GOLD PRO WEEKLY November 24-28, 2014

[Sive Morten]

Fundamentals
Gold climbed above $1,200 an ounce on Friday to its highest in three weeks, helped by short-covering and after a surprise interest rate cut by China fueled hopes that demand would rise in the world's biggest consumer of the metal.

Also underpinning gold's inflation-hedge appeal were remarks by European Central Bank President Mario Draghi that opened the door for more drastic measures to prevent deflation. In addition, the ECB said it had started buying asset-backed securities, in a move to encourage banks to lend and revive the economy.
"China adding stimulus, the Draghi comments and ECB buying some debt all mean that traders are especially keen on covering shorts before week end and ahead of next week's OPEC meeting," said George Gero, vice president of RBC Capital Markets.

China cut its benchmark interest rates for the first time in more than two years to lower borrowing costs and lift a cooling economy. "Any measures that accelerate the spending power of the Chinese public are bound to be positive for gold," Mitsubishi analyst Jonathan Butler said.
Traders also digested news of central bank sales and purchases. Ukraine cut its gold reserves by more than a third in October, data from the International Monetary Fund showed, while Russia raised its gold holdings for a seventh straight month.

On previous week we’ve said that we need to check CFTC report to understand what recent rally was... And, guys, this really was big change in positions. Not just shorts were covered, but longs opened and this was accompanied by change in open interest. This is first change on of such value for long time. Now is a question wether it will get any continuation and support, for example from SPDR fund statistics.
Open interest:

Shorts:

Longs:

It looks supportive factor for our long-term nearest target at1.22. Market gradually but stably continue to approach to it and right now it stands not too far from current levels.
Technicals
Monthly
As we’ve said two of our patterns have been completed - bearish grabber @ 1400 and recent dynamic pressure that have led market to 1180 lows and clear them out. Still we have another one pattern in progress that is Volatility breakout (VOB). It suggests at least 0.618 AB-CD down. And this target is 1050$. But this is long-term perspective and in a light of recent CFTC data and possible bullish grabber it becomes not as flawless as it was couple of months ago.
On previous week we’ve mentioned potential bullish grabber on gold market and recent rally could have absoutely special meaning for us. As less and less time till the end of November, chances on confirmation of this pattern are increasing. Grabber could become a reaction on butterfly pattern that we have here. Also, as we’ve mentioned previously, the depth of the reaction is also important.
As market now stands above 1180 this could be bullish sign. Let’s not call it as reversal by far, but anyway retracement that could be triggered will be very deep. And reason for that stands due potential monthly bullish grabber. Take a note that November MACDP=1183,04. That’s why moving above 1180 will be important from this point of view as well. This could be comfirmation of the grabber. In this case market at least will return right back to 1360 Yearly Pivot point. As you can see situation is really thrilling and Friday’s rally on China’s rate cut just has added chances for success.
As market has turned to retracement up and until we will not know results of it (whether we will get grabber or not) currently it is not big sense to discuss on second question – how deep market could drop below 1180.
So here we just repeat what we’ve said previously on this subject. Thus, to understand what will happen and how far gold could fall we need keep a close eye on CFTC and SPDR data because it will warn us about possible changing.
Another factor that could impact on gold market is possible gold buying from SNB. We’ve said about it on previous week:
Swiss gold referendum's support falls short of majority: poll | Reuters
But last public opinion poll points on decreasing of supporters of this measure from 44 to 38%. Thus, currently the chances on SNB purchases are not very significant.
Finally the major driving factor for Gold is inflation and particularly here US economy has problem. All stats are improving across the board but wages and wealth of middle class stagnates. Although this is typical for first stage of grow in economical cycle, but this does not support gold appreciation by far. Still, it seems that situation slightly starts to change here. Our ultimate target stands at 1050 and this is just 80 bucks above recent 1130 lows… ABN AMRO recently told about 800$ at the end of 2015, but we have solid doubts on this forecast. The point is that Fed “plans” to change rate somewhere in 2015. It means that inflation probably will become visible somehow. And in these conditions gold will react even earlier, as well as Treasury bond market. Conclusion here is as follows. If we will get grabber we will start to think about 1360 until it will be valid. We could return back to thoughts on 1050, only if grabber will fail and market drop below 1130 again.

