GOLD PRO WEEKLY, October 10-14, 2016

[Sive Morten]

Fundamentals

(Reuters) Gold fell for the ninth straight session on Friday, briefly tapping a four-month low as computer-generated selling offset support from weak U.S. payrolls data, but bullion was on track for its biggest weekly
drop in more than three years.

A crash in the pound briefly sent gold priced in sterling to a three-month high. Spot gold was down 0.09 percent at $1,252.71 an ounce by 3:11 p.m. EDT (1911 GMT), after falling 1 percent to $1,241.20, the lowest since June 8. It was on track to close the week down 4.8 percent, its biggest drop since June 2013. U.S. gold futures for December delivery settled down 0.1 percent at $1,251.90.

Spot gold's fall below the 200-day moving average on Thursday was "not a good sign," said Bill O'Neill, co-founder of LOGIC Advisors. "There was a lot of algorithm and computer-generated trading, and that's really was caused all this," he said about the sudden drop to the session low.

Gold prices got an initial boost from news that U.S. employment growth slowed for the third straight month in
September and that the jobless rate rose. The slowdown was not expected to prevent the Federal Reserve from raising interest rates later this year, though it curbed speculation about a move as early as next month.
The dollar index is still expected to post its biggest weekly rise since June this week, based on Monday's
upbeat U.S. jobs and manufacturing report
.
Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced. "The majority of the move lower (occurred) on Tuesday ... following hawkish comments by Fed officials ... and a subsequent break of the psychologically and technically important $1,300 level," Goldman Sachs said in a note.

"With prices having corrected sharply, we are broadly neutral on the outlook for gold through year-end, with our forecast of the probability of U.S. rate hikes through year-end roughly in line with market expectations."
Outperforming spot, sterling-denominated gold was at 1,007.53 pounds an ounce, up 1.3 percent, after surging 6.5 percent to 1,059.06 pounds, its highest since mid-July. The pound plunged to a 31-year low in a matter of minutes overnight in what traders said was a "flash crash."

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund fell 0.03 percent to 947.63 tonnes on Wednesday.

COT Report
CFTC data shows numbers on 4th of October, before miserable drop has happened. But even before the drop bearish changes have started to form. take a look that net long speculative position decreased as well as open interest. It means that some longs were closed. I wonder what we will see on Tue next week, when CFTC data will incude recent drop.

Technicals
Monthly

Well, as gold is returning back to strong action, we continue to make video researches on Gold market. Monthly picture currently supports our suggestion on deep retracement, this is just how markets work. Sooner or later but this retracement should happen and now it stands underway.

Technically recent upward action started in Dec 2015 is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Probably it should happen but this potential downward action has a great chance to become just a retracement. Overall political and financial situation in the world probably will not give a chance to relax. Thus, we have a positive long-term view on gold market.

As market slightly has moved above YPR1 and our K-resistance area, something is starting to form here, I mean pattern by which long-term global trend could change on gold. Price has formed nice bearish engulfing right around this area and now gold is following to its signal

Take a careful look at the picture - could you recognize here possible reverse H&S pattern? Besides the shape itself, some features here that in general typical for H&S. For example, relation between head and shoulders - 1.618. Butterfly... very often first part of H&S takes the shape of butterfly pattern...

Finally take a look at action on downward slope and upward one of the head - last move down was slower than current move up. All these moments point on possible H&S pattern here.

If we really will get it - then we could make an assumption on possible depth of retracement. Now the bottom of shoulder stands approximately around 1160 area... Currently we could only gamble what event could push gold as low as 1160 again, but probably something will happen.

Our suggestion on initial drop was correct - growing psychological pressure among managers of Hedge and Mutual funds, good performance of gold in 2016, coming rate hike in Dec and overloading long positions forced traders to fix profit as soon as gold has dropped below 1300 area.

That's being said, taking together technical, fundamental and sentiment picture we suggest further drop on gold, at least to 1160-1180 area. Second step is watch for validity of H&S pattern. If it really will work (and we think that it should), then we expect new long-term bullish trend on gold market that should lead to new highs on 2000$+ levels. It means that 1160-1200 area should be treated as strategical point for long entry.

Weekly

Here we've got opposite breakout of the flag that we've talked about. On weekly chart we have two different scenarios. In short-term scenario we expect that some upward bounce should happen, at least if market is not dispeared totally. Major reason - weekly oversold at K-support area. This is rather nice stimulus for upward bounce. Actually we have DiNapoli bullish "Stretch" pattern.

Second scenario - is a reversal bearish pattern. Here, guys, we could get H&S. Head stands precisely at 1.618 extension of potential left shoulder. So, we think that this is one of the patterns that we have to keep an eye on. To be formed, market needs continue dropping (after minor bounce) somewhere to 1200 area and then start to form right shoulder. Target of this direct H&S, as AB=CD pattern leads us directly to the bottom of right shoulder on monthly chart... Overall, this combination looks realy interesting.

