Sive Morten
Special Consultant to the FPA
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- 18,648
Fundamentals
While UK political news barely have made any impact on Gold market, still, it was sensible to US statistics and expectations around US/China negotiations. These two factors were making weather on the market last week. At the same time, impact was not too strong and gold was showing gradual action the same as FX markets. Technical tools of analysis worked pretty accurate, which tells that mostly market was driven by its own.
Next week should be the same kind as major changing are expected next month.
In the beginning of the week gold has dropped to its lowest levels in more than three months on increased appetite for riskier assets, while U.S. President Donald Trump failed to provide any information on the trade deal with China in his speech.
“The problem for gold right now is (Treasury) yields have risen, the probability that the Federal Reserve will tighten (monetary policy) has dropped and the equities market has returned very well,” said Bart Melek, head of commodity strategies at TD Securities. Any reduction in aggressive behaviour on the trade front would drive investors away from bullion, he said.
Meanwhile, the market was looking out for any reassurances on the Sino-U.S. trade agreement and for any delay in a decision on European car tariffs from Trump’s address at the Economic Club of New York.
“There is guarded optimism (in the market) and we are tilting to the idea that there’ll be some deal done, may be not as comprehensive as both the side were arguing,” Melek added.
However, Trump took aim once again at the Fed for its interest rate policy in a highly anticipated speech that offered no fresh details on his administration’s long-running trade war with China.
Gold, considered a safe store of value during economic and political uncertainties, has risen about 13% so far this year on concerns regarding the U.S.-China trade resolution and monetary policy easing by global central banks.
“The precious metals bulls are trying to stabilize their markets after recent strong selling pressure has driven prices to three-month lows,” Kitco Metals senior analyst Jim Wyckoff said in a note.
Bullion fell 3.6% in the previous week and extended declines into a fourth straight session on Tuesday.
Also on investors’ radar was continuing unrest in Hong Kong, with a senior officer saying the protests had brought the city to “the brink of total breakdown.”
Gold prices edged down on Thursday as bullion's safe-haven appeal was dented by hawkish signals from the U.S. Federal Reserve on further interest rate cuts, citing
growth in the U.S. economy, a strong labour market and steady inflation. U.S. Federal Reserve Chair Jerome Powell said the negative interest rates sought by President Donald Trump were not appropriate for the U.S. economy right now. The Fed has cut interest rates thrice this year to help sustain U.S. growth. A lower interest rate trims the opportunity cost of holding non-yielding bullion.
SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.04% to 896.77 tonnes on Wednesday from 897.09 tonnes the previous session.
Gold prices slipped on Friday, on track to break a three-session winning streak as stock markets hit record highs following comments from U.S. officials that
progress was being made on the "phase one" trade agreement with China.
"Overall trading gold has been impacted by the trade war and there is tremendous optimism with the final stages of getting stage one deal ratified," said Edward Moya, a senior market analyst at OANDA. "This has been the biggest headwind for the global economy and a major de-escalation is derailing the safe-haven demand (for gold)."
Gold prices have gained more than 14% so far this year as the trade dispute between the world's biggest economies roiled financial markets, stoking fears of a global economic slowdown and prompting major central banks to reduce interest rates. Wall Street's main indexes hit record highs at the open on upbeat comments related to U.S.-China trade talks and strong earnings.
U.S. Commerce Secretary Wilbur Ross said U.S.-China trade talks were set to continue with a telephone call on Friday as both sides seek to hammer out a phase one trade pact. Gold prices retreated from a near one-week peak hit on Thursday, but were still set for a weekly gain of about 0.6%.
"This week's been a story of gold really trying to claw back some of the losses from the previous week, and it has done that to a degree, we are up from the lows from $1,450 and gold is attempting to get back above the 100-day moving average," said Mitsubishi analyst Jonathan Butler. "Next week we've got some interesting data - the manufacturing PMIs and FOMC meeting minutes coming out which will show whether there were any dissenting voices in U.S. Federal Reserve arguing for stronger set of rate cuts or whether the consensus was really for keeping the rates on hold."