Weekly
Last week as reason for possible bounce we’ve mentioned significant support area that includes monthly Fib level, inner butterfly AB=CD target and MPS1. Although we’ve said above that gold has completed butterfly, but weekly chart shows that not quite. Actually we have two side-by-side butterfies here and both of them were not been completed yet normally.
Besides, market has not reached 1.618 extension target of smaller AB=CD pattern. This makes us to be worry on perspectives of this rally. May be on intraday charts 40$ explosion looks outstanding – on weekly chart market just re-tested broken 1180’s lows and formed another hammer pattern. In short-term perspective rally could continue and it will be interesting what we will get around MPP and 1200-1210 area. Existence of untouched 1.27 butterfly target is a cloud on horizon of possible upside action. Now culmination has come on weekly chart. The point is, although on Friday market has shown growth, but still it stands inside of normal retracement range and gold has not exceed 1210 area when retracement could be treated a bit overextended. At the same time CFTC shows splash in bullish activity.
That’s why we will be watching over MACDP around MPP on coming week, because gold could form bearish grabber here. If it will fail – then definitely something is changing in long-term sentiment, while if market will confirm it and it will start to work then nothing will be lost yet for bears...

Daily
Alpari UK shows a bit curious chart with missing of 2-3 candles... Anyway this is not a big problem for our analysis right now. Despite on recent rally up market has not broken through major resistance. Now it stands and completion point of harmonic swing, daily overbought and Fib resistance. Thus, we have DiNapoli bearish “Stretch pattern”. It means that this is not good time for taking long position right now if you would like to do it. Stretch probably will not cancel possibility of bullish action, but it just warns you “don’t take long right now, wait for retracement”.

4-hour
Since market is forming butterfly here, it is logical to suggest that if any retracement will happen, it will happen probably after market will reach 1210 area. Daily Stretch pattern could lead market at least to strong support area – 1181-1188. It includes former tops, WPS1 and K-support area. So if you really would like to take long position, but do not want to struggle with Stretch – think about this level.
Still, we do not sure yet, do we really have to enter long already. CFTC data looks pretty, but technically market has not shown yet drastical changes that we would like to see as confirmation of bullish strength.

Conclusion:
CFTC data looks impressive and from time to time market tries to challenge resistance. But major event still yet to happens – breakout of 1210 area or failure. In long term perpective we will be watching for bearish grabber on weekly chart. While in short-term perspective – week probably will start from some retracement due bearish Stretch on daily.

 

[Sive Morten]

Good morning,


Reuters reports Gold steadied below $1,200 an ounce on Tuesday after small losses in the previous session, while traders eyed the dollar and an upcoming Swiss referendum on central bank gold reserves for more trading cues.

The Nov. 30 vote is aimed at preventing the Swiss National Bank from offloading its gold holdings and obliging it to hold at least 20 percent of its assets in gold, compared with 8 percent last month.

Markets believe a 'yes' vote could boost gold prices, which fell to a 4-1/2-year low earlier this month, though the most-recent opinion poll showed that support among Swiss voters for the initiative has slipped to 38 percent.

"The impact of a 'yes' vote could quickly translate into prices and take gold as much as $50 higher," said HSBC analyst James Steel, adding that its central case was that the referendum will not pass.

"The bulk of opinion in the market appears to favour a 'no' vote and although a rejection of the provision by voters would not be surprise, it could deal a modest psychological blow to the market and help reaffirm the bear trend in prices, but is unlikely to send prices immediately visibly lower."

Traders were awaiting U.S. economic data due later in the day for cues on the strength of the economy and its impact on the dollar.

Robust economic data could hurt gold as it would prompt the U.S. Federal Reserve to raise interest rates sooner than later. Bullion is a non-interest-bearing asset.

A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies, and also dents bullion's appeal as a hedge.


