GOLD PRO WEEKLY, November 09-13, 2015

[Sive Morten]

Fundamentals
Reuters reports gold fell to a three-month low on Friday and was set to post its biggest weekly drop in more than two years after U.S. data showed job growth surged in October, making it likely the Federal Reserve will hike interest rates in December.

U.S. job growth surged in October and the unemployment rate hit a 7-1/2-year low of 5.0 percent in a show of economic strength, sending the dollar <.DXY> up 1.4 percent to the highest since April.

"The powerhouse payrolls report battered gold beneath $1,100 for the first time since August," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.

"Gold is now down eight days in a row but will remain under pressure as the market's view of the chances of December rate hike soars."

The U.S. futures contract for December delivery settled down 1.5 percent at $1,087.70 an ounce. The contract's volume surged nearly 49,500 lots between in the half hour that followed the jobs report, the biggest 30-minute burst of volume for the most active contract in a year.

Spot gold was heading for a 4.6 percent decline for the week, the sharpest such slide since June 2013 and nearing July's 5-1/2-year low.

"With numbers like these, the Fed are almost duty bound to raise rates within this year," Mitsubishi precious metals analyst Jonathan Butler said.

"The dollar is approaching 3 month highs and U.S. treasury yields are the highest since July. Gold could retrace to the lows for the year," he added.

Fed Chair Janet Yellen said on Wednesday that a rise in rates in December was a "live possibility" if justified by upcoming economic data.

Assets in SPDR Gold Trust , the top gold-backed exchange-traded fund, tumbled to 671.77 tonnes, the lowest since mid-August. On Thursday alone, the fund saw outflows of 8.34 tonnes, the biggest daily drop since July 17.

It is obvious that CFTC data also shows reversal in sentiment. Thus, Open interest has dropped significantly, as well as speculative long positions. At the same time, guys, we can't say that short have grown too much. In fact, growth was relatively shy. Last time we've said that our ratio that shows relation between shorts and longs stands near crucial level of 80-82%. Usually when ratio reaches high numbers - retracement becomes thing of high probability. Of course recent drop does not look like retracement. But, we should be careful with our judgement on reasons of this drop. Overextended bullish sentiment also is important. Next week we have to monitor short positions. If they will start to increase, this will be confirmation of changing wind in sentiment. While if not - it could indicate that gold still has chances on upside reversal. But this will happen only on next week. Right now we have to work with bearish sentiment on gold market.

Open interest

Speculative Longs:

Speculative shorts:

Technicals
Monthly

So, Goldman expect bearish continuation on Gold market and as recent rally does not impact significantly monthly chart, we probably should not deny it totally as well. I mean, bearish scenario. Last week it has become a reality. As drop was really fast, we even have not got any hint on long entry. Right now we have to return back to medium-term bearish view.

At the same time we think that currently gold is 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 Middle East tensions. Currently we see clear signs that situation will become worse in nearest 2 months.

As we've said last week - it is difficult to make any far going conclusions yet and mostly right now started upside action looks like tactical bounce from strong support area. To get another status market should show significant upside action and form bullish reversal swing. It means that gold has to exceed 1310 area.

We still have just one long-term pattern in progress that has not achieved it’s target yet. This is VOB pattern. It suggests at least 0.618 AB-CD down. And this target is 1050$. Besides, in the same area we have 1.618 target of most recent butterfly pattern.

Also we have extended bearish dynamic pressure here. Although trend shifted bullish in 2014, but market still forms sequence of lower tops. Speaking on VOB again - it assumes reaching of minor 0.618 target and gold stands very close to it. That's why chances are really not small that we could get another drop to 1050 and Goldman could be right. And as we've said, even when rally was strong - we call to not hurry to write-off bearish strength by far.

Still, it doesn't mean that we will ignore bullish setups and just wait for chances to enter bearish trade. Absolutely not. We will just keep in mind that bearish scenario exists, but we will trade any clear and attractive setups that gold will form, despite whether it will be bullish or bearish. We do not trade on monthly chart directly and just use it for understanding overall picture.