U.S. Federal Reserve Chair Jerome Powell on Wednesday signalled no further cuts will occur unless there is a "material" change in the economic outlook.
In general, relatively "quiet" situation is confirmed by CFTC data. Net long position on gold stands stable and shows just minor fluctuations around the top level:
Source: cftc.gov
Charting by Investing.com
Technical
Monthly
Although we see that fundamental factors make mixed impact on the market - we see downside action, but at the same time long-term positions of big players stand intact - technical picture shows more significant changes.
On monthly chart gold keeps bullish context by far. MACD trend stands bullish and price action is forming tight flag consolidation right under resistance area. In general we keep 1530-1585 range as major monthly resistance here.
Butterfly pattern suggests at least 3/8 retracement, which seems solid pullback on lower time frames. It could look scaring but in reality this is normal technical reaction on achievement important target.
That's being said monthly chart keeps long term bullish tendency intact by far.
Weekly
Weekly trend stands bearish. Last week we've mentioned two driving factors. From the technical side we have monthly resistance and butterfly target, from the fundamental side - progress in US/China negotiations. The latter probably will keep its relevance on coming week as well. And, in general it will be decisive for near term action and downside continuation.
Here we have two support areas. First one is hit already at 1447, next one is K-support area of 1362-1380. K-area is also the target suggested by monthly butterfly pattern. Taking in consideration the momentum, it seems that drop should continue after technical bounce as market stands at weekly oversold and near Fib support level. Fundamental factor also points on this scenario as market widely expects positive result in negotiations.
Now we see that price is not at oversold any more. It means that we should be careful to any bearish signs on lower time frame. Last week we have discussed more extended upside reaction on weekly support and gold has behaved well, reaching our minimal reaction target around 1472 area. Next week we will see, whether gold has enough power to climb a bit higher.
Daily
Daily trend also stands bearish. Hypothetically, minimal response to butterfly target is done, as 3/8 pullback has happened. At the same time, it is unclear yet could gold climb slightly higher, because potentially, existence of weekly K-support area and oversold provides enough support for higher retracement. Upside action should be driven by some patterns, which help us to recognize the moment if something will go wrong.
Intraday
Here, on 4H chart we have hint on AB-CD pattern with shy BC leg. Once market has hit Agreement resistance around K-area, it has turned to downside retracement. For the truth sake we were watching for deeper pullback on Friday, as here actually first upside reversal swing and bearish momentum is still here.
But on Friday we have new inputs in scenario - multiple bullish grabbers on 4H chart, which point on upside continuation, or, at least on spike up and new local high around K-area:
Alternatively, if grabbers will fail, we will watch for scenario that we've discussed on Friday - AB-CD retracement down and appearing of "222" Buy pattern:
Grabber is a cool stuff, of course, but we should not forget about strong bearish momentum on weekly chart. Besides, 4H chart by price shape cares features of B&B "Sell" pattern, which also suggests deeper, 5/8 retracement. Thus, if grabber will trigger upside action - very well. If not - we're watching for 1456 area.
Finally, breaking of this level and drop below 1456 could be the first sign of major downside continuation. Those of you, who still keeps long positions since last week should think about profit protection and risk management.
For new long position you could try to use as grabbers as our major "222" Buy setup. Logical decision is to split position and use minor part to deal with the grabbers while major part hold on a case of reaching 1456 level. Stop anyway should be below the level, preferably around 1450-1451 area.
Conclusion
Driving factors are transparent right now, the major question when we will get major impact. As investors anticipate breakout in US/China trading agreement - gold will stay under pressure. Currently we do not see any hazard to long-term bullish tendency, big traders still keep longs on gold. In short-term perspective we will keep an eye on bullish continuation with vital area around 1456 major Fib level.