Gold has not shown any impressive action recently. Although CFTC shows bullish changes, but market still can't break through 1210 resistance. Yesterday action was inside one, and right now we have two possible moments to watch for. First one and major one is monthly grabber of cause, but it has not been formed yet. Second - if market will start to coiling around 1210 area and will not turn down - this also will be suspisious and could be a bullish sign. In this case we could suggest that market is preparing upside breakout:

Shortly speaking market needs some driving factor, that could push market in one or other direction. May be this will be Swiss voting, may be something else...
On 4-hour chart market is forming butterfly "Sell" with 1.27 point right around WPR1 and 1212 level. Also here price action reminds some bullish pressure. Trend shifts bearish but price creeps and creeps higher. This makes us think that we still could get another leg up:

On hourly chart we could take closer look at it. Thus, here we could find even 2 butterflies with the same 1.27 level and both of them stand in bearish rising wedge. Thus, looks like culmination is close. First move up to 1210-1212 and testing of WPR1 and then breakout direction will show us what bet we have to make..

 

[Sive Morten]

Gold Daily Update Wed 26, November 2014

Good morning,

Reuters reports Gold struggled to build on overnight gains on Wednesday as equities rose on optimism over the U.S. economy, while traders nervously awaited cues from the dollar and a Swiss referendum on central bank gold reserves.

The gold market has been in a tight range this week, lacking direction ahead of the U.S. Thanksgiving holiday on Thursday and the Swiss referendum on Sunday.

The metal has seen quiet trading since recovering from a four-and-a-half year low earlier this month, though not everyone believes the worst is over.

Societe Generale cut its forecast for gold and said prices would average $1,150 an ounce in the fourth quarter and $1,025 next year.

"We expect the gold price to continue to fall as the dollar strengthens further and the gold bear market continues, leading to the metal averaging just $862 between 2016 and 2019," Societe Generale analyst Robin Bhar said in a note.

"We continue to expect investment demand for gold to wane, as the markets believe there are better alternatives, and this will be exacerbated when the U.S. begins to raise interest rates next year, due to better economic conditions and low inflation."

Spot gold was little changed at $1,200 an ounce by 0718 GMT, after gaining 0.3 percent in the previous session. Asian stocks edged up after upbeat U.S. economic growth data calmed investor anxiety over a deteriorating global outlook.

The U.S. government upgraded its reading on third quarter gross domestic product to 3.9 percent on Tuesday from 3.5 percent reported last month, though the upbeat picture was somewhat marred by other data showing lower consumer confidence and moderation in house price gains.

Recent strong economic data from the United States has bullion investors worried that the Federal Reserve could soon raise rates, hurting gold, a non-interest-bearing asset. A robust economy also dulls gold's safe-haven appeal.

Traders were eyeing more U.S. data due later on Wednesday for cues, while also awaiting a referendum in Switzerland that could result in the central bank purchasing bullion.

The vote is aimed at preventing the Swiss National Bank from offloading its gold holdings and obliging it to hold at least 20 percent of its assets in gold, compared with 8 percent last month. The most-recent opinion poll showed that support among Swiss voters for the initiative has slipped to 38 percent.


As many other markets gold shows mostly flat action recently. On daily chart market has shown inside session and our former analysis is still valid:

That's why currenty we're mostly interested in 4-hour chart. As market is still coiling under solid resistance area around MPP - it could be bullish dynamic pressure when gold could show either breakout or spike up to complete at least minor targets on intraday charts. Right now nearest ones stand at 1210-1212 levels - butterfly, 1.618 AB-CD and WPR1.

On hourly chart we see that market is showing flat exit from our wedge pattern, but 1.27 extensions if inner butterflies have not been reached. And still, 4-hour chart seems most important:

 

[Sive Morten]

Gold Daily Update Thu 27, November 2014

Good morning,
Happy Thanksgiving everybody!


Reuters reports Gold dipped for a second session on Thursday, holding below $1,200 an ounce, as outflows resumed from the top bullion exchange-traded fund and traders remained cautious before an upcoming Swiss referendum on central bank bullion assets.

A weaker dollar after lacklustre U.S. data, however, checked losses in gold which is seen as a safe-haven asset.

