Gold GOLD PRO WEEKLY, October 05 - 09, 2020

Sive Morten

Special Consultant to the FPA
Messages
13,911
Fundamentals

This week the event has happened that brings absolutely new vector to financial markets - the positive test of D. Trump. It could make either light effect or hard one, depending on the way of recovery of the US leader. But despite how it will go - in nearest few weeks hardly gold turns to downside continuation as investors' fear will keep gold on a surface. Although other factors supportive for deeper retracement - new liquidity measures have not been provided, rumors on positive shift in Brexit negotiations and so-so US statistics, but their effect probably will be muted until clarity on D. Trump's health.

British Prime Minister Boris Johnson and the head of the EU’s executive, Ursula von der Leyen, agreed in a phone call on Saturday to step up Brexit talks to close “significant gaps” barring a new trade partnership. The two sides have said this week’s round of negotiations aimed at getting a new, post-Brexit trade agreement from 2021 made some progress but not yielded a breakthrough.

The EU says a deal must be sealed by the end of the month - or in the first days of November at the very latest - to leave enough time for ratification in the bloc by the end of the year. Johnson and von der Leyen discussed the next steps in their call on Saturday.

“They agreed on the importance of finding an agreement, if at all possible, as a strong basis for a strategic EU-UK relationship in future,” they said in a joint statement.
Progress had been made in recent weeks but ... significant gaps remained, notably but not only in the areas of fisheries, the level playing field, and governance,” it added.


The two leaders instructed their Brexit negotiators, Michel Barnier and David Frost, “to work intensively in order to try to bridge those gaps”.

Johnson said earlier on Saturday the UK continued to push for a Canada-style deal with the EU, but was also ready to sever current close-knit trade ties and default to general World Trade Organization rules, which include quotas and tariffs.

“I think there’s a good deal to be done,” he said. “There’s a big opportunity for both sides to do well.”

More trade talks are due in London next week and in Brussels the following week before the 27 national EU leaders meet on Oct. 15-16 to assess progress. London has also said it wants clarity by Oct. 15 on whether a deal is possible or not. An estimated trillion euros worth of annual trade would be at stake if they fail to get an agreement. The EU says it will not implement any new deal if London undermines their earlier Brexit divorce treaty with its draft Internal Market Bill.

With time running out, controversy over the new domestic UK law backed by Johnson has cast fresh doubt on whether a deal was possible. German Chancellor Angela Merkel, however, said on Friday she was still “optimistic”.

The EU believes the British government is split between hawks like Johnson’s aide Dominic Cummings, the architect of the 2016 “Leave” campaign, and those Brussels sees as more moderate like Frost on whether to push for a deal or leave without one. British foreign minister Dominic Raab, seen as part of the former faction, said separately on Saturday that the EU no longer had the power to treat Britain poorly.

“Yes, we want a free trade deal with the EU, but any deal must be fair. The days of being held over a barrel by Brussels are long gone,” Raab told the Conservative Party’s annual conference.

Gold edged down on Wednesday, as a chaotic first U.S. presidential debate drove investors to the safety of the dollar and raised concerns over the next stimulus bill, leading the metal towards its worst month in nearly four years. The first U.S. presidential debate between President Donald Trump and Democratic rival Joe Biden turned investors cautious and drove them to seek refuge in the dollar, reducing gold’s appeal for other currency holders.

“It seems like after last night’s debate, a wedge might have formed between the two parties again and a possibility for any kind of stimulus may have diminished,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago. “Whenever the dollar index rallies, we see a deflationary environment and that weighs on not only the prices of gold but also silver and a lot of other commodities,” Streible added.

Despite the recent pullback, most analysts see an upward trajectory for gold in the medium to long term. The metal is on track for its eighth straight quarterly gain.

“The good thing for gold is, with more uncertainty, more people want to own gold, and in addition to that, it looks like some of the policies may continue, like the low and negative interest rates across the globe,” Michael Matousek, head trader at U.S. Global Investors said.

Investors were eyeing talks between U.S. House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin to reach a deal on the long-awaited COVID-19 relief bill.

"If there's a deal, chances are stimulus will reignite the idea that inflation will move towards the Federal Reserve's target," which along with the interest rate suppression policy by the Fed is a very good catalyst for gold, said Bart Melek, head of commodity strategies at TD Securities. He said the breakthrough of the psychological barrier of the $1,900 level could drive the market technically a little higher.

Meanwhile, U.S. manufacturing activity unexpectedly slowed in September as new orders retreated, while U.S. weekly jobless claims drifted lower but remained at recession levels, further bolstering gold's safe-haven appeal.

