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Gold GOLD PRO WEEKLY, May 13 - 17, 2019

Discussion in 'Sive Morten- Currencies and Gold Video Analysis' started by Sive Morten, May 12, 2019.

  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fundamentals

    This week, we have few pure economical factors and markets mostly follow to different rumors and views on US - China negotiations. In yesterday report on EUR, we've put our view on this subject in detail, so you could read it there. In two words - we think that it is a bit far-fetched reason for USD drop as we do not support idea that tariffs war escalation will force Fed to drop the rate as it should make strong impact on US economy...

    As Reuters reports - Gold prices rose on Friday and were set to post a weekly rise as the United States raised tariffs on Chinese goods, exacerbating fears of a global economic slowdown, while palladium surged more than 5% on technical buying and short covering.

    The United States intensified a tariff war with China on Friday by hiking levies on $200 billion worth of Chinese goods. U.S. President Donald Trump said on Friday he was in no hurry to sign a trade deal with China.

    The escalation in the U.S.-China trade dispute has weighed on stock markets worldwide and boosted demand for assets viewed as safer.

    “Gold is up today and will be up in the short term until there is a concrete resolution to the continuing trade tensions between the United States and China,” said Rob Lutts, chief investment officer at Cabot Wealth Management.

    “Gold is kind of inching high because of instability in the equities market,” said INTL FCStone analyst Edward Meir.

    For gold, the U.S.-China trade conflict could also force the U.S. Federal Reserve to cut interest rates, which could further support bullion prices.

    Global anxiety has also seen an uptick as U.S. bombers arrived at a U.S. base in Qatar to counter what Washington describes as threats from Iran.

    “The Iran situation is not improving. Trump’s policies have led to a change in the dynamics. We’re not sure whether the changes will make the situation safer or not but the uncertainty will affect how investors see gold,” Lutts added.

    Bullion was also supported by a weaker dollar which fell after data showed a smaller-than-expected rise in the U.S. consumer price index last month.

    Speaking on physical consumption and jewelry - gold demand jumped this week in India due to increased retail purchases for a key festival and weddings on price corrections, while premiums in China eased as buying slowed in the world’s top consumer.

    “This year, footfalls in showrooms were higher for Akshaya Tritiya and per customer buying was also higher than last year,” said Mangesh Devi, a jeweller based in Satara in the western state of Maharashtra.

    Indians celebrated the annual Hindu and Jain festival of Akshaya Tritiya on Tuesday, when buying gold is considered auspicious.

    Dealers were charging a premium of up to $2.5 an ounce over official domestic prices this week, up from last week’s $2. The domestic price includes a 10% import tax and 3% sales tax.

    Jewellers were making purchases to replenish inventories after brisk sales over the last few weeks, said a Mumbai-based dealer with a bullion importing bank.

    India’s gold demand is expected to rise in the June quarter from a year ago due to a higher number of auspicious days for weddings and a fall in local prices ahead of a key festival, the World Gold Council said on Thursday.

    Meanwhile, premiums in China fell to around $8 towards the end of the week from $12 early in the week on tepid demand.

    “Chinese premium is falling fast as after the labour holiday, the jewellery sector enters a dull season,” said Samson Li, a Hong Kong-based precious metals analyst with Refinitiv GFMS.

    In Singapore, demand softened this week with premiums falling to 60 to 80 cents from $1 last week.

    “Most of the wholesalers have not restocked after Akshaya Tritiya. We heard that the business improved for the festival year-on-year,” said Brian Lan, managing director at dealer GoldSilver Central in Singapore.

    “Prices were more or less stable this week. Besides that there is not much buying from the investment side during the festivals.”



    In Hong Kong, premiums were mostly unchanged at 60 cents-$1.20 with demand remaining flat from last week.

    Retail buying in Japan improved a little bit due to a stronger yen, a Tokyo-based trader said.

    Relatively higher demand pushed premiums to 50 cents, compared with last week when prices were on par with the benchmark.

    CFTC data shows that overall net position stands bullish and it slightly has increased this week. So gold keeps bullish sentiment.
    upload_2019-5-12_22-47-14.

    We do not support idea of domination of US-China tariffs risk, Iran risk etc. things that were mentioned above by different traders. But we see other different political and economical risks that support demand on gold in long-term. This is hidden political processes in EU, slowdown of China and Japanese economies and weakness of Pax Americana world model. Big cracks usually accompanied by big volatility on financial markets and gold is not an exception. We suggest that best era for gold market should come closer to the end of 2nd term of D. Trump presidency, but the first signs of global bull trend should start earlier.