While UK political news barely have made any impact on Gold market, still, it was sensible to US statistics and expectations around US/China negotiations. These two factors were making weather on the market last week. At the same time, impact was not too strong and gold was showing gradual action the same as FX markets. Technical tools of analysis worked pretty accurate, which tells that mostly market was driven by its own.
Next week should be the same kind as major changing are expected next month.
In the beginning of the week gold has dropped to its lowest levels in more than three months on increased appetite for riskier assets, while U.S. President Donald Trump failed to provide any information on the trade deal with China in his speech.
“The problem for gold right now is (Treasury) yields have risen, the probability that the Federal Reserve will tighten (monetary policy) has dropped and the equities market has returned very well,” said Bart Melek, head of commodity strategies at TD Securities. Any reduction in aggressive behaviour on the trade front would drive investors away from bullion, he said.
Meanwhile, the market was looking out for any reassurances on the Sino-U.S. trade agreement and for any delay in a decision on European car tariffs from Trump’s address at the Economic Club of New York.
“There is guarded optimism (in the market) and we are tilting to the idea that there’ll be some deal done, may be not as comprehensive as both the side were arguing,” Melek added.
However, Trump took aim once again at the Fed for its interest rate policy in a highly anticipated speech that offered no fresh details on his administration’s long-running trade war with China.
Gold, considered a safe store of value during economic and political uncertainties, has risen about 13% so far this year on concerns regarding the U.S.-China trade resolution and monetary policy easing by global central banks.
“The precious metals bulls are trying to stabilize their markets after recent strong selling pressure has driven prices to three-month lows,” Kitco Metals senior analyst Jim Wyckoff said in a note.
Bullion fell 3.6% in the previous week and extended declines into a fourth straight session on Tuesday.
Also on investors’ radar was continuing unrest in Hong Kong, with a senior officer saying the protests had brought the city to “the brink of total breakdown.”
Gold prices edged down on Thursday as bullion's safe-haven appeal was dented by hawkish signals from the U.S. Federal Reserve on further interest rate cuts, citing
growth in the U.S. economy, a strong labour market and steady inflation. U.S. Federal Reserve Chair Jerome Powell said the negative interest rates sought by President Donald Trump were not appropriate for the U.S. economy right now. The Fed has cut interest rates thrice this year to help sustain U.S. growth. A lower interest rate trims the opportunity cost of holding non-yielding bullion.
SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.04% to 896.77 tonnes on Wednesday from 897.09 tonnes the previous session.
Gold prices slipped on Friday, on track to break a three-session winning streak as stock markets hit record highs following comments from U.S. officials that
progress was being made on the "phase one" trade agreement with China.
"Overall trading gold has been impacted by the trade war and there is tremendous optimism with the final stages of getting stage one deal ratified," said Edward Moya, a senior market analyst at OANDA. "This has been the biggest headwind for the global economy and a major de-escalation is derailing the safe-haven demand (for gold)."
Gold prices have gained more than 14% so far this year as the trade dispute between the world's biggest economies roiled financial markets, stoking fears of a global economic slowdown and prompting major central banks to reduce interest rates. Wall Street's main indexes hit record highs at the open on upbeat comments related to U.S.-China trade talks and strong earnings.
U.S. Commerce Secretary Wilbur Ross said U.S.-China trade talks were set to continue with a telephone call on Friday as both sides seek to hammer out a phase one trade pact. Gold prices retreated from a near one-week peak hit on Thursday, but were still set for a weekly gain of about 0.6%.
"This week's been a story of gold really trying to claw back some of the losses from the previous week, and it has done that to a degree, we are up from the lows from $1,450 and gold is attempting to get back above the 100-day moving average," said Mitsubishi analyst Jonathan Butler. "Next week we've got some interesting data - the manufacturing PMIs and FOMC meeting minutes coming out which will show whether there were any dissenting voices in U.S. Federal Reserve arguing for stronger set of rate cuts or whether the consensus was really for keeping the rates on hold."