Based on monthly chart analysis gold stands as close as never to reaching of 1050 target.

Weekly

Action on weekly chart suggests that market should reach 1025-1035 area. Yes, our beacon is 1050, but it stands on monthly chart and +/- 20$ is normal for monthly levels. Besides, if gold will trigger stops below 1050 - this will add fuel to bearish fire and market could drop another 20$ just by momentum.
Here we see that gold stands below MPS1 and this indicates bear trend. Since drop was really significant - we do not take into consideration minor AB-CD extension of "222" Sell pattern but will be watching AB=CD target directly. Besides, market is not at oversold by far, but already has broken all major Fib levels.
If you will take a look carefully at this chart - you will recognize 2 butterflies to the left from "222" pattern. Both of them have 1.618 extensions around our AB=CD. That's why most probable destination is not 1050$ but slightly lower - 1025-1035$.
Don't pay attention to grabber that was formed last week (yes, this big nasty black candle is bullish grabber). Having such drop makes it almost useless, at least on weekly chart. To make it work - something really big and unexpected should happen either on market or in geopolitics.

Daily

Here guys, we could appeal to reaching of minor 0.618 AB-CD target right at daily overbought, but bearish impulse is too strong. It means that if even some retracement will happen - hardly it will be significant. We probably will not see any more or less meaningful relief until market will not meet important target, for example 1.0 AB=CD @ 1037.
I am even not sure that possible retracement will reach 1122 Fib resistance, although thrust down, as you can see looks perfect for DiNapoli directional patterns.
Still never say "never". Gold is approaching to solid 1080 support cluster, may be we will get B&B...

Intraday

Intraday charts mostly useless by far. Market not just shows any signs of upside retracement, but even shows acceleration to the downside. All that we could do by far is just keep watching...

Conclusion:
Our former conclusion on keeping of long-term bearish patterns was correct - they are still valid and they are powerful enough to push gold lower at least for another 100$. They area VOB (Volatility breakout) and bearish dynamic pressure.
At the same time It is also not the reason to stay hardly on opinion that everything lost and gold will start another super bearish series. This drop coincides with extreme numbers of sentiment ratio and currently we do not see significant increase in short positions. Also geopolitical tensions are growing. This makes us be cautious on any overestimating of bearish power and treat it by far just as motion to next, but relatively close targets.
In short-term perspective we probably will try to catch chance for short entry with target around 1025-1035 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.

 

[Sive Morten]

Good morning,

Recent comments from Reuters - Gold was mired near a three-month low on Tuesday on expectations the U.S. Federal Reserve was well on track to raise interest rates before the end of the year.

A forecast-beating U.S. October employment report on Friday pushed up bets that the Fed will increase interest rates in December for the first time in nearly a decade, weighing on the price of non-interest bearing gold.

"Gold will stay below $1,100 as the interest rate hike becomes more and more imminent," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

Following bullion's recent steep drop, MKS Group trader James Gardiner said "a bounce, or at least a consolidation, is well overdue". He pegged the next support level for gold at around $1,074 and then at $1,050.

The dollar hovered near a seven-month peak against a basket of major currencies, spurred by growing expectations for a U.S. rate hike next month.

After a potential rate hike in December, the U.S. central bank may take its time in raising rates further which should be broadly supportive for gold, said INTL FCStone analyst Edward Meir.

But Meir said the metal faces more weakness in the near term and "poor technicals and a buoyant dollar do not help gold's upside case much either".

While the market braces for a U.S. rate hike, a consensus is forming at the European Central Bank to take the interest rate it charges banks to park money deeper into negative territory in December, in a move that could weaken the euro and push up inflation.