    Gold again becomes the standard, absolute criteria of value for global economy, drives out US Dollar and putting all currencies on 2nd place, behind the gold.

    In shorter-term situation gold stands in precarity, as US economy is getting pace, and rise in inflation stands on horizon.

    Here is what Fathom consulting tells on US productivity:
    US labour productivity figures released last week showed that labour productivity growth reached its highest level in eight years in the four quarters to 2019 Q1. A key question for investors and policymakers is whether this is part of a cyclical upturn, or whether productivity is slowly returning to more normal rates of growth.

    The pace of US economic growth has struggled to return to the kinds of rates regularly seen before the Global Financial Crisis. This phenomenon is not restricted to the US — it has been an issue in many advanced economies. There are two broad reasons for it: the growth rate of the working age population has slowed relative to the pre-crisis period; and labour market productivity growth is lower too. Demographics and the retiring of many baby boomers mean that the working age population is expected to grow slowly for many years ahead, dampening trend growth. The outlook for productivity growth is not much better in our view.

    We have long argued that ultra-loose monetary policy has contributed to the slowdown in productivity growth by blunting the forces of creative destruction. A growing body of literature now supports this view. The US is one of the few advanced economies that has raised interest rates since 2008 — a step in the right direction. And US tax reforms, by encouraging business investment, are likely to boost productivity a little too.

    But with the Fed now on hold, little sign of inflation picking up, and the natural rate of interest seemingly low, the prospect of interest rates and productivity growth returning to their pre-crisis averages seems remote. There is typically a cyclical component to productivity growth: the fear is that the upturn over the past year or so may be little more than that.

    [​IMG]

    That's being said, in short-term perspective gold stands at positive mood as no rate hike stands yet on horizon, but global economical and political tensions provides necessary support.

    Turning point in US economy stands not too close and mostly relates to longer-term perspective. But short-term upside potential is limited. As soon as first signs of inflation start to appear - gold upside action stops and wide sideways action could last for a long time.

    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. On monthly chart see price stands at Yearly Pivot which holds overall situation balanced.

    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. Current retracement down looks strong on daily chart, but it is just 30% of major swing up which is minimal level.

    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.

    The one important thing that we've got on April is testing of YPP and now it is very important how market will response. To keep upside trend valid, market has to hold above it, although it could flirt with it for some time. Now we see that on first test price holds above this level.

    Among bullish signs we could mention MACD hidden divergence which suggests action above 1380 top in long-term perspective.
    gold_m_13_05_19.

    Weekly

    Taking in consideration weak upside action on gold market this week, it makes us think on downside continuation, and the action that we see right now is not upside continuation yet.

    As we mentioned previously, the most tricky moment though, is uncompleted OP target of major AB=CD pattern, which stands around 1260 and under recent lows. If we would get OP been hit, everything would be in a good order - retracement target is hit and we have clear bullish continuation pattern right at K-support area - "222" Buy.

    But with untouched OP on the back, it is too risky go long and more confirmation is needed. For example, taking out of "C" point and erasing of AB-CD pattern could be good confirmation of bullish ambitions.

    Strict rules of bullish position taking here, suggest placing stop below OP, which is rather costly and not suitable to everyone.

    Taking it all together, the 3-Drive "Buy" pattern could be formed and finalize downside action, leading price to OP, if we would get upside action somewhere to 1310 area - the top of 2nd drive.
    gold_w_13_05_19.

    Daily

    Here we have mixed picture, despite that performance is not impressive and price can't pass through the trendline, MPP and to show any meaningful upside action - it also doesn't show any strong drop and coiling around resistance. Grabbers were completed so-so, as price just hit minor target, showing W&R of recent top at the same 1285 area. Inside the wedge we have "222" Sell pattern.

    Conversely we have bullish divergence with MACD, and in fact, we have large falling wedge, which potentially is a bullish pattern.Trend by MACD also stands bullish by far. This week we have to keep an eye on major intraday levels again to get early signal of the breakout in any direction. Also we need to avoid long-term flat action here as it will be sign of weakness and bearish dynamic pressure.
    gold_d_13_05_19.

    Intraday

    On intraday charts situation has not changed significantly. On 4H chart price still stands under major resistance, shows tight retracement and keeping bullish context. In fact, here we see some signs of bullish dynamic pressure, as trend stands bearish while market shows higher lows. It means that upside breakout is still possible.

    Thus, bears should wait either completion of upside targets or breaking of bullish context. The latter probably happens if price drop below 1275 area.

