GOLD PRO WEEKLY, May 16-20, 2016

[Sive Morten]

Fundamentals

(Reuters) Gold prices rose on Friday, buoyed by weak U.S. equity markets and chart-based strength, as it shrugged off a higher dollar and strong U.S. economic data suggesting a brightening outlook for the economy. The metal briefly gave back some gains after U.S. retail sales were reported to have increased 1.3 percent last month, the most since March 2015 and more than the 0.8 percent expected by economists.

Spot gold was up 0.8 percent at $1,273.53 an ounce at 2:46 p.m. EDT (1846 GMT). That left gold down 1.1 percent this week, the biggest weekly decline since the week ended March 25. U.S. gold for June delivery settled up 0.1 percent at $1,272.70 an ounce.

"When dollar's up and gold is up, that's a bull market for gold," said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago. "We're getting a technical break out and equities are getting soft here."

The dollar rose to a two-week high against a basket of currencies, as the stronger-than-expected U.S. economic data appeared to boost expectations the Federal Reserve will raise interest rates more than once this year. The U.S currency had already received a boost overnight when two Fed officials said the central bank should raise rates if data points to an improving economy. Strong economic data and the prospect of a rate increase in the next few months should weigh on gold, Citi strategist David Wilson said.

"The move (in the gold price) this year has really been down to the shift in the U.S. policy expectations," Deutsche Bank analyst Michael Hsueh said. "It's more about ... when we start to see a consistent improvement in U.S. data that could push the pendulum the other way and push the dollar higher."
Gold has gained 20 percent this year after weak economic data in the United States and elsewhere eased expectations of a near-term increase in U.S. interest rates.

Higher rates would lift the opportunity cost of holding non-yielding gold. Reflecting sustained optimism toward bullion, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose to the highest since November 2013.

Technical analysts at ScotiaMocatta said their view of gold is neutral while it trades between the $1,303 resistance level and the $1,256 support.

Last week we've estimated that speculative net long position on gold market stands at all time high. It makes upside potential limited for gold market. Now we see that although gold price stands the same - net long position slightly has decreased, while open interest has increased again. It means that traders have opened some shorts positions. This confirms our assumption that gold could really stand not far from reversal down.
Thus, we should be very careful with holding longs right now and mostly in nearest future we probably will start watching for bearish signs and patterns:

Technicals
Monthly

On last April week market finally has turned to action. As market already has moved above YPP, next target based on pivot framework is YPR1 around 1315 area. Currently price is moving through 1285 Fib level that already has been tested once.

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 different geopolitical tensions. Besides, financial game between Central Banks turns to hot stage and this will add more volatility. Currently we see some calm down in geopolitical turmoil, but this is probably temporal. All problems that were existed have not been resolved yet. War in Syria just has brought new inputs in global force balance, and sooner or later we will see continuation.

Not just Middle East stands in our focus. We see that fumes of this conflict spread over planet. Recall Paris terrorist attack, Brussels, refugees tensions in EU, Brexit voting, a lot of contradiction inside EU as political as economical - North Stream-2, mutual sanctions, Montenegro NATO membership, right now Armenia and Azerbaijan conflict and a lot of others. All these stuff is happening on a background of reducing population wealth and solvency and currency wars between major economies. Recent Fed shift just proves this conclusion. 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, France and others.

At the same time gold needs to move above 1308 to break current bearish trend by forming upside reversal swing.

Currently action looks very impressive, but 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 Volatility breakout target (that has taken the shape of butterfly "Buy") has been completed. 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 1315-1330 will become a real test of bullish strength. Monthly overbought, YPR1 and Fib level... hardly market will pass it easily and without solid reactions. May we will even get here extended H&S reversal pattern...Especially taking in consideration - really tight situation with CFTC data. Of course, we can't foresee outstanding events, say, how gold will react on Brexit voting. It definitely may be gold will overcome former limits of speculative positions. But we can't rely on exceptions. We have to build our analysis on high probabilities. And it tells that currently is not the time to take long-term bullish positions.

Weekly
Trend is bullish here. On a way up gold has broken not just pennant, but also 1285 Fib level. Retracement after OB level has been hit was mild and market has not reached even minor 3/8 Fib support. This also indirect sign of bullish power.