So, on Gold market right now is few that we could add. Just small candle on Monday, thus, our expectation stands the same - bounce on daily chart, at least to WPP, or if we will get lucky to WPR1 and Fib level. In second case it could be B&B "Sell"

If bounce really will start - may be market will form butterfly "Buy" as foundation for it on hourly chart:

 

[Sive Morten]

Good morning,

Recent Reuters comments - Gold ticked up on Wednesday as the dollar pared some of its recent gains, but the metal remained under pressure near a three-month low as outflows from bullion funds and an anticipated U.S. rate hike weighed on the market.

Assets in SPDR Gold Trust , the top gold-backed exchange-traded fund (ETF), fell to 663.43 tonnes on Tuesday - the lowest since September 2008 when Lehman Brothers filed for bankruptcy kicking off a global financial crisis.

Investors have been pulling out of bullion funds on increasing bets the U.S. Federal Reserve would raise interest rates this year. Bullion as a non-interest-paying asset could take a hit to demand with higher rates.

"The ETF market is suggesting more pain (for gold) in coming days," ANZ analysts said in a note.

But the metal was within striking distance of $1,084.90 reached on Friday, the lowest since Aug. 7, after a robust U.S. nonfarm payrolls report boosted bets the Fed would hike interest rates at its next meeting in December.

The employment report released last week has strengthened the conviction of economists who have been forecasting a December interest rate increase, according to a Reuters poll published on Tuesday.

The survey of over 80 leading economists found a 70 percent median chance the U.S. central bank would raise its short-term lending rate at its final meeting of the year, next month.

The technical picture for gold is weak, and the next support is at the 5-1/2-year trough of $1,077 an ounce hit in July, analysts have said.

"A looser ECB and tighter Fed may not be entirely priced into gold and we could see further downside. Still, we sense sellers may be puttering out of momentum," said HSBC analyst Jim Steel, adding that physical demand from Asia could be increasing.

Reuters reported exclusively on Monday that a consensus was forming at the European Central Bank to cut the deposit rate further, to weaken the euro and push inflation.

Gold's recent sharp decline has stoked some physical demand in top consumer Asia. Premiums on the Shanghai Gold Exchange, an indicator of demand in China, were at a healthy $4-$5 an ounce on Wednesday.

Sustained physical demand could provide a floor for declining gold prices.

So, on daily Gold picture looks the same. Market mostly was held by not just 1080 support and previous consolidation but also by oversold. Right now market is gradually leaving oversold. Still chances on upward retracement to WPP still exists.

Although we've expected butterfly here - market has formed something like Double Bottom, or we could call it as rectangle . Anyway, possible upside target will be the same - equal to width. If market will follow this pattern and show upside breakout - we could reach area around 1100 and WPP.
If Gold will return back to lower border, then inside bearish channel, then, probably action down will continue and next destination will be 1170-1175 area - lower border of the channel. That's being said we should wait either for 1100 or bearish breakout of rectangle and return inside bearish channel:

 

[Sive Morten]

Good morning,

Reuters reports on gold - Gold languished near a three-month low on Thursday as investors positioned themselves for a U.S. rate hike this year, although they still awaited more cues from Federal Reserve officials speaking later in the day.

A strong U.S. nonfarm payrolls report last week bolstered expectations that the Fed would hike rates for the first time in nearly a decade at its next policy meet in December.

Higher rates would dent demand for non-interest-paying gold while boosting the dollar.

"The $1,084-85 area is now building as a strong short-term support level with decent stop orders developing below," said MKS Group trader James Gardiner.

"The dollar has managed to consolidate in the last few sessions, however, there is still an upward bias for the dollar which will continue to put pressure on the (precious) complex," he said.

Gold had slid for ten out of 11 sessions as of Wednesday.

The next major support level for gold is at a 5-1/2-year low of $1,077 reached in July, analysts have said.

Traders will be eyeing remarks by at least six Fed officials at various events later in the day for signals on economic growth and the U.S. central bank's monetary policy.

Fed Chair Janet Yellen and Vice Chair Stanley Fischer will also be speaking.