U.S. Federal Reserve Chair Jerome Powell on Wednesday signalled no further cuts will occur unless there is a "material" change in the economic outlook.
In general, relatively "quiet" situation is confirmed by CFTC data. Net long position on gold stands stable and shows just minor fluctuations around the top level:
Source: cftc.gov
Charting by Investing.com
Technical
Monthly
Although we see that fundamental factors make mixed impact on the market - we see downside action, but at the same time long-term positions of big players stand intact - technical picture shows more significant changes.
On monthly chart gold keeps bullish context by far. MACD trend stands bullish and price action is forming tight flag consolidation right under resistance area. In general we keep 1530-1585 range as major monthly resistance here.
Butterfly pattern suggests at least 3/8 retracement, which seems solid pullback on lower time frames. It could look scaring but in reality this is normal technical reaction on achievement important target.
That's being said monthly chart keeps long term bullish tendency intact by far.
Weekly
Weekly trend stands bearish. Last week we've mentioned two driving factors. From the technical side we have monthly resistance and butterfly target, from the fundamental side - progress in US/China negotiations. The latter probably will keep its relevance on coming week as well. And, in general it will be decisive for near term action and downside continuation.
Here we have two support areas. First one is hit already at 1447, next one is K-support area of 1362-1380. K-area is also the target suggested by monthly butterfly pattern. Taking in consideration the momentum, it seems that drop should continue after technical bounce as market stands at weekly oversold and near Fib support level. Fundamental factor also points on this scenario as market widely expects positive result in negotiations.
Now we see that price is not at oversold any more. It means that we should be careful to any bearish signs on lower time frame. Last week we have discussed more extended upside reaction on weekly support and gold has behaved well, reaching our minimal reaction target around 1472 area. Next week we will see, whether gold has enough power to climb a bit higher.
Daily
Daily trend also stands bearish. Hypothetically, minimal response to butterfly target is done, as 3/8 pullback has happened. At the same time, it is unclear yet could gold climb slightly higher, because potentially, existence of weekly K-support area and oversold provides enough support for higher retracement. Upside action should be driven by some patterns, which help us to recognize the moment if something will go wrong.
Intraday
Here, on 4H chart we have hint on AB-CD pattern with shy BC leg. Once market has hit Agreement resistance around K-area, it has turned to downside retracement. For the truth sake we were watching for deeper pullback on Friday, as here actually first upside reversal swing and bearish momentum is still here.
But on Friday we have new inputs in scenario - multiple bullish grabbers on 4H chart, which point on upside continuation, or, at least on spike up and new local high around K-area:
Alternatively, if grabbers will fail, we will watch for scenario that we've discussed on Friday - AB-CD retracement down and appearing of "222" Buy pattern:
Grabber is a cool stuff, of course, but we should not forget about strong bearish momentum on weekly chart. Besides, 4H chart by price shape cares features of B&B "Sell" pattern, which also suggests deeper, 5/8 retracement. Thus, if grabber will trigger upside action - very well. If not - we're watching for 1456 area.
Finally, breaking of this level and drop below 1456 could be the first sign of major downside continuation. Those of you, who still keeps long positions since last week should think about profit protection and risk management.
For new long position you could try to use as grabbers as our major "222" Buy setup. Logical decision is to split position and use minor part to deal with the grabbers while major part hold on a case of reaching 1456 level. Stop anyway should be below the level, preferably around 1450-1451 area.
Conclusion
Driving factors are transparent right now, the major question when we will get major impact. As investors anticipate breakout in US/China trading agreement - gold will stay under pressure. Currently we do not see any hazard to long-term bullish tendency, big traders still keep longs on gold. In short-term perspective we will keep an eye on bullish continuation with vital area around 1456 major Fib level.
