GOLD PRO WEEKLY, May 30-03, 2016

[Sive Morten]

Fundamental
(Reuters) Gold slid 1 percent to a three-month low on Friday, extending losses after Federal Reserve Chair Janet Yellen indicated the U.S. central bank could raise interest rates within months if the economy continues to improve, boosting the dollar.

The economy is continuing to improve ... growth looks to be picking up," Yellen said in remarks in Boston. "If that continues and if the labor market continues to improve, and I expect those things to occur ... in the coming months such a move would be appropriate."

The remarks lifted the U.S. dollar index to a two-month high. "You couldn't really say it was uber hawkish, but it keeps the door open for a July hike, and as far as gold is concerned, that means that there was a bit of a higher cost of carry in U.S. dollar terms," said Bart Melek, head of commodity strategy for TD Securities in Toronto.

Spot gold was down 0.9 percent at $1,208.90 an ounce at 3:01 p.m. EDT (1901 GMT), off an earlier low of $1,206.45, the lowest level since Feb. 22. It was on track to close the week down 3.5 percent, the biggest fall since early November and the fourth straight weekly decline after minutes of the Fed's latest policy meeting indicated last week that a rate rise may be on the cards sooner rather than later.

An increase in U.S. rates would raise the opportunity cost of holding gold, while boosting the dollar, in which it is priced. U.S. gold futures for June delivery settled down 0.5 percent at $1,213.80 an ounce.

"Yellen reinforced the currently prevailing view that a Fed rate hike in June was clearly on the menu though perhaps not yet the blue-plate special," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York. "The hurdle to a June hike remains formidable with July favored as Brexit will then be out of the way and the committee will have seen more data."

On Thursday, Fed Governor Jerome Powell said he felt the economy was on a "solid footing" and within reach of the Fed's inflation goals.

Now, guys, you can see what we have on CFTC report. Gold was not able to increase long positions any more, since they were right at all time high, as well as open interest. We have started to talk that retracement inavoidale 2-3 weeks ago, although it was a question about final leg up.
Right now we see as gold has dropped significantly last week - speculative net long positions dropped for 50K contracts and open interest also has decreased. It means that some shorts probably were opened but major drop has happened due closing of long positions. Since we will come closer and closer to Fed meeting, investors could take a pause in re-establishing them and could postpone it on a time after Fed meeting in June and Brexit. Other words speaking, as we are closer to Fed and Brexit as less chances that gold will turn up soon. Mostly this tells that retracement will last at least for a month or so...

Technicals
Monthly

So, guys, gold has taken a pause in upward action around 1300 area. We've warned about it 3 weeks ago when we've got specific numbers from CFTC. Based on situation in sentiment and existence of strong resistance area makes problems for gold on a way up.

Current uward action is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Probably it will happen very soon and may be already is happening. Still this potential downward action has a great chance to become just a retracement. Overall political and financial situation in the world probably will not give a chance to relax. Thus, we have a positive long-term view on gold market.

On Friday market has dropped significantly. Taking in consideration overall situation that mostly supportive for USD and difficult position according to CFTC data, hardly gold will be able to rebound immediately. On monthly chart we will get nice bearish engulfing pattern. Usually it leads to comounded retracement down, equals to the length of the bars. Thus, following this logic we could see gold @ 1130 area very soon. But after that it could become a right shoulder of pattern that could be formed here.

Weekly
Trend has turned bearish on weekly time frame. Also we see here small bearish devergence right at major Fib resistance and YPR1. This just confirms that market was not able to pass through it.

On Friday market has broken upside flag pattern in opposite direction that probably could be treated as starting of long-term downward retracement. The same conclusion we could make on fact of MPS1 breakout.

Still this action will not be smooth. As you can see gold right now has limited downside potential, since it almost has reached 1205 Fib support and weekly oversold. As a result, we can't exclude some upside retracement and appearing of some H&S pattern. And particularly this pattern will lead market to retracement destination, somewhere around 1230 area, or may be 1245 Fib support. We will estimate it later with more precision.

The one thing that we could say is retracement probably should be deep, as first upside swing has come to an end. By the same reason move down probably will take 2-leg shape, some AB-CD may be...

