GOLD PRO Weekly March 30-03, 2015

[Sive Morten]

Fundamentals

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

Gold fell on Friday, snapping a seven-day rally as investors remained cautious ahead of comments from U.S. Federal Reserve Chair Janet Yellen, but the metal still looked set to post its second straight weekly gain.

Despite Friday's losses, gold was on track to finish the week up around 1.5 percent after its longest winning stretch since August 2012.

Yellen will speak in San Francisco on monetary policy in a speech scheduled for 1945 GMT and traders will be listening for clues on when the Fed may begin tightening monetary policy.

"Yellen ... has been accused of being too dovish and maybe she wants to react to that by making her speech sound a little bit less dovish," Saxo Bank senior manager Ole Hansen said.

Saudi Arabia and its allies launched air strikes in Yemen this week, rattling wider markets and supporting gold, usually seen as an insurance against risk. But even oil prices turned lower as fears eased about any disruption of Middle East crude shipments due to the Yemen conflict.

"Geopolitics has never been something that could set a trend in gold prices, it only causes a short-term deviation from the existing trend," Julius Baer head of commodity research Norbert Ruecker said.

Gold had gained strength after the Fed sounded cautious at its policy meeting last week about the pace of any interest rate increase, prompting the dollar to fall from multi-year highs.

Investor caution over the price rally was evident as SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, continued to post outflows. Holdings fell nearly 6 tonnes on Thursday to 737.24 tonnes, the lowest level since January.
Palladium lost 3 percent to a 5-1/2-month low of $736.80 an ounce.

Mike Dragosits of TD Securities in Toronto said in a note that vehicle sales in China are expected to increase. The bank forecast palladium prices at $800 an ounce in the second quarter.

"Since each new vehicle sold in China is a major demand driver for palladium, in the catalytic converter, we would suggest that the downturn in prices for the metal is near a bottom," he wrote.

Recent CFTC data shows solid growth in speculative short positions, while long positions stand flat after drop. This confirms bearish sentiment and tells that current upside rally mostly technical and has no support from institutional investors. It seems that we should use it for short entry.
The same tells SPDR fund report. It shows outflows for 2nd week in a row. Storages have dropped from 750 tonnes to 744 two weeks before and now they have decreased to 737 tonnes –for another 7 tonnes, although gold was in upside action last week.
Again we remind that gold is entering into bearish seasonal trend. All these moments obviously do not support bullish reversal on gold. So sentiment statistics mostly confirms bearish sentiment and makes us treat recent upside action only as retracement. Thus, in long-term perspective we should use it for short entry.

Here is detailed breakdown of speculative positions:
Open interest:

Shorts:

Longs:

Summary:

Technicals
Monthly
There is really shy difference in close price from previous week. 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$. At the same time we need 1130 breakout to start clearly speak on 1050 target.
In the beginning of the year market showed solid upside action. Gold was able to exceed yearly pivot, passed half way to Yearly Pivot resistance 1 but right now has reversed down and closed below YPP. From technical point of view this is bearish sign. This could be very significant moment and next logical destination will be yearly pivot support 1 around 1083$.
Recent US economy data mostly shows solid 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 (mostly inflation) in nearest perspective. Approximately the same was announced by Fed in forecast on inflation and had become a reason of dovish approach to rate hiking. Another concern right now is too strong dollar that becomes a problem per se for economy growth. Yesterday we’ve talked about this in our FX weekly research and if you want some details, please read it directly.
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. Day by day we see worrying geopolitical news.
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. Besides, right now we can clear recognized bearish dynamic pressure on monthly chart. Take a look, although trend has turned bullish, but market was unable to show more or less meaningful upside action. Right now we see the tendency of lower highs creation and this significantly increases chances on downward breakout.

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. By the way, most recent action also could turn to butterfly…
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. Current picture points on solid chances of downward continuation, because CD leg is faster than AB. Right now market stands at resistance that includes some daily Fib level and as you can see – weekly previously broken lows. As market has no real support from big investors as CFTC and SPDR shows – chances on downward reversal looks significant.
All other targets stand significantly lower – 1080, 1050 and even 990$.

Daily
So guys, major question here – is it time to take short position or retracement could be higher? Based on sentiment data from CFTC, SPDR fund we could think that upward action should not be too deep and should finish somewhere around. At the same time market easily has passed through K-resistance area and only stopped due overbought. Unfortunately on daily chart we do not have any clear patterns yet that could let us make conclusion. We even do not have sufficient thrust for DiNapoli DRPO or “B&B” patterns.
It means that the only way how we could get the answer is to watch how market will react on intraday strong supports and how it will move to them. Gradual, choppy, slow action and standing above major support levels will increase chance on upside continuation. While thrusting plunge could be the sign of reversal down again. Any patterns also could give us assistance.

