Gold GOLD PRO WEEKLY, November 12-16, 2018

Sive Morten

Special Consultant to the FPA
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Fundamentals

Last week we've made a suggestion that gold should have problems with upside continuation due negative fundamental and sentiment background. As a result all attempts to break through major resistance have failed.

Fed meeting results just has supported this direction. As we've said in our FX research yesterday - probability of Dec rate increase now stands around 80%. Statistics also looks good. It means that coming week doesn't promise anything good for gold market as well, at least based on information that we have.

As Reuters reports - Gold fell to its lowest in a month on Friday as the U.S. dollar strengthened after the Federal Reserve reaffirmed its monetary tightening stance, seen as a negative for non-yielding bullion.

The Fed held interest rates steady on Thursday but is widely expected to raise interest rates in December - which would be its fourth hike this year - as it pointed to a healthy economy marred only by a dip in the growth of business investment.

“The Fed’s announcement caused the dollar to strengthen and the outlook for higher U.S. interest rates has gold on the defense,” said Bob Haberkorn, senior market strategist at RJO Futures.

Also weighing on overall commodity market sentiment, was a decline in oil prices, with benchmark Brent crude falling to its lowest since early April.

“Gold is re-establishing its relationship with the crude oil market,” said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York.

Gold can be used as a hedge against inflation fueled by higher oil prices.

Now let's take a look at sentiment on the market. SPDR fund that has shown good jump in inventories two weeks ago has lost 2 tonnes this week. This is small outflow, but it just shows that positive dynamic and investors courage has stopped.

But CFTC data looks positive for gold. Open interest has jumped for 25K contracts. Speculators and hedgers have increased bullish positions. Although speculators just have closed shorts, hedgers have opened 15K short contracts, which indicates that in medium term perspective gold could continue upward action.

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In general this is understandable. Rising interest rates cycle suggests more pressure on stock market and gold is treated as one of the assets where funds could be protected from inflation.

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This information lets us keep our view on current pullback as on retracement still, despite that on Friday there was negative acceleration.

Technical
Monthly


Monthly picture barely has changed as November action stands as inside one to October candle. On monthly chart we keep our long-term technical scenario, that could be realized. this is not single possible scenario, but currently it seems as very probable. We will keep it intact for awhile, because it illustrates our fundamental expectations on gold market. Although final downside target could be revised higher someday because as political as economical situation is not static but we keep our direction "down" by far.

Here we try to involve fundamental view in technical analysis, trying to combine patterns with real fundamental situation on gold. So, we will take broader view.

If you follow our weekly updates, you should remember our explanation and why we think that gold inability to break through 1380 resistance should be treated as bulls' defeat and gold failure. This is important in outlook of longer-term perspective.
Fundamental picture suggests two major things. In shorter-term US will keep dominate role in the world, because indirectly it controls EU economy as major EU companies have significant part of their business in US, or on US territory, US dollar is still world major currency and, as we've estimated above, China starts to show signs of chilling their economy. US economy itself feels good. D. Trump by restructuring of political role of US on international arena will safe a lot of "unnecessary" spending, such different programs of opposition financing, military spending of different kind. This should improve US budget, reduce deficit, which also will work on support of US economy.
Second important issue, this long-term relations that stand for decades start changing. Both of these moments, putting together, lead us to following conclusion. Within few years, 2-3 probably gold will remain under pressure of positive interest rates cycle. While gradually, when breaking of long-term economic relations will be seen brighter and brighter and impact not only China, EU but US as well - this will be turning point for the gold, or slightly before that. Because any global crush of any kind triggers demand for gold. That is what we see from fundamentals. The same view we see among other analysis, which they backed with statistics and fundamental research. Thus, Fathom Consulting expects starting of world crisis around 2020.