But first - upward bounce. This situtation leads us to conclusion - do not take short position, wait for upward bounce. Trading long is possible but more risky as you will go against major tendency, dealing with the "Stretch" pattern. We do not recomment to go long. But if you will decide to do this - try to get more confirmation, some bullish patterns on your back, use nearest targets etc...

Daily

Trend is bearish here, market also at oversold. As we've estimated already that gold stands at strong support, here we should discuss probably, upside potential of retracement. Personally, I like area around 1285-1292$ range. This is K-resistance on daily chart and former flag border. Re-testing of this line seems logical and typical action for gold market. Breaking K-area and moving above WPR1 will be negative sign for bears and will look like irrational action.

Our task will become simplier, if gold will form, say B&B "Sell" pattern. Recent thrust down is suitable for DRPO or B&B. After this retracement it is logical to suggest 2nd wave of dropping to 1200 area... B&B could become very desirable pattern, since we should treat it not as just short-term trade but as chance to take position on medium term perspective:

Hourly
On intraday charts it is still difficult to say what particular pattern could formed that will start upside bounce, since its too few time has passed since drop has stopped. Based on hourly picture, it seems that gold could form some kind of wide "V-shape" reversal with diamond shape in the culmination. May be something else will be formed, but whatever will happen, if you intend to make scalp long trade - get a pattern on your back. Do not trade without it. Because retracement could not come at all... In this case no patterns probably will be formed. So Friday situation could repeat - we expected DRPO "Buy" and retracement. DRPO has not been formed and market has dropped more.
MACD bullish divergence already stands in place:

On 4-hour chart market has also not bad thrust down, so, minor DiNapoli patterns could be formed here. But we're mostly interested with DRPO "Buy" as we expect action to 1290 area...

Read carefully!
Conclusion:
Perspective of 1-3 months looks bearish. We mostly are watching for reverse H&S pattern on monthly chart that should provide us strategical entry point around 1160-1200 level.
Perspective of 1-2 years looks bullish. As H&S pattern will be completed, new bullish trend should start. We expect to see gold on areas above 2000$

In very short-term perspective we will be watching for upside bounce to 1285-1292 area, but we will not trade it, although this is not forbidden for scalp traders. It's major purpose - is to give us level for short entry. As minor bounce will be completed, we expect next stage of bearish action to 1200 area. But this probably will happen on next week...
Read carefully!

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.

 

[BigVB]

Another great report thanks

 

[csc2009]

Indeed, thanks Sive.

 

[fxsmall]

Amazing !!! Thanks Sive

 

[Sive Morten]

Good morning,

(Reuters) Gold prices edged lower on Tuesday after two sessions of gains, with the U.S. dollar strengthening amid speculation the Federal Reserve will raise U.S. interest rates in December.
Spot gold had dropped 0.2 percent to $1,257.06 an ounce by 0810 GMT.

U.S. gold futures fell 0.1 percent at $1,259.10 an ounce. Gold had risen for two consecutive sessions, after first touching a four-month low of $1,241.20 an ounce on Friday. Spot gold ended last week about 4.5 percent lower, its biggest weekly decline since November 2015.

"After the drastic drop, the optimistic mood in gold markets has reduced," said Jiang Shu, chief analyst at Shandong Gold Group. "Gold prices will be in further decline due to a rise in the U.S. dollar."

The dollar index, which measures the greenback against a basket of six major currencies, was up 0.3 percent at 97.213 on Tuesday. A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

"The broad-based dollar strength continued to cap the upside for (precious) metals throughout mid-morning and into early afternoon with little in way of data to drive markets," said Alex Thorndike, senior precious metals dealer at MKS PAMP Group, in a market note.

The metal is highly-sensitive to increases in U.S. interest rates, which can lift the opportunity cost of holding
non-interest-bearing gold. Traders have priced in a 70-percent chance that the Fed will hike rates at a Dec. 13-14 meeting, up from 66 percent early Friday, according to CME Group's FedWatch tool. Investors are also waiting for Wednesday's release of minutes of the latest Federal Reserve Open Market Committee
meeting to see how close the central bank was to hiking rates last month.

Speaking to reporters after a speech in Sydney, Chicago Fed President Charles Evans said on Tuesday he "could be fine" with raising U.S. interest rates in December, but that he would prefer to see how the economy and inflation progressed before deciding.

Spot gold may revisit its Oct. 7 low of $1,241.20 per ounce,as its bounce from this level could have completed, according to Reuters technical analyst Wang Tao.

Last week gold has reached important and strong support area - daily and weekly Oversold @ daily K-support. Also it has tested the low of Brexit candle. Probably we can't speak on W&R here, since mostly gold stops there due support rather than real tricky stop hunting action. On Friday market has formed high wave pattern and stands inside of it's range since then.

I hope you keep in mind our long-term strategy on gold market as we've explained it in details in weekly research. If you remember we agree to watch for B&B "Sell" pattern on daily chart. Because it could be very welcome and let us to go short with relatively low risk:

On 4- hour chart we also see that 1280 is a K-resistance area:

That's being said, we probably should be a bit more patient. It is too early to go short yet. For long entry we have no context, except, may be daily bullish "Stretch" pattern. We do not intend to trade it, but if you do - wait, at least some upside reversal patterns on daily chart before taking long position.