4-hour
So, trend has turned bearish here. If you remember we stand here with short-term bearish “Kibby Trade” – combination of overbought and AB-CD 1.618 extension resistance. Still, downward action, as you can see, a bit slow and does not have sign of thrust. It’s gradual. It means that this is probably retracement yet. Major level that we will watch on coming week is 1182-1190 cluster. This is K-support area and it stands very close to WPS1 as well. This should be enough to check whether downward action a reversal or retracement. If market has power and intension to continue move higher it should not pass through this area.

Conclusion:
Recent market data and opinion of investors tells about speculative character of recent rally. This action does not confirm by any real inflow. It means that upward action is very fragile and could turn down at any moment. Our major task here is to catch this moment.
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.
In short-term perspective market stands in upside retracement. The first part of it has been completed recently, while whether we will get second part depends now on how market will behave around key 1182-1190 level. Right now we do not see signs that reversal already has happened. Downward action looks gradual and does not exclude second leg of upside retracement by far.


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 31, March 2015

Good morning,


Reuters reports today Gold edged lower on Tuesday and was heading for a second straight monthly fall, pressured by expectations the U.S. Federal Reserve will increase interest rates this year.

Bullion has fallen 3 percent since hitting a three-week high above $1,200 an ounce last week, as the dollar gained after Federal Reserve Chair Janet Yellen on Friday signalled a rate hike could be likely later this year.

Citing sustained gains in the U.S. economy, Yellen's remarks halted gold's longest rally since 2012, that had been spurred by hopes the Fed would take it slow in raising rates.

"Gold's inability to hold over the psychological $1,200 level, which it recently cleared, suggests that bullion may be susceptible to a further consolidation of gains," said HSBC analyst James Steel.

"Bullion may weaken further in the near term, we believe."
Investors are looking to U.S. jobs data on Friday, with a robust report likely to lift expectations that policymakers could raise U.S. interest rates sooner than later.

Economists polled by Reuters forecast a 245,000-gain in U.S. jobs in March. U.S. jobs increased by 295,000 in February, marking the 12th straight month that employment gains have been above 200,000 - the longest such run since 1994.

But outside the labour market, there were still signs that the U.S. economy hit a soft patch in the first quarter. Consumer spending barely rose in February as households used the windfall from lower gasoline prices to boost savings to the highest level in more than two years.



So, as among other dollar-related assets gold shows retracement after first upward leg. As we've estimated in our weekly research current upside action should be treated only as retracement since it is not supported by real money of institutional investors. Currently gold is approaching to our intraday support that should become an indicator of market's strength and we have to estimate can we count on upward continuation or not. Trend still holds bullish on daily chart:

So, on 4-hour chart we might say that our "Kibby trade" mostly completed. Despite the moment where you will decide to take profit - here or a bit later at AB=CD target, anyway this will be positive result.
So, right now gold is entering into support cluster - K-area, WPS1 and major 5/8 Fib level. Situation here is very similar to EUR. Although K-area and WPS1 stand a bit higher, but AB=CD (barely we could call it as AB=CD, BC leg is very small) creates Agreement with 5/8 level. Also this level coincides with former top. Following gold's habit, there is solid chance that market will reach it. If you will decide to take long position here - do not forget move stop to breakeven as soon as market will show meaningful upside respect of this support. Upward action is very fragile and barely reliable.

 

[Sive Morten]

Gold Daily Update Wed 01, April 2015

Good morning,


Today Reuters reports Gold kicked off April by climbing on Wednesday as the dollar retreated, but expectations the Federal Reserve is on course to lift interest rates this year capped gains.

Investors are looking to U.S. jobs data due on Friday, when another strong number could boost bets the U.S. central bank will hike interest rates sooner rather than later.

Economists polled by Reuters have forecast a 244,000 rise in non-farm payrolls in March, which would mark the 13th straight month of job gains of over 200,000, matching a run in 1994-95.

The Fed will have a "strong" case to hike interest rates in June, Richmond Fed President Jeffrey Lacker said, dismissing recent weak U.S. economic data as transitory and perhaps due to unseasonable weather.

"There's some short-term support around $1,180, but I still believe the price will continue to go down given pressure from the Fed increasing rates," said Chen Min, analyst at Jinrui Futures in Shenzhen.

Bullion has dropped nearly 3 percent since touching a three-week high last week, as the dollar gained momentum after Fed Chair Janet Yellen's comments on Friday suggested a rate hike is still on the cards for later this year.

Yellen's remarks halted a seven-day rally in gold, its longest since 2012, that had been spurred by hopes the Fed would take it slow in raising rates.

The greenback slipped against a basket of major currencies on Wednesday, making dollar-denominated assets such as gold cheaper for holders of other currencies.

Buying interest from China, the world's second largest gold consumer after India, is "relatively soft" at current prices, said Chen.

"Buyers are waiting for prices to fall below $1,100," she said.

The world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Trust , in March recorded its biggest monthly outflow since December 2013.

Investors were also keeping an eye on talks between Iran and six world powers to settle a dispute over Tehran's nuclear programme as discussions extended beyond a Tuesday deadline.