As we can see gold is not at OB any more here and has pretty much room that allows it to reach 1315-1330 destination point. If we do not have CFTC in mind - I would say that gold should reach 1330 next resistance area. Upside aciton stands almost vertical and i'ts very fast. As MPP has been tested last week - gold could move to MPR1 that also coincides with major resistance area on monthly chart. NFP data was mostly supportive for further gold upside action.
Still as we're coming closer to major resistance - monthly/weekly charts can't give us a lot of information. Now we probably should closely watch for daily and intraday charts and be very sensitive to any reversal pattern that will be formed there.

Here, on weekly we see only 2 important things. First is - gold has tested MPP again but keep standing above it. Second - despite excellent Retail Sales data and USD appreciation, gold has not dropped below 1260 area and even returned previously lost position. This is the bullish sign for gold.

Overall action since February reminds attempts to fade an upside momentum. First pause has led to appearing of pennant. Momentum was too strong to stop it by H&S pattern on daily. That's why it has failed. Looks like second chance to trigger downward retracement will happen at 1315-1330 area.

Daily

This chart shows very bullish price action. It has happened so that last week gold mostly stand in the range and churning traders' positions. Trading volume there was extremely large:

As a result, gold holds above major 1260 level, above MPP. It keeps valid 1255 lows and has risen on a background of raising US Dollar. It seems that chances on upward continuation are still here. As we've discussed previously - it could take the shape of small butterfly that has the same 1.618 target around 1330, as big one:

4-hour
This chart shows that confrontation between strong support area and fast drop by AB=CD pattern. Last wee all attempts to push gold lower have failed. But at the same time market was not able to start upside action as well. As a result it takes the shape of pennant pattern.

Currenty we think that bulls have a bit better situation, mostly due reasons that we've discussed above. Theoretically they will take control if gold will move above 1295 area, but if on Monday we will get upside pennant breakout it could become early sign of upward continuation.

Conclusion:
We think that fundamentally gold stands somewhere near bottom and situation is starting to change. But this bottom could be "extended" in time. Thus right now we call to not take long-term bullish positions since CFTC data and technical picture tell that gold stands at the edge of solid retracement.

In short-term perspective scalp long positions could be taken. Currently we mostly expect resolving of consolidation around major support area @ 1260. It seems that right now bulls have advantage due to last week round results.

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]

Good morning,

(Reuters) Gold prices edged up on Tuesday as the dollar weakened, but gains were capped as Asian
shares recovered from two-month lows. News of billionaire investor George Soros and other big
funds buying the metal for the first time in years also supported prices.

"There is more of a positive tone to rhetoric on the gold price outlook that may affect prices, but eventually it is the U.S. dollar that is the key driver," said analyst Helen Lau of Argonaut Securities in Hong Kong.
An index of the dollar against a basket of six major currencies edged down about 0.2 percent on Tuesday. A
weaker greenback makes dollar-denominated gold cheaper for holders of other currencies.
However, gains were limited as Asian shares rose after a rebound in technology giant Apple and stronger oil prices boosted Wall Street.

"Investor flows into ETFs (exchange traded funds) remain pretty strong and that just shows any dips we are seeing in the gold market seem to be a relatively short, with investors taking the opportunity to hold on to their long positions," said analyst Daniel Hynes at ANZ in Sydney.

Assets of SPDR Gold Trust, the world's top gold ETF, have been rising steadily this year and are at their highest since November 2013. U.S. regulatory filings on Monday showed that some influential investors bought into gold through ETFs in the first quarter. Soros, who once called gold "the ultimate bubble",
bought 1.05 million shares in the SPDR gold fund, returning to bullion for the first time in three years.
Gold bull John Paulson, however, continued to slash bets on bullion.

Gold has rallied 20 percent this year on speculation that the U.S. Federal Reserve has slowed its expected pace of rate increases on concerns over the volatility in global markets. The Fed should consider raising rates at its June meeting, Richmond Fed President Jeffrey Lacker told the Washington Post in an interview published on Monday, saying inflation was moving toward 2 percent and labour markets had tightened.