It seems that next week we will expect the same behavior as on EUR - ending of current move down and starting upside bounce.

Daily

Here we see that market is forming extended reversal pattern. The major uncertainty here is not about pattern but mostly in real numbers and destination points. Downward action has stopped as market has hit daily oversold and almost has reached first major Fib support. This could create bullish Stretch pattern and trigger upside retracement.

Most expected pattern here is H&S probably. Thus, market needs to form right shoulder. Depending what height it will get - downside target could be different. Right now we have only one target - ultimate 1.618 extension of Butterfly that stands precisely around major 5/8 Fib support @ 1245 area.

So, our first task is upside retracement that should happen on next week... In general, guys, last part of drop has sufficient number of candles to become a thrust for some DiNapoli pattern - B&B "Sell" or DRPO "Buy", so let's watch for this opportunity as well...

4-hour

Here market has completed our AB-CD 1.618 target, but nothing else has happened yet. Whether market will turn down, what pattern will be formed - is still unclear. Here we could recongnize fast H&S shape that potentially could lead gold to 1260 area - most probable destination point of upside retracement, but this will happen only if market will turn up immediately. But will it happen? Major Fib support on daily chart still has not been touched a bit. Still 1205 is rather wide support area since we have multiple minor Fib levels around, because on daily chart there are a lot of minor lows stand around major one in Dec 2015. Thus, you could draw minor levels as well or, even thurst levels from 1070 level where thrust up really has started...

That's why probably some Fib support has been touched...

Hourly

Finally, here we have clear 3-Drive "buy" pattern, but will it become the one that will start upside retracement - we will see on next week:

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, that probably already has started. It is difficult to estimate its target with high precision but we think that aprox. it should reach 1130-1145 area.

Still this move down will be extended in time and could take month or more and will not be straight down. Mostly it should take some shape of AB-CD and should start from reversal pattern on daily chart. That's why on next week we expect to get upside retracement that later could lead to appearing of H&S pattern on daily. And only after that drop to 1130-1145 should start. Something like that...

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 edged up on Tuesday after falling to a three-and-a-half month low in the prior session but
the yellow metal remained on track for its biggest monthly decline since November on the back of broad strength in the dollar.

Bullion got some support earlier in the session as Asian stocks wobbled and were headed for a monthly loss. Spot gold was up 0.6 percent at $1,212.46 per ounce as of 0630 GMT. On Monday, the safe-haven asset fell as much as 1 percent to $1,199.60 an ounce, its lowest since Feb. 17.

"There is pessimism for gold prices at the moment. The pressure is not done yet... For the coming two days, I still think the bearish sentiment will dominate," said Mark To, head of research at Hong Kong's Wing
Fung Financial Group.

The safe-haven asset has been under pressure over the past couple of weeks as senior U.S. central bank officials, including Fed chief Janet Yellen, indicated that a rate rise may be on the cards sooner rather than later. St. Louis Fed President James Bullard said on Monday global markets appear to be "well-prepared" for a summer interest rate hike from the Fed, although he did not specify a date for the policy move.

Gold has fallen about 6.3 percent so far in May, its biggest monthly fall since November. A bearish target at $1,175 per ounce has been aborted for spot gold, as it managed to hover above a support at $1,206, Reuters technical analyst Wang Tao said. "The precious complex continues to be under pressure albeit with some positive technical support now flowing through," said MKS Group trader James Gardiner.

The dollar hovered near its highest in two months against a basket of currencies on Tuesday on growing expectations of an imminent U.S. rate hike. U.S. non-farm payrolls data for May is due on Friday and a
solid reading could heighten expectations for a June rate rise. Investors will also be looking out for trading cues from data on U.S. personal income and consumer confidence, due later in the day.

So, on gold picture is not as bright as on some other assets. Thus, yesterday on thin market gold has reached major 3/8 Fib support and oversold on daily chart. Mostly conditions are ready for starting upside bounce - reversal swing has been formed, OS and FIb level were hit. But, currently we donot see any signs for reversal on intraday charts yet, no patterns...
It makes us think that gold could drif slightly lower. At the same time we do not have big choice of tools to estimate downside targets. Thus, we see on 1185 level as potential target - previous top, YPP and butterfly 1.27 ultimate target. Thus, gold could creep a bit lower with OS line:

On 4-hour chart gold shows harmonic bounces and no hint yet on possible reversal, no patterns as well:

That's being said, we need to get breaking of this tendency, appearing of some patterns here. May be this will happen around daily 1185 level. Only after that we could think about scalp long positions...Currently we have to wait a bit more...