A deal could see the dollar "sell off slightly thus giving gold a bit of a lift," INTL FCStone analyst Edward Meir said in a note.


Well, here we have almost the same setup as on EUR. You will see similar patterns are forming here.
On daily chart market is flirting around new MPP, but we expect that 1172 Fib support should be reached before upside action will start (if it will start at all, of cause):

On hourly chart we have lighting bolt AB=CD, although we barely could treat it as AB-CD... anyway it has Agreement with 1172 Fib support. Right now we have a rising wedge pattern as reaction on MPP. But you can see that price does not show any reversal features. This confirms our expectation of getting 1172 area. For example, as on EUR, market could form butterfly here as well. Rules of trading of this setup are the same as those that we've mentioned in EUR today's update:

 

[Sive Morten]

Gold Daily Update Thu 02, April 2015

Good morning,


Reuters news for today:
Gold hovered above $1,200 an ounce on Thursday, clinging to gains from the prior session when it rose the most in two months, after weak U.S. private jobs data suggested that a more comprehensive employment report could disappoint.

Indications that the U.S. economy slowed significantly in the first quarter are boding well for safe-haven assets such as gold which is trading not far off a three-week high reached last week.

U.S. private employers added the smallest number of workers in more than a year in March, missing market expectations. Other data also pointed to slower U.S. economic growth, with factory activity hitting a near two-year low in March.

The report came ahead of Friday's U.S. nonfarm payrolls which is forecast to show an increase of 245,000 in March after rising 295,000 in February, according to a Reuters poll of economists.

A weaker jobs number on Friday could push back expectations for a U.S. interest rate hike which some analysts had predicted to come as early as June.

"We think there is little chance that the U.S. nonfarm payrolls are able to defy the odds this Friday by producing yet another resounding jobs report," said Howie Lee, investment analyst at Phillip Futures.

"That could send gold prices spiraling upwards to $1,220."

Gold hit $1,219.40 last week, its highest since March 2, at the end of a seven-day run-up on expectations that the U.S. central bank would go slow in raising interest rates.

Trading activity is expected to be thin on Friday with many markets shut for the Easter holiday.


So, gold has shown nice upward action that increases chances on turning to real 2-leg upside retracement. Market right now stands as above MPP, as above WPP. Trend is bullish on daily chart.
Initially, as on EUR, we should focus on first AB=CD 0.618 target that coincides with MPR1 and overbought area:

Still, it is not very attractive to take long position right here and we try to wait for pullback. Hourly chart shows 2 support areas and something that looks like DRPO "Sell" pattern. If it will really work, that it is better to watch for 1190 Fib support. Also guys, as a result of 4-hour chart we could get butterfly "Sell" that will bring us to daily target.
Besides, if even DRPO will not work - volatility on NFP release could shake markets and gold still could appear around 1190.

 

[Sive Morten]

Gold Daily Update Fri 03, April 2015

Good morning,


Reuters reports Gold held its grip on $1,200 an ounce in holiday-thinned trading on Friday ahead of a crucial U.S. jobs report that will provide clues on when the Federal Reserve will hike interest rates.

U.S. nonfarm payrolls are forecast to show a rise of 245,000 in March after gaining 295,000 in February, according to a Reuters poll of economists.

A weaker-than-expected report could prompt investors to increase bets that the Fed might hold off on raising interest rates until later this year, buoying safe-haven assets such as gold.

Gold jumped nearly 2 percent on Wednesday in its sharpest single-day gain in two months after U.S. private hiring in March missed market forecasts, suggesting Friday's more comprehensive employment report could also underwhelm.

While a weaker U.S. nonfarm payrolls would support bullion, only an extremely poor outcome would sustain any price rally, HSBC analyst James Steel said.

"Given the steepness of the rally this week in reaction to the (U.S. private hiring) numbers, job gains would likely have to be very disappointing to further boost bullion near term," Steel said in a note.

"A stronger jobs number is more likely to have a greater impact to the downside for gold."

Gold is particularly sensitive to shifts in U.S. interest rates, which also move the dollar, in which the metal is priced.

Trading activity is expected to be lean with most markets, including those in the United States and Europe, shut for the Good Friday holiday.


So, gold market is closed today, but we can bring some comments on yesterday's action.
On daily chart we do not have any changes - short-term sentiment holds bullish and market keeps chances on uspide AB=CD action:

It's clear that NFP could change anything, but technically, if we carefully will take a look at action, we will see that downward action was slow and gradual while recent upside rally looks faster and shows impulse features. It gives us idea that we could get Butterfly "Sell" pattern here that could lead us precisely to daily target, even slightly above it:

Our hourly DRPO "Sell" has worked nice and market has reached 50% support area, still it could show downward AB=CD retracement to an area that we've discussed around 1190, if, say, NFP will match expectations. If NFP will be bad - gold could rally right from here:

Anyway we will see it only on Monday...