It could look unbelievable, but technical picture shows approximately the same. Failure of 1380 upside breakout confirms our idea of 2-3 years of US and US Dollar domination. But at the same time gold should show preparation to reversal, and here it is. One of the scenarios that might be formed here is big 1.618 butterfly, which is bullish reversal pattern. It has 1.618 target right around gold price, which is corresponds to extraction spending approximately. So, it is long-term breakeven point.
Finally, butterfly could become large reverse H&S pattern around all time 5/8 Fib support and ~40% of this pattern could be seen on the market. What we see on the chart nicely corresponds to current fundamental background. Alternative scenarios suggest appearing of different patterns, such as "222" Buy, or 1.27 butterfly but it doesn't affect the core and reflects only a degree of global political and economical processes, whether they will be smooth or drastic.

Of course, political life is not static, and it could show fast turns. But right now, everything looks very harmonic.

Here we also have mentioned huge demand on gold from emerging countries - China, Russia and Turkey. Developed countries repatriate gold from US. It means that everybody prepares to something, which should significantly increase demand for a gold. Decisive moment here will be the breakout of YPS1 where gold stands right now. But last few weeks we see that gold, oppositely, holds well and even bounces higher, up from it.
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Weekly

Weekly trend stands bullish. Upside action has started by DRPO "Buy" pattern after weekly oversold has been reached. Now gold has completed AB=CD upside target. As result we've got "222" Sell pattern, which minimal target is 3/8 retracement where we stand now.

Bullish setup will be valid until market holds above "C" point of our AB-CD pattern and stands above major 5/8 Fib support. Drop below 1175 will erase this setup. In this case we have to acknowledge that it was just 3/8 reaction on weekly OS, although we're still watching for 50% at least around 1260.

Overall situation let's us by far search chances to go long.
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Daily

Here is our picture for next week. As we've said, if market fails to proceed higher, we should get 2-leg retracement down and this has happened. Market mostly has completed 1205 OP target. Now price stands at very strong support area - K-support and Agreement.

Putting together strong drop and strong support, most probable action - upside pullback and downside continuation after it will be done. This brings a lot of trending setups depending on your time frame. It could be long trade on intraday charts first. We intend to use level's strength to protect position with breakeven stop later.

Ultimately, we watch for 1185-1190 crucial area, which is XOP and major 5/8 Fib support. Gold has to stay above it to keep long-term bullish scenario. If market will break it, it could be 1st step on a road to weekly OP around 1113$ target:
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Intraday

4H chart shows that market could slip slightly lower, to 1205 target by two reasons. First is, this is actually daily OP, that has not been hit yet totally. Second - this is 1.27 extension of butterfly "Buy" here. It means that 1205 is a level where we could try to go long, if we get bullish reversal patterns on lower time frames.

Second setup here is potential B&B "Sell", which has good chances to happen from 1218-1219 K-resistance area. This is also WPP.
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On hourly and lower time frames we do not have something special. Watch for 1H bearish grabber, that could become starting point of final leg to 1205. 15-min chart shows very gradual upside action with clear signs of retracement and bearish dynamic pressure. Maybe some pattern, such as butterfly "Buy" will be formed there.

That's being said, in the beginning of the week we're watching for two possible trades - upside action from 1205 and B&B "Sell" from 1218-1219 area.

Conclusion:

Sentiment stands moderately positive for gold market and keeps on the table possible action to 1260 area later in the month. Now we mostly deal with retracement. It is still a question whether gold will proceed higher from 1205 area or another leg down to 1185 will happen. In the beginning of the week we focus on upside pullback, approximately from 1205 to 1218 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.
 
Greetings everybody,

So, I see that gold market is not very interesting for you :rolleyes:, let's take a look at GBP today. People ask to share our view on it.

On GBP, for better understanding of short-term situation we need to take slightly broader view on daily chart.
Based on June 2016 collapse we have wide AB-CD pattern with minor COP target at ~1.25. That is where market gravitates to.