"The main driver (for gold) is investment money and reaction to economic headlines, geopolitical headlines and the dollar," said David Govett, chief executive of Govett Precious Metals and a former trader. "A lot of those things are factored in, but it's going to get worse before it gets better, and because of that gold is going to benefit and move back to $2,000."

Gold clung to the $1,900 level in choppy trading on Friday, with gains capped by a firm dollar, but bullion remained headed for its biggest weekly rise in eight weeks as U.S. President Donald Trump's COVID-19 positive test hurt risk sentiment.

"The election is 33 days away, there's so much unknown -- will it be a mild case, how will he react to it? So we have flight to safety keeping gold afloat," said Bob Haberkorn, senior market strategist at RJO Futures. "Traders seem cautious because they're concerned about equity markets selling off. Gold can move back up "if the U.S. congress passes a stimulus bill, that seems to be what this market is hanging on to for now," Haberkorn added.

Gold had risen to an over one-week high after Trump said in a tweet that he and his wife Melania had tested positive for the coronavirus, hammering Wall Street.
However the White House reassured Americans that the President was "not incapacitated". Investors also took stock of the last monthly employment report before the Nov. 3 presidential election, which showed U.S. job growth slowed more than expected in September.

"Gold is likely to remain range-bound in the short term. The market will wait through the weekend and look for news," said Tai Wong, head of base and precious metals derivatives trading at BMO.

President Donald Trump told Americans from his hospital room that the next few days will be the “real test” of his treatment for COVID-19, after a series of contradictory messages from the White House caused widespread confusion about his condition.

Over the next period of a few days, I guess that’s the real test, so we’ll be seeing what happens over those next couple of days,” Trump said into the camera, seated in front of an American flag and wearing a jacket and open-necked shirt.

A White House team of doctors said on Saturday morning that Trump’s condition was improving and that he was already talking about returning to the White House. One doctor said Trump told them, “I feel like I could walk out of here today.”

Within minutes, White House chief of staff Mark Meadows gave reporters a less rosy assessment, telling them, “The president’s vitals over the last 24 hours were very concerning and the next 48 hours will be critical in terms of his care. We’re still not on a clear path to a full recovery.”

COT Report

CFTC data this week shows not ordinary report. Investors were closing everything. The open interest has dropped more than 100K contracts. Positions were closing by everybody - speculators, hedgers, longs, shorts, even spread positions were closed. Market has lost approximately 10% of its open interest just in single week.

1601802783200.png


Our suggestion that it was run for cash action and investors just out their margins from the fire of possible uncertainty. In fact this was the demand for US Dollar, but as investors equally have closed longs and shorts - gold remains at the same levels. It seems that in current environment gold mostly is treated as the source of cash - the same as stock market. Money flows to yen, dollar and US Bonds.

At the same time SPDR statics that long-term investors hold positions intact. This week SPDR reserves has reached the new top:
1601803078495.png


As major risk stands in relation to not only global finance and politics, but to US Dollar itself, as it is national US currency, it makes reasonable to search protection against worst scenario and this should support gold price in nearest few weeks. This is the reason why we think that gold downside retracement continuation should be postponed. For us it makes no difference as we anyway intend to wait for predefined entry levels. But for short-term traders it could mean absolutely different environment.

Technicals
Monthly


October performance is very shy so, it makes no impact on overall picture. With the new fundamental background, we could say only that if deeper retracement is not cancelled yet totally, but probably will be postponed for few weeks at least. Thus, it is more probable to see flat or slowly rising October performance.

Here, on monthly chart, the area around 1700 is still interesting, but it is difficult to say when gold could reach it. Price has shown a kind of W&R of doji lows and returned back inside its range.
gold_m_05_10_20.png


Weekly

Trend here stands bearish. In general we have DiNapoli "Stretch" pattern because of combination of oversold level and 1836 Fib support, that suggests upside reaction that already has started - we talked about it last week. On coming week, in turn, It seems that on coming week we have to resolve tactical tasks - to keep an eye on upside action trying to estimate its potential target and signs of reversal, if any will be formed.

gold_w_05_10_20.png


Daily

Here, on daily I plot the wide K-resistance area of 1935-1951, but if you add more Fib levels from reaction points that I've marked by blue circles, you will get more Fib levels around 1935 level. In general this area simultaneously is major resistance and indicator. As resistance it is most probable target of upside retracement. So, to keep existing downside tendency, it is preferable for the gold to stay below this area. Otherwise, recent black candle on weekly chart will be erased and this fact significantly increases odds of upward continuation. Any acceleration through broken trend line also will be not in favor of the bears.