So., right now we see the real struggle on gold market. CFTC data shows that bullish positions stand very tight situation. Sentiment is bullish, gold wants to go higher but it can't, since there is a lack of investors how could purchase more gold. At the same time it can't move down, since nobody wants to sell or close longs. This leads to nervous and choppy action on intraday charts. But this situation can't last forever. Soon we probably will get some cathalysts that will push market in one or other direction - data, news, geolitical event - no matter what it will be:

On 4-hour chart we have two major points - 1255 lows and 1295 tops. They are keys for futher direction. While gold fluctuates inside this range - it stands at fragile equilibrium:

That's why you can differently treat current swings on the market. First, we clear see AB=CD down. Now gold stands with minor AB=CD up. But what this AB-CD means? Is it just AB-CD retracement and we're now getting "222" Sell pattern? Or this is new AB-CD that should lead market higher?
To be honest guys, here we have more bearish signs. Take a look - gold was not able to break through WPR1. This hints on retracement quality of current upside action. Second, gold shows strong pullbacks, very choppy action. This is not typical for bullish market.

That's being said, currently we call you to not take new long positions. Since long positions already at maximum, gold needs really important event that could push it higher. At the same time - it is too early for short entry, since 1255 lows still hold. Thus keep only those positions that already protected by breakeven stop order.

 

[Sive Morten]

Good morning,

(Reuters) Gold dropped on Wednesday after strong U.S. economic data and comments from the central
bank officials bolstered expectations that the Federal Reserve could soon hike interest rates.
A Fed policymaker said on Tuesday he will push for an interest rate hike in June or July, and two others predict upto three rate increases this year. Gold is highly sensitive to rising rates, which lift the
opportunity cost of holding non-interest yielding bullion.

"The prices have slipped slightly today... that is partly due to speculation or increased bets that the Fed will be listing higher rates this year," said Vyanne Lai, analyst, National Australia Bank.

Bullion has rallied 20 percent this year on speculation that the Fed has slowed down its expected pace of rate increases on concerns about global economic growth and the volatility of stock markets. In its April policy statement, the Fed indicated it wants to have more confidence in the economy's overall health before hiking rates again. U.S. data on Tuesday showed that consumer prices recorded their biggest increase in more than three years in April. Housing starts and industrial production rebounded strongly last
month, suggesting the economy was regaining steam early in the second quarter after almost stalling early in the year. Strong economic data could prompt the Fed to raise rates sooner than later.
Traders will be eyeing the Fed's April meeting minutes which is due later in the day for further cues on U.S. interest rate outlook.

"I think a lot of investors are holding back as they are waiting for the FOMC minutes," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central. "Officials have been saying they wish to raise the rates but unless and until Fed Chair Janet Yellen mentions something I don't think the market will actually take that into consideration," he added.

Dollar strength also weighed on gold and other precious metals on Wednesday. The dollar index, which measures the greenback against six major currencies, rose 0.3 percent.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.56 percent to 855.89 tonnes on Tuesday, the highest since November 2013.


On Gold market situation barely has changed. It still stands around 1260 area. As we've discussed yesterday, sentiment is really tighten here and long positions mostly full while nobody tends to close them or go short on gold. This keeps gold flat. Due some speculations yesterday on Fed rate hike, gold has dropped slightly. Still it stands above important 1260 level:

Although currently gold has no bullish signs and chances on upside potential look blur - we think that it's too early to dispear. We are just ride in June and situation will become hotter day by day as we will come closer to Brexit and June Fed meeting. Also we will get a lot of data till this day, including NFP...
In short-term perspective we do not exclude that gold could return back to 1260 upport and test it again. Currently price looks heavy, multiple grabbers have appeared:

Here, on hourly chart, gold even could take the shape of this butterfly and drop right to WPS1:

 

[Sive Morten]

Good morning,

(Reuters) Gold slipped to a three-week low on Thursday, extending overnight losses after minutes from a
Federal Reserve policy meeting signalled the U.S. central bank could raise rates as soon as next month, boosting the dollar to multi-week highs.

The U.S. economy could be ready for another interest rate hike in June, according to the Fed's April policy meeting minutes released on Wednesday. The central bank had lifted rates in December for the first time in nearly a decade. Gold is highly sensitive to rising rates, which increase the opportunity cost of holding the metal.