Currently cable can't proceed lower, because due yesterday's collapse it stands at oversold area. But potentially, butterfly pattern could be formed here with the same 1.2480-1.25 target. This is our view for few weeks, probably:
gbp_d_13_11_18.png


In short-term, as we stand at OS, some pullback should happen. Besides GBP has unfilled gap on intraday charts. So, logical trading plan is to wait of this gap closing. Around this gap we see strong resistance area and AB-CD target. It looks suitable for short position taking.
As usual - if upside action will become very fast - do not be short. Second - move stops to breakeven as soon as GBP will show technical drop out from strong area. It should happen, because resistance is really strong.
By DiNapoli framework, this could be B&B "Sell" as well, as downside thrust looks not bad, actually:
gbp_4h_13_11_18.png
 
Welcome everybody,

Let's turn to Gold again. Our major picture stands on daily chart. Since price already has passed through major K-support area around 1211 and OP target at 1205, next destination area is 1185 - XOP target, 5/8 Fib support and MPS1.
Now market stops downside action due daily OS and trend line support here:
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4H chart shows that price also stands at WPS1. Here we have perfect downside thrust which potentially could become a background for DiNapoli directional trade, like B&B "Sell". Fib levels tree shows strong resistance area around 1212 - K-level and former natural support/resistsance zone. Since we are at OS on daily, gold could try to reach this level.

On broader 4H view, you could recognize Double Top pattern that we've mentioned last week and in weekly report. It has the same target around 1180-1185 area on daily chart:
gold_4h_14_11_18.png


On 1H chart we could recognize reverse H&S pattern. Its XOP target agrees with 1212 major resistance on 4H chart. OP target stands at 1207. Last candle on the chart is bullish grabber as well. So, despite that we have bearish view on gold on daily chart, few sessions could be spent on upside retracement. Taking its all together - upside bounce, approx. to 1212 first, downside reversal and action to 1180-1185 second.
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Morning guys,

On Gold market we have really special situaiton when our levels have been reached but the nature of this action stands opposite to the one that we've suggested.

On daily chart we've got our bounce up from trendline and OS area and reaching of "B" point, MPP resistance.
At first glance, everything stands well, right, and we've pointed this level for potential short entry:
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But take a look at intraday patterns. On 4H chart we've got not B&B "Sell" but DRPO "Buy", which, in fact, short-term bullish reversal pattern. Yes, strong K-resistance area has stopped market for awhile, and DRPO has hit minimum 50% of thrust target. But who said that gold can't proceed higher.
With this rally on the back, it is not comfortable to sell, right? Besides, market stands close to resistance - let's call it as neckline. If price will break it up - this could mean that upside continuation on gold continues.
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The same story on 1H chart. Our H&S pattern has worked perfectly, and XOP target has been exceeded, which is not normal for retracement on bearish market. Now we have multiple grabbers and they suggest further upside continuation, at least to 1218-1219 area.
gold_1h_15_11_18.png


That's being said, despite that market stands at predefined resistance - it is not good background for short entry. We need to wait 1-2 session, because trading plan could be changed drastically.
 
Greetings guys,

well, gold market confirms our doubts on bearish continuation. As we've said yesterday - market has reached our predefined level for short entry but in opposite manner. So, it mostly erases attractiveness of short position taking.

Now we see the same thing - market is coiling around MPP, which also a segregation line between two consolidations and gold is trying to return back in upper one. If this will happen - we cancel our scenario with XOP target. Further upward action will mean that this is continuation of weekly upside retracement. Potentially we think that it could reach 1260 area.
Besides, in fact we have '222" Buy on daily chart...
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On 4H chart we see multiple bullish signs - DRPO instead of B&B (that's the reason why we didnt' sell yesterday), failure to complete Double Top target and upside breakout of K-resistance area. All this stuff points on market strength and holds us from taking short position, at least now.
The fact that price is coiling around resistance also doesn't match to normal bearish action. At the same time, market still stands around resistance area and we can't say that it has been broken totally, we need a bit more upside continuation to get confidence with bullish scenario.
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On 1H chart market shows bullish dynamic pressure, which suggests upward breakout of previous tops. So, things that we see right now keep us aside from taking any short position by far.
gold_1h_16_11_18.png
 
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