 

[Sive Morten]

Good morning,

(Reuters) Gold held steady, supported by an easing dollar and weaker Asian stocks on Wednesday, a day
after it closed higher for the first time in 10 sessions. Asian stocks were on a weak footing on Wednesday as a slip in crude oil prices dampened investor appetite for riskier assets, while the recently bullish dollar stalled against the euro and yen following a mixed bag of U.S. economic data.

U.S. consumer spending recorded its biggest increase in more than six years in April as households stepped up purchases of automobiles, although other data showed an ebb in consumer confidence in May.

Spot gold was little changed at $1,215.80 an ounce at 0645 GMT. The precious metal gained 0.8 percent on Tuesday, its biggest single-day percentage gain since May 13.

The safe haven asset has climbed nearly 15 percent so far this year, but has been under pressure after minutes from the U.S. Federal Reserve's April meeting released last month boosted expectations of an imminent rate rise. Bullion lost about 6 percent in May, its biggest decline in six months.

U.S. gold was nearly flat at $1,218.50. "The fact that gold did not undergo another sharp selling about on Tuesday in light of strong U.S. macro data (and an equally strong dollar) tells us that participants may already have discounted a rate rise," INTL FCStone analyst Edward Meir said in a note.

"However, we do not want to buy gold just yet, but would rather wait for a pullback to the $1,180-$1,190 level where we see more credible support."

An increase in U.S. rates would raise the opportunity cost of holding gold, which does not earn interest. It would also bolster the dollar, making gold more expensive for buyers in other currencies.

U.S. non-farm payrolls data for May is due on Friday and a solid reading could heighten expectations for a rate increase this month or as early as July.

"We expect further correction as the numbers should come in favourably for the Fed to move as early as July and so, taking that into consideration, I think we're not done yet in the adjustment process," said Dominic Schnider of UBS Wealth Management in Hong Kong.

So, on daily chart market has hit major Fib support and oversold. Right no, although we see upside bounce, it's too weak. Mostly it reminds just reaction on oversold. That's being said, probably this is not upside retracement yet that we're waiting for.
At the same time, even this minor bounce could generate a signal, if price will reach 1230 Fib resistance. In this case we will get daily B&B "Sell" pattern that could trigger downward continuation. Next level where market could stop is 1185 area - butterfly target and YPP:

On 4-hour chart gold shows swing of the same length and slope. Looks like investors just avoid activity before NFP release. NFP will bring not just unemployment data, but also inflation (wage growth) and will become key to June Fed meeting. That's why, it looks like, gold could stand passive till Friday... Let's hope that we will get B&B "Sell" at least...

 

[Sive Morten]

Good morning

(Reuters) Gold inched up on Thursday on the back of a weaker dollar, as investors assess whether the
latest set of U.S. economic data will boost the prospect of an early interest rate hike by the Federal Reserve. Bullion had turned negative on Wednesday after the greenback got some cushion as data showed U.S. manufacturing activity expanded for a third straight month in May.

Spot gold was up 0.2 percent at $1,214.61 per ounce by 0629 GMT. It fell 0.2 percent on Wednesday to close at $1,212.40. U.S. gold gained 0.2 percent to $1,217.

The dollar index, which measures the greenback against a basket of six major currencies, was down 0.1 percent on Thursday. A weaker dollar makes gold less expensive for buyers in other currencies. The safe-haven metal has been taking a beating over the past couple of weeks as senior U.S. central bank officials, including Fed chief Janet Yellen, indicated that a rate rise may be on the cards sooner rather than later.

"We expect the Fed to move in June rather than in July, in which case gold could be closer to bottoming out, since we see the dollar weakening after the move is out of the way," INTL FCStone analyst Edward Meir said.