Focus will also be on economic data. New U.S. applications for unemployment benefits likely fell last week, according to a Reuters survey, almost reversing the prior week's increase, suggesting the labour market recovery continued to gain momentum in early November.

Investor flows have not been encouraging for gold. Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, fell to 663.43 tonnes on Tuesday - the lowest since September 2008 when Lehman Brothers filed for bankruptcy and kicked off a global financial crisis.

Other precious metals have also taken a hit from a stronger dollar. Silver was trading near a 2-1/2-month low of $14.22 reached in the previous session.

Platinum fell to $974 on Thursday, its lowest in nearly seven years. Palladium was trading near its lowest in two months. Both the metals have been hit by fund outflows.

So, on daily chart picture barely has changed. Market is still coiling around major support. But today we will get mass Fed members speaking and this could shake the boat a bit. Currently, guys, based on intraday charts, chances on upside bounce to WPP has diminished significantly.

Thus, on 4-hour chart we see clear bearish dynamic pressure. Gold is not at oversold any more. If it will drop slightly and touch stops - this could lead to downward acceleration, since gold also has no significant support till 1050 area:

Approximately the same conclusion we could made based on hourly chart. Market shows irrational behavior in relation to patterns that were formed. Instead of upside breakout gold has dropped again to lower border and just creeping with former border of the channel. This makes market look really heavy.

That's why currently we gravitate to opinion that drop down looks more probable than retracement to WPP.

 

[Sive Morten]

Good morning,

Today comments from Reuters on gold - Gold fell for a twelfth session out of thirteen on Friday, trading close to a near six-year low on rising bets that the Federal Reserve would hike U.S. rates next month and as investors pull out of bullion-backed funds.

The platinum group metals (PGMs) also tracked gold lower. Platinum tumbled to a near seven-year low of $865.25 on Thursday, and was eyeing its worst weekly drop in four years.

Palladium fell to a 2-1/2-month low of $530.75, and with a 12 percent drop, was headed for its worst week since September 2011.

"While we find physical demand for the PGMs from industrial sources to be broadly steady, investors are retreating and we see no early signs of further production restraint," HSBC analyst James Steel said.

"Either a sector-wide rally in commodity prices or tangible evidence of production cuts are required to engineer a rally in the PGMs," he said, adding that gold could also see more losses.

Holdings of platinum exchange traded funds (ETFs) are at a two-year low, while assets of palladium funds are at their lowest since April 2014.

Assets of SPDR Gold Trust, the top gold ETF, fell to 661.94 tonnes on Thursday, the lowest since September 2008. Holdings of all gold funds are at their lowest since March 2010.

Sustained outflows could add to the pressure on the metal prices, already hit by the strength in the dollar.

Bullion has been under pressure recently as expectations for a December rate hike in the United States strengthened after a robust nonfarm payrolls report earlier this month.

Fed officials lined up behind a likely December interest rate hike on Thursday with one key central banker saying the risk of waiting too long was now roughly in balance with the risk of moving too soon to normalize rates after seven years near zero.

Traders will be eyeing U.S. data due later in the day, including retail sales, to gauge the strength of the economy and its impact on the Fed's monetary policy.

On gold market situation is very intereting and tricky. Yes, gold has completed our short-term expectation for drop. But take a look what has happened later - market returned back up. It means that we've got W&R of former lows on daily chart. And this increases chances for retracement up significantly.
Actually we do not want to say that retracement definitely will happen, but we, guys, will be happy anyway. Thus, if bounce will happen - we will get B&B for short entry. If not - we will get confirmation of 1080 breakout and take short on minor retracement later.

On hourly chart we should watch for possible appearing of H&S pattern. If market will do this - this will be confirmation of possible B&B "Sell" on daily and this will be signal for us to wait for 1110-1120 area.
If gold will fail to do this and drop down again - it will mean that tricks with stop grabbing have been played out and bear trend has re-established.