on weekly chart, it fluctuates inside major swings and mostly is driven by shorter-term factors. It makes minor impact on monthly picture and our long-term view. Recent fundamental and sentiment analysis shows that no big changes have happened and gold still stands positive. Despite technical retracement, we do not have reasons yet to cancel our long-term positive view on gold.
As we've said earlier, we're watching for our so called "symmetrical" model. It could be clear symmetry in market action, and we have suggested that future action could be a reflection of previous downside action shape.Now market has moved more above the trend line, which was a crucial level for long-term technical picture.
Gold shows good performance in December- February, which could put the foundation of new long-term upside trend. We still keep our harmonic technical model on monthly chart as primary tool of analysis.
Fundamental reasons for gold rising mostly relate to changing of global political and economical situation. Strong global shifts never could happen without big political events. This should provide big support to gold market. Now it is widely suggested that these processes should accelerate closer to 2020 year, or even in second half of 2019. For example, here is report by Fathom Consulting and their expectations to see world crisis around 2020.
Here is explanation of our "symmetrical" model and scenario. Recent action on gold market reminds reverse H&S shape but very choppy and extended in time. Important COP target has been hit and upside action has started. In fact we have mirror action to the right and to the left from COP point. Market forms approximately equal lows on both sides. The speed is also similar. Is it possible that reversal is forming? Why not.
On monthly chart we keep watching whether gold will be able to hold above trend line. Now price stands above YPP as well, but it has not been tested yet by price. As meaningful retracement stands under way - YPP should work as nearest destination point.
Weekly
Here on weekly, our first setup has been completed - B&B "Buy" trade. Once XOP target has been hit, we've mentioned two patterns - "222' Sell and B&B "Buy".
By Dinapoli framework, we've got B&B "Buy" pattern and it has done well as gold has completed 5/8 Fib resistance level after upside bounce from 3/8 Fib support here, on weekly.
At the same time we have "222" Sell which suggests drop at least to 1275 Fib support, but I would say it should be somewhere 1270, as YPP stands at 1269. As B&B is completed, now we watch AB=CD action down here and completion as "222" pattern as normal reaction on XOP target and weekly OBght.
Daily
On Friday gold has formed inside session guys, and all that we've said in daily update is still valid here. Daily chart forms bearish setup as B&B trade is done and price forms "222" Sell pattern here. Upside action was gradual, bars are of moderate range and overall action matches to conditions of retracement type of price behavior.
Thus, we focus on downside continuation in a shape of AB-CD pattern. It should lead market somewhere to 1260 area. At the same time our signal level is 1322. Any fast action above it will mean immediate upside continuation. Do not forget that our long-term view is bullish and we're just in a pause of longer term upside trend. Pause could finish unexpectedly.
Thus, bears could use "222" pattern to go short with stops above 1322 Fib level and upside AB-CD target. While bulls should wait either 1260 destination point or downside setup failure, if price jump above 1322.
Intraday
Although setup mostly stands in place - it still has some uncompleted moments. On 4H chart our upside AB=CD has not been completed totally yet. It means that before taking short position we should wait for completion of the pattern. Final upside leg still could be formed. Besides, we have valid bullish stop grabber that points on the same thing:
For example, upside action could be finalized by another butterfly at the top. We even could treat this action together as 3-Drive "sell" pattern:
Conclusion:
Long-term sentiment on gold market still stands positive and we expect re-establishing of upside trend as soon as retracement will be over.
On coming week we keep an eye on 1322 area, which should give us a signal whether we get second retracement leg to 1260 or gold re-establish upside longer-term trend.
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.