Gold is sensitive to interest rates, gains in which raise the opportunity cost of holding the non-interest-yielding asset. Investors are looking out for trading cues from the U.S. May ADP private employment report due later in the day for potential relief, with the report often seen providing clues to the non-farm payrolls data, scheduled for release on Friday.

Spot gold is biased to revisit its May 30 low of $1,199.60 per ounce, as it has failed to break a resistance at $1,219, Reuters technical analyst Wang Tao said. "We do not think $1,200 is a bottom. Before Fed's July conference, gold will touch a new bottom of perhaps $1,130-1,140 in the following one and a half months," said Jiang Shu, chief analyst at Shandong Gold Group, the parent of Shandong Gold Mining Co Ltd. "Overall though, because prices have been higher in the first half of the year, the second half may not be as good for gold long investors," Shu added.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.24 percent to 870.74 tonnes on Wednesday, the highest since November 2013.

Thus, gold mostly confirms that current upside action is mostly reaction on reaching daily Fib support and OS. Upward action looks heavy and lazy and takes the shape of bearish flag. All these stuff hints on further drop. Next level to watch for is 1185 - YPP and butterfly 1.27 target:

On 4-hour chart we see the same - bounce doesn't impress at all. As a result, we could recognize here possible butterfly. It is interesting that 1.618 extension coincides with daily 1185 area. So, we've got setup to watch for - completion of butterfly and market reaction from 1185. May be particular this butterfly will trigger upside AB=CD retracement:

 

[Sive Morten]

Good morning,

(Reuters) Gold was nearly unchanged on Friday but headed for a fifth consecutive weekly decline, as the
dollar and Asian stocks held steady and the market awaited U.S. nonfarm payroll data. Investors remained cautious ahead of the U.S. labour data, a strong reading of which could push the Federal Reserve to hike
interest rates sooner rather than later - move that would be bearish for non-interest bearing gold.

Bullion was little affected in the previous session with the European Central Bank keeping its rates unchanged. "A good jobs figure could help cement the case in investors' minds for a June or July Fed rate hike. This would likely weaken gold and the $1,200 an ounce level could be tested," said HSBC analyst James Steel. "A hard break may be only temporary as long term the outlook for gold is positive," Steel added, however.

Spot gold was nearly flat at $1,211.40 per ounce at 0630 GMT. It touched a low of $1,206.60 earlier in the session and remained on track for its fifth straight weekly loss. U.S. gold was up 0.1 percent at $1,213.90.
The dollar index held near a two-month peak, while Asian shares outside Japan advanced 0.5 percent.

Gold, which has gained about 14 percent so far this year, has been under pressure the past couple of weeks as comments from senior U.S. central bank officials, including chief Janet Yellen, boosted expectations of an imminent rate rise. Spot gold may consolidate further in a range of $1,205-$1,219 per ounce, as suggested by a Fibonacci retracement analysis, Reuters technical analyst Wang Tao said.

"We haven't seen a bottom of gold yet and $1,200 has been holding well," said Brian Lan, managing director at Singapore-based gold dealer GoldSilver Central. "Depending on data tonight we will see how the market closes. If it closes above $1,200, then next week will be critical with news from Yellen expected," Lan said.

Yellen is due to speak on Monday, the last chance for the Fed to communicate with markets before it begins a blackout period ahead of its policy meeting on June 14-15.

On Gold market action is very tight and lazy, definitely investors are wating for numbers. If we wouldn't expect NFP, I would say that, probably, gold should drop to 1185 and then start upward action. MOstly because we have bearish flag on daily and no signs of thrusting action on intraday charts. But we have NFP today... this brings adjustments in our view.
Thus, we think that it is better to wait for some daily pattern, based on thrust down, say B&B "Sell" or may be even DRPO "Buy" . This will be just safer than catching something on intraday charts.

Because on intraday patterns due passive behavior of investors, we do not have clarity. On 4-hour chart it could be butterfly down to 1185, but suddenly market has turned to sideways action:

As a result we could get opposite scenario as butterfly "Sell" on hourly chart:

Trying to resolve this mess on a background of coming NFP looks like very difficult task. And we definitely will have only one thing if we will deal with it - problems. About profit we do not sure...
That's why, our thought is to wait for some pattern on daily chart - this will be just safer...