Spot gold had fallen 0.3 percent to $1,254.17 per ounce by 0642 GMT, after earlier in the session dropping to its lowest since April 28 at $1,251.65. It declined 1.7 percent the day before. U.S. gold futures dipped 1.5 percent to $1,255.40.

"Just as the prospect of extended low rates and a weaker dollar provided commodities with considerable tailwinds earlier in the year, the reverse could be at work now," said INTL FCStone analyst Edward Meir.
"As rising rates and a stronger dollar pressures prices lower, gold could be a front-casualty in such a retreat."

Fed Vice Chairs William Dudley and Stanley Fischer are due to speak later in the day and the markets will be eager to get more details on the Fed's thinking. Bullion investors will also be eyeing data on U.S. weekly
jobless claims on Thursday for trading cues.

"I suspect people will use this opportunity to continue to add (gold) allocations but at a much lower pace. So, it would not have much of a huge impact on the global gold market," said Richard Xu, fund manager of China's top gold exchange-traded fund (ETF) HuaAn Gold.

So, yesterday on release of Fed minutes, that was mostly supportive to USD, gold has broken our 1260 area. Although it would be perfect if it will turn up from 1260, this breakout doesn't mean that gold will not be able to move to 1330 level. As we've said - as we will come closer to mid June, as situation will become hotter, and this could become supportive for gold. Gold theoretically will keep chances on upside continuation, until it stands above 1200, although it is clear that as closer it will be to 1200 as more difficult it will be to return o upside road.
Still in short-term perspective we have to watch for next destination point that should be around 1240:

4-hour chart shows that gold has broken our 1260 K-support Agreement and MPP. It means that it comes to next target around 1240. This is butterfly extension, our initial 1.618 AB=CD target and daily larger AB=CD destination... and yes, MPS1 and daily oversold. So, this will be good level.

Right now gold stands at minor support - WPS1 and 1.27 butterfly extension. But it will not be able to hold it, maximum that we could expect is minor upside bounce. Recall that gold also was stopped by WPR1 on a way up and it means that it was just a retracement. This moment also points on further downward continuation.
That's being said, it could be minor bounce up in few hours and then road to 1240....

 

[Sive Morten]

Good morning,

(Reuters) Gold steadied after two days of losses on Friday, but was set for its biggest weekly slide in
eight weeks on the back of a firmer dollar and indications from the U.S. Federal Reserve that it could raise interest raise rates sooner than expected.

New York Fed President William Dudley said on Thursday there was a strong sense among the central bank officials that markets were underestimating the probability of policy tightening and that the Fed was on track for a rate hike in June or July.

The comments came a day after the minutes of the Fed's April meeting revealed that most policymakers felt a rate increase might be appropriate as early as next month.

"The gold environment is now substantially different from what was apparent several weeks ago when a weaker dollar and a benign rate environment were providing an element of support," INTL FCStone analyst Edward Meir said in a note. "This is no longer the case, as both these variables are no longer as constructive."

Upbeat U.S. economic data on Thursday further supported views of a rate hike next month. "I don't think there will be a interest rate hike in June. Maybe a quarter or two is required to push rates higher and the
most reasonable time will be Q4, but if they wish to push the hike earlier, it should be in Q3," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

Holding in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.5 percent to 860.34 tonnes on Thursday, the highest since November 2013.

So, Gold market has created another trick here. On daily chart price has met oversold but AB=CD pattern has not been completed. At the same time we see classical hammer pattern here, that many traders use for long entry. We warn you - be careful!
Shortly speaking - our opinion is that it is not time yet to buy. We expect another leg down here that will wash out many traders and provide liquidity for enter of professionals:

On 4-hour chart appearing of bullish engulfing is a trick that will attract many traders to go long. At the same time - pay attention that gold has not been completed as daily large AB=CD, as 4-hour 1.618 AB-CD as 1.618 Butterfly target. All of them stands slightly lower. That's why we expect that gold will complete them and only after that will show some upside action:

For example, it could form another butterfly, like here, on hourly chart:

Or may be it will form something else. But anyway, if you want to go long on gold - don't hurry, wait when major patterns will be completed around 1240 level, i.e. wait for another leg down...