Gold GOLD PRO WEEKLY, October 01-05, 2018

Sive Morten

Special Consultant to the FPA
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Fundamentals

Gold mostly was driven by short-term economical factors last week and the major one was Fed statement of course.
As Reuters reports - Gold inched higher but was on track for its longest monthly losing streak since January 1997 as the U.S. dollar firmed against the euro after Italy’s budget jitters threatened the European currency.
Bullion is down more than 0.5 percent in September, its sixth straight monthly loss.

Traders said weaker-than-expected U.S. core personal consumption expenditures (PCE) data, a measure of inflation, sparked bargain hunting in gold.

“The disappointing core PCE raises questions about the future of inflation (in the U.S.), said Tyler Richey, co-editor of the Sevens Report. “At this point, inflation numbers are helping gold claw back from the post-Fed close.”

The U.S. Federal Reserve raised interest rates on Wednesday and said it planned four more increases by the end of 2019 and another in 2020. Spot gold prices later closed down 0.6 percent to $1,194.06 per ounce, their lowest since Sept. 11.

The greenback climbed to a two-week peak on Friday versus a basket of major currencies, boosted by gains against the euro amid concerns about the Italian budget and a U.S. interest rate outlook.

“(The dollar’s rise) was more of a result of the euro weakness than real dollar strength,” Richey added.

Still, other U.S. data released on Friday supported the view of an economy that is on a stable growth path. U.S. durable goods rose 4.5 percent in August, rebounding from a revised 1.2 percent drop the month before.

Gold is down more than 13 percent from an April high, largely because of the stronger dollar, which has been boosted by a vibrant U.S. economy and fears of a global trade war. Investors have bought the greenback instead of gold as a safe investment.


In longer-term perspective we keep valid our bearish view on gold market, at least for 2018-2019 years. As we've mentioned yesterday in EUR report, future Fed rate policy is not priced in yet. It means that as Fed will follow it step by step, this should provide long-lasted gradual pressure on gold market within couple of years.

In 2020 some analysts, say Fathom consulting, expect starting of global crisis and economy recession. It should start in US but, as it usually happens, the whole world will be involved. That corresponds to technical picture as well, as gold is forming large bullish reversal pattern. Currently only professionals could find some early hidden signs of coming disaster in minor statistics data and their own calculations, as it Fathom does. Big indicators do not show yet any signs. But, since we have access to Fathom analysis, we have to stay on guard of any event that will confirm this idea.

COT Report

Here we also do not have big changes yet. As we think, gold now stands in retracement, the pause in long-term bearish action. And for any pauses the slowdown in sentiment changes is a common thing.
Now we see that open interest is dropping while net speculative position doesn't change since mid August. This combination tells that traders close positions approximately in equal value as longs as shorts.
The one thing that is not typical is the time. Now, guys, Gold stands in seasonal bullish trend. It suggests not only additional positive component, but growing of activity either. Somehow we do not see it on the market:

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SPDR fund statistics doesn't show any positive shifts as well. Once gold has turned to retracement, withdrawal of assets has slowed a bit either, but no inflows yet.
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That's being said, sentiment analysis mostly supports idea of retracement on gold market. Because if it would be real bullish reversal, we would see different traders activity.

Technical
Monthly


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.

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 as revolutions, 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.

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.

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.

So, that's is our long-term view. There is softer scenario of "222" Buy pattern instead of butterfly exists, but which one will happen in reality is impossible to say right now and we will keep an eye on both.
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Weekly

The reason why we choose gold again for second weekly report is a situation on weekly chart. Last week we've mentioned bearish grabber as major technical driving pattern. Today we have another important detail that could shed some light on coming action on gold market.

Weekly price action mostly stands inside the range of long August candle, when gold has hit weekly oversold. Since then we watch for patterns here and upside bounce to at least 3/8 resistance area of 1238$, which seems normal pullback in such conditions.

Despite our long term bearish trend on gold, it can't show straight down action without any pauses. And we think that one of these stops we have right now. Although the scale of this "pause" looks impressive 50-70$ per contract bounce, on weekly chart this is just 3/8 pullback, which seems normal when market hits oversold and YPS1 areas. Thus, on weekly we still watch for our directional pattern, based on the thrust down.

Weekly time frame is the one that gives us the vision for few weeks. In a longer-term view we still have large AB=CD pattern with OP around 1113 area. Sooner or later but probably it should be reached. Just because gold has dropped easily through 1215 major support and has not stopped at 1180 YPS1 but collapsed right to 1160. So, now price action stands between COP and OP target. Usually in such placement, price gravitates to OP, because in fact, it has no strong support lower, its a free space. And the only thing that keeps gold from disaster is Oversold condition, which important for us in short-term view.

In shorter-term we've got a bearish grabber, but it is completed, guys. Do you see this small low to the left from it? Yes, it was minimal target of this pattern and this lows have been taking out on Thu action.

And finally - take a look how price relates to 3x3 DMA. We've got barely close above 3x3 two weeks ago. This week we have close below. It means that major DiNapoli pattern that we will watch for here is DRPO "Buy". Now we need close above 3x3 DMA to get a confirmation.

The fact that grabber has been completed doesn't mean that gold can't go slightly lower, it could. I would say, that I want to see gold slightly lower, because now we have too big difference between DRPO lows.
Thus, 2nd close above 3x3 could happen not on coming week but later. But this doesn't affect on DRPO idea. Whenever it will happen - it will be DRPO.
gold_w_01_10_18.png


Daily

On daily chart gold provides short-term bullish setup - "222" Buy pattern at major 5/8 support. Still this setup
has some degree of freedom. For example, upside reaction could be just minor bounce, or market could drop further and this still will be "222".