"Gold is stuck on either side of $1,200 with a break of $1,190 or $1,205 needed for the next leg in either direction," said Jason Cerisola, metals dealer at MKS Group.

"(Precious) metals are likely to remain quiet ahead of the U.S. holiday and the Swiss referendum on the weekend," he said.

U.S. consumer spending rose modestly in October and a measure of business spending plans fell for a second straight month, suggesting some slowing in the pace of economic growth. But other data on Wednesday showed consumer confidence approaching a 7-1/2-year high in November.

Outflows from SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, resumed after a week, dragging on prices of the precious metal. Holdings fell 0.29 percent to 718.82 tonnes on Wednesday - near six-year lows.

Traders are now waiting for Sunday's Swiss vote on central bank gold reserves for more trading cues.

The vote is aimed at preventing the Swiss National Bank from offloading its gold holdings and obliging it to hold at least 20 percent of its assets in gold, compared with 8 percent last month. The most-recent opinion poll showed support among Swiss voters for the initiative had slipped to 38 percent.

If a 'yes' vote is passed, the Swiss central bank would have to buy about 1,500 tonnes of gold over the next few years, analysts say, boosting bullion prices.


Gold stands quiet at the eve of the Holiday and major action we probably will get only on next week. Be prepared for possible solid gap as Swiss voting will take place on Sunday.
The fact that SDPR fund continues to loose inventories and polls on possible "no" on voting tells that gap probably could happen down. Still, we can't exclude some spike up as gold could grab stops before reversal.
On daily chart market still coiling around resistance forming day by day inside sessions:

On 4-hour chart our expectations stand the same. Market stands very tight around WPP. Signs of bullish dynamic pressure still stand around, and if even downward reversal will happen - we still expect some spike for stop grabbing before reversal. This spike probably could reach 1214 around WPR1 and 1.27 extension of butterfly "sell" pattern:

 

[Sive Morten]

Gold Daily Update Fri 28, November 2014

Good morning,

According to Reuters news Gold extended losses into a third session on Friday, dropping to a one-week low, on expectations that plunging oil prices could sap inflationary pressure, curbing the metal's appeal as a hedge.

Oil hit four-year lows around $70 a barrel on Thursday, as OPEC resisted the temptation to cut back production following the more than 30 percent plunge in prices since June.

The drop in oil prices, along with the resulting strength in the dollar, hurt gold which is often seen as a hedge.

"Precious metals declined as lower oil prices prompted concerns about deflation," said ANZ analyst Victor Thianpiriya.

"Gold sympathized with oil but I think there is a limit to the downward slide and we might hold $1,180 for now," said a trader in Tokyo, adding that the market was also eyeing the Swiss vote on central bank reserves on Sunday.

The vote is aimed at preventing the Swiss National Bank from offloading its gold holdings and obliging it to hold at least 20 percent of its assets in gold, compared with 8 percent last month.

The most-recent opinion poll showed support among Swiss voters for the initiative had slipped to 38 percent.

A surprise 'yes' vote, however, could prompt the Swiss central bank to buy about 1,500 tonnes of gold over the next few years, boosting bullion prices, analysts say.

"Most people in the market are already expecting a 'no' in the Swiss vote but it might still cause some sell-off. A 'yes' vote is unlikely but if it happens, we can see a jump in prices," the Tokyo-based trader said.


Although gold has shown shy pullback out from 1208 resistance area - it will be correct to say that gold still stands under resistance.

Despite some plunge has happened on OPEC statement - major event still stand around SNB on 30th of November. Negative result could make a psychological effect and lead to further gold prices drop.
But right now market still stands around pivot levels. Thus, butterfly has reached precisely WPS1 on 4-hour chart:

Still guys, as we again do not see real purchases, chances on significant breakout are minimal. Only if SNB will get positive result on referendum - this could lead to upside breakout. Currently we do not see any other factors of such strength that could significantly impact market...

 

[Agent Orange]

Hi Sive

I really appreciate your analysis.....but could you please fix your microphone. The sound recording is very bad