Currently price stands far from it and overall price action is gradual and choppy, but situation could change by possible news on Monday. At current moment we think that it is too early to go short. As we warned you during last week - we need better and more reliable bearish context to step in by two reasons. First is, technically we still have weekly bullish directional pattern and no signs of its ending, second- fundamental reasons suggests that upward action could continue.
gold_d_05_10_20.png


Intraday

On 4H chart market is taking the first test of its bullish ambitions, meeting intraday K-resistance area, which is also strong because it coincides with natural resistance level. If market breaks this level - the road to 1950 will be open, as price freely will be able to fluctuate inside the former triangle range.
gold_4h_05_10_20.png


The only pattern that we could recognize on 1H chart is a kind of reverse H&S that we could use to control the situation. Scalp trading is also not forbidden of course. It seems that 1882 will be the first level that worthy of our attention. It should hold, to keep bullish 1950 scenario valid. Gold failure to stay above it will increase chances on turning back to bearish scenario.
gold_1h_05_10_20.png


Thus, if you trade intraday - plan your trades accordingly. Bulls could consider 1882 in case of gradual action to the level, while bears could think about either Sell on breakout of this level down or 1950 level where potential H&S target stands.
 
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Sive Morten

Special Consultant to the FPA
Messages
13,911
Greetings everybody,

On gold market we do not have significant changes by far. Market mostly is stumble around resistance level and in two words speaking - we're still following to the pattern that we've specified in weekend. On daily chart picture mostly stands the same:
gold_d_06_10_20.png


On 4H chart price is struggling with big resistance cluster. Despite that we do not have any meaningful upside action, we also do not see any signs of bullish capitulation. Market is struggling and this is good sign for the bulls. At least, here we definitely could say that currently it is not time for any bearish position yet:
gold_4h_06_10_20.png


The same we could say about 1 H chart. The first part of our trading plan is done - yesterday Gold has dropped to predefined level and formed so-called "right shoulder". Our next step is consider upside AB=CD that should lead us to 1955 area. So, if you have stepped in yesterday - move stops to breakeven. For bears - either wait for this H&S pattern failure and drop back below 1880 again or completion of the pattern around 1950 area.
gold_1h_06_10_20.png
 

Sive Morten

Special Consultant to the FPA
Messages
13,911
Greetings everybody,

Recently we've got the same type of action as on GBP - daily bearish reversal candle. Not occasionally yesterday we've said that it would be better to not take any new long positions by far. Our Monday position is closed at breakeven.
Appearing of reversal action suggests that some continuation should follow soon. This puts under question pattern that we have on intraday chart:
gold_d_07_10_20.png


At first glance, market just returns back to the right arm's bottom and H&S is still could work. But here we see few negative moments. Daily reversal is the one, second - market shows too slow upward action and too fast drop. This is bad sign for bullish reversal pattern:
gold_4h_07_10_20.png


As a result, if you still want to buy - focus on possible Double Bottom pattern. 1H AB-CD target stands precisely around the 1.1850 lows. In this case daily reversal candle also will be satisfied. This is the earliest bullish setup that could come. Bears probably could consider downside continuation with AB-CD pattern...
gold_1h_07_10_20.png
 

Sive Morten

Special Consultant to the FPA
Messages
13,911
Morning everybody,

So, in general everything stands well and gold accurately follows the scenario that we've specified yesterday. As we've explained reasons why we more expect downside action rather than sharp reversal, today we should try to catch the reversal point.
gold_d_08_10_20.png


Despite that Gold still keeps the shape of H&S pattern on 4H chart, we think that chances on upside continuation are phantom. Besides, now it is clearly visible the shape of "222" Sell pattern here. Also, take a look - reversal could happen even earlier, if market completes the grabber here and it starts to work:
gold_4h_08_10_20.png


Still, if gold will complete upside AB=CD - we will get nice sell chance around 1902-1904 area - Agreement resistance and "222" Sell pattern. Potential target, as we mentioned it previously - 1850 bottom again, where is OP target stands:
gold_1h_08_10_20.png
 

Sive Morten

Special Consultant to the FPA
Messages
13,911
Greetings everybody,

On Gold market we see the breakout in short-term context as situation is changing there and we have to return back to our previous scenario with AB=CD pattern to 1950 area. Our "222" Sell setup was also nice, given us ~20$ drop, but it has not led to bearish reversal and downside continuation as we've suggested. And this makes us to change short-term view, returning back to our previous idea with higher AB=CD retracement into 1950 area:
gold_d_09_10_20.png


Although odds have suggested opposite but gold somehow has found the power to reverse situation and former H&S pattern is working again. Price returns back to K-resistance area and we again watch for AB=CD pattern here. This time chances to break the level are higher:
gold_4h_09_10_20.png


On 1H chart our "222" Sell is worked but it has not become the downside reversal and continuation of daily reversal bar:
gold_1h_09_10_20.png


Taking in consideration the new inputs - currently we do not consider any new short positions and have to wait when market will reach 1950 Agreement resistance area.
 
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