Still it give good setup for intraday trading and tells daily traders that it is not good point for short entry:
gold_d_01_10_18.png


Intraday

At the same time, existence of "222" on daily doesn't make our task easier. Indeed - 4H chart shows that market already has reached 3/8 Fib resistance and re-tested of broken trend line. It means that "222" already has completed its minimal target and we do not have any other patterns that 100% suggest upside continuation.

Second - with our major AB-CD pattern here, we see fast collapse to OP, which increases chances on downside continuation. XOP stands at 1170 area and it is very important for us. If gold will drop to it, our weekly DRPO will look more attractive.

So, what could we do in current circumstances. Scalp traders could watch for bullish continuation patterns on hourly and lower time frames, based on upside leg from 1180 lows. If we will get "222" Buy or something, this could mean upside continuation and AB=CD upside retracement somewhere to 1200 area maybe.

Others need to watch for bearish patterns. Here, on 4H chart it could be "222" Sell somewhere from 1200. In this case short position could be taken with 1170 XOP target. As you can see now we're turning to tactic trading at lower scale.
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Conclusion

In long-term analysis we see thrilling agreement of fundamental and technical pictures, which should be interesting to watch within few years.

Shorter-term setup shows that gold stands in contraction mode. It makes us deal mostly with tactical intraday setups, while gold is prepares major patterns and big moves.


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,

Today, on gold market we have more objects for discussion, especially on intraday chart. On daily chart situation barely has changed - we see the same upside reaction on major 5/8 Fib support and Agreement area by "222" Buy pattern.
Still, as we've said before - minimal 30% target of this pattern already has been hit.
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On intraday charts we agreed to watch for clear patterns and first one will be "222" Sell probably at 4H:
gold_4h_02_10_18.png


Detailed view of this pattern on 1H shows that CD leg could be finalized by butterfly "Sell pattern around 1197 area. So this should be first area where short position could be taken. Next level is 1200 - 1.618 butterfly target. It will be useful, if gold will show just minor respect of 1.27 and proceed higher.
In general we're looking for 4H XOP target around 1170 sometime within this or next week.
gold_1h_02_10_18.png
 
Greetings everybody,

Although we've expected upside action yesterday, but real reaction have exceeded even most brave expectations. The major reason for that was pointed Italy debt concern:
“Gold has jumped a little bit on populist sentiments from euro zone, Italy deficit concerns, and fall in equities,” said Benjamin Lu, commodities analyst, Phillip Futures.

“Overall, our assessment is it’s a knee-jerk reaction. We are seeing a little bit of selling and buying activities supported by equity markets ... But it’s still a dollar story. Gold prices are still very susceptible to the dollar.”


At the same time, investors are sceptic on perspectives of this rally. But we need to keep in mind that weekly DRPO "Buy" stands on the table and if week will close somewhere around - we will get it.

From the opposite side we've got bearish grabber on daily now, although it is a weaker kind:
gold_d_03_10_18.png


On 4H chart, theoretically we have "222" Sell. Market has not stopped at OP target but followed right to XOP. Here I ask you a question - would like to sell here? I'm pass. Too fast action that we've not expected. When market behaves different compares to expectations this is either occasional event or something is changed. Anyway it is better to wait a see what will happen.
gold_4h_03_10_18.png


On 1H chart our focus will be at 1196 K-support area, just because this is weekly 3x3 DMA level. Depending on weekly close we either will get DRPO or not.
gold_1h_03_10_18.png
 
Greetings everybody,

Gold, as other markets waits for tomorrow NFP. As we've said yesterday rally looks a bit artificial and too strong in relation to the factor that has triggered it. On daily chart our bearish grabber is still valid and also we've got tweezers top as a result of last session. These bearish patterns do not look scaring, but still with dollar supportive background I do not want go long too much.
gold_d_04_10_18.png


On 4H chart gold still stands in wide consolidation and keeps XOP target at 1170 valid. To change the direction, market has to break it up and move above 1215 highs:
gold_4h_04_10_18.png


On 1H chart gold has reached crucial support area that we've mentioned yesterday. This is K-support and weekly 3x3 DMA value. If gold will break it down, chances on action to 1170 will increase significantly. But anyway, it will be due NFP.
gold_1h_04_10_18.png


All in all, gold stands at equilibrium by far and we need breakout in one or another area to make a bet. Currently we do not see any attractive setups for trading.
 
Greetings everybody,

On gold market we have almost the same story as on EUR. Gold stands at important support and depending on what we will see today - scenarios could be different next week.

On daily chart we do not have something really new. Some bearish pressure exists around 1210 area, as you can see long shadow on yesterday's session. Our tweezers and bearish grabber are still valid, and in general statistics stands in favor of USD today.
gold_d_05_10_18.png


On 4H market has re-tested our channel border and another bearish grabber has been formed. Channel is important, because we need to get upisde breakout to talk about short-term bullish sentiment again here.
gold_4h_05_10_18.png


Hourly picture on gold market mostly the same as on EUR. Here we have AB=CD (and "222" Buy") with 1194 target and butterfly with 1193 extension. Both targets stand close to crucial K-support area. If something wrong will be with NFP indeed, these patterns will trigger upside reversal here. So, if you're planning to bet on NFP release on long side - think about 1194 area.

Failure and collapse through this level today will let us talk about deeper downside action next week.
gold_1h_05_10_18.png
 
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