    Bulls could act differently - either trying to catch upside continuation pattern on lower time frames, or waiting of upside breakout of 1290 area.
    gold_4h_13_05_19.

    On 1H chart potential H&S pattern still stands in focus, because it could clarify everything. Drop down means downside continuation on daily chart as well, while its failure and move above 1290 top leads us to more extended upside targets, and, who knows, may be our 3-Drive on weekly chart appears indeed.
    gold_1h_13_05_19.

    Conclusion


    Long term background mostly stands the same and it is positive for gold market. In a shorter-term we need to investigate the scenario that market might finish downside retracement on weekly and turning back to long-term bullish trend again. Now we do not have total confidence with this. Although we have bullish setup and could trade it, 1275 is an area that is crucial for new bullish setup and gold has to hold above it to keep bullish sentiment. Otherwise we probably should get drop to our major 1255-1260 area.


    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.
     
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  2. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    So, under impact on external factor from China gold has shown impressive rally yesterday. Although technically we were right about bullish sentiment while price stands above 1275 lows, but personally I was not able to catch the entry and missed it. So, if you're in - you've done perfect.

    As we've said in weekly report - for short entry we need either 1275 breakout or completion of upside targets. First scenario is erased. Second scenario suggests that gold could climb to 1310 area. Recall our weekly 3-Drive "Buy". If we're correct - gold should turn down there and that is the level where we will watch for bearish reversal patterns on intraday charts.
    Breakout of 1310 area up suggests end of retracement and re-establishing of long-term bull trend on gold. So it will be significant indicator.
    gold_d_14_05_19.

    On intraday charts we do not see any bearish setups. Market now stands at 1300 daily resistance and some pullback is natural. Our double bottom target is 1310 as well, around MPR1 area.
    gold_4h_14_05_19.
     
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  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    On daily chart of gold we do not have big changes by far, market is still coiling around major daily resistance. Our next upside target is 1310, which is also our signal level. This is potential breakeven point, as market could turn down and start forming weekly 3-Drive Buy. Or, conversely, with upside breakout, long-term upside trend could continue. Thus, 1310 is not just an upside target, but something more.
    gold_d_15_05_19.

    On 4H chart market is forming a kind of flag pattern, which is bullish. Our double bottom target stands the same - 1310 area as well:
    gold_4h_15_05_19.

    Theoretically we could consider potential bullish setups on intraday charts. The one that I like is as follows:
    gold_1h_15_05_19.
    I'm not definitely sure that we've got retracement right to 1290, upside action could start earlier, but, if we will - buying at K-support and with "222' Buy on the back looks like not bad setup.
     
  4. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    So as we've promised yesterday, let's take a look at AUD. Besides, gold is coiling near the top, keeping our same bullish context.

    On Aussie dollar we suggest bullish context. On daily chart market today completes major OP target right at 5/8 Fib support, creates Agreement support and forms "222" Buy" pattern. Thus, this is not the point for taking any short position and I would trade aussie long in current situation:
    aud_d_16_05_19.

    On 4H chart we have another bullish pattern that finalizes downside action. This is Butterfly "Buy".
    aud_4h_16_05_19.

    So, attempt to go long against current lows is not very expensive and we treat it as not bad scenario. Besides, as butterflies could become a part of H&S pattern - it could happen, that aussie shows not just minor 3/8 pullback to 0.6970 area, but upward action could be stronger, if, say, some relief happens on US/China negotiations.

    For entry you could use minor H&S pattern that is forming right now on 1H chart.
     
  5. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Greetings everybody,

    Gold market shows reasonable reaction on strong daily K-resistance area, as we've expected, but action stands in a bit different manner - it is too strong. Which makes us think that it could be downside reversal with 1255 target.

    Here we also show you our strategic pattern - 3-Drive "Buy" that should start from 1255. This is major scenario that we are watching:
    gold_d_17_05_19.

    On 4H chart we've talked about possible AB=CD retracement and appearing of "222" Buy pattern. Initially retracement has started nice, but later it has shown acceleration and price dropped right to XOP target and mostly erased all tariffs upside rally. Taking in consideration that we have Double Bottom here and its target has not been met yet, such a drop breaks natural price behavior and puts the shadow on upside perspective. Thus, in current moment it seems that it is not good situation for any long position. Meantime, to get confirmation of our bearish suggestion, we prefer to get drop below 1280 Fib support, as market still stands at breakeven point at former support and neckline.
    gold_4h_17_05_19.
     
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