 

[Sive Morten]

Good morning,

(Reuters) Gold edged higher on Wednesday as the U.S. dollar retreated, with markets waiting for minutes
from the September Federal Reserve policy meeting for more clues on any interest rate hikes this year.
Spot gold was up 0.3 percent at $1,255.92 an ounce by 0715 GMT, after falling half-a-percent in the prior session.

U.S. gold futures gained 0.1 percent to $1,257.4 an ounce. Minutes of the Federal Reserve Open Market Committee's (FOMC) September meeting are scheduled to be released at 1800 GMT on Wednesday.
"If the minutes provide more data that the voter members in the FOMC are showing greater divergence in opinions, (then)combined with the recent release of U.S. economic data ... the probability of Fed hiking the interest rates in December is possibly going to increase," said NAB analyst Vyanne Lai. The upside risks to gold prices associated with Republican candidate Donald Trump's presidency after the first two debates
have also receded, said Lai, adding that the seasonally strong physical demand period in October would however provide some support to gold prices.

"The overall trend into December would be a downward one." Traders have priced in a 70-percent chance that the Fed will raise rates at its Dec. 13-14 meeting. The metal is highly-sensitive to U.S. interest rates,
increases in which lift the opportunity cost of holding non-yielding gold while boosting the dollar, in which it is
priced.

The dollar index, which measures the greenback against a basket of six major currencies, was down 0.1 percent at 97.589. The index surged to a seven-month high on Tuesday.

"Investors will continue to eye developments for a potential December FOMC rate hike as well as the race to the U.S. presidency as key market movers in the near term," Alex Thorndike, senior precious metals dealer at MKS PAMP Group, said in a note.

Spot gold still targets its Oct. 7 low of $1,241.20 per ounce, as its bounce from this level has completed, according to Reuters technical analyst Wang Tao.

"The spectre of falling U.S. equity markets should theoretically be supportive for gold," INTL FCStone analyst Edward Meir said in a note.

Asian shares hit three-week lows on Wednesday after a dour start to Wall Street's earnings season knocked U.S. stocks.

On Gold market price stands quiet by far, but today Fed minutes will be released. We mostly expect some bounce here, at least to 1285 area and intend it to use for short entry. Gold stands at strong support and oversold. That's why on daily chart we mostly watch for B&B "Sell" pattern:

But retracement itself could take different shape. Although we do not care much about it, since we have no intention to trade it, but this could be important for scalp traders.
Thus, on 4-hour chart gold shows some signs of bearish dynamic pressure. As a result, before retracement will start, gold could form upside reversal pattern, such as butterfly of H&S, especially if today's Fed minutes will appear to be more hawkish:

Or, upward action could start immediately. In fact this is a question of trendline breakout on hourly chart:

That's why let's wait for Fed minutes release and see what will happen. If you think about scalp long trade - wait for real upside reversal patterns.
Our task, as we mostly watch for daily picture is to get gold around 1285 resistance and think about short position...

 

[Sive Morten]

Good morning,

(Reuters) Gold edged up on Thursday on a weaker dollar and as equities plunged on soft Chinese trade data that stoked concerns about the health of the world's No.2 economy.

The bullion rose even after minutes from a U.S. Federal Reserve meeting last month signalled that the central bank could raise interest rates in December. "Despite the FOMC minutes that were released overnight, gold prices didn't really move. This strongly suggests that gold prices at this juncture, of $1,250, have already digested the probability of a rate hike around this year," said OCBC Bank analyst Barnabas Gan.

Gan added that various headwinds to the global economy would buoy safe-haven demand for bullion, with the metal likely to touch $1,300 by the year-end. Several voting Federal Reserve policymakers judged a rate
hike would be warranted "relatively soon" if the U.S. economy continued to strengthen but doubts on inflation remained, according to the minutes of the Fed's September policy meeting released on Wednesday.

"Gold has been under pressure but we do not think the FOMC minutes will add materially to the downwards slant of the market," HSBC analyst James Steel wrote in a note. "But without further increases, some of the pressure on gold may come off."

Spot gold was up 0.3 percent at $1,257.95 an ounce by 0742 GMT, while U.S. gold futures advanced 0.5 percent to $1,259.80 an ounce. "There is a lot of buying on the physical side in Asia, mainly from China and buying from exchange-traded funds after recent dips," said a precious metals trader with a China-based
bank.

The dollar index, which measures the greenback against a basket of six major currencies, was down nearly 0.1 percent at 97.924. Asian stocks stumbled to three-week lows and U.S. stock futures and Treasury yields fell after China's September trade data showed a sharp decline in exports.

China's September exports dropped 10 percent from a year earlier, far more than what markets had expected, while imports unexpectedly shrank 1.9 percent after an encouraging bump up in August, official data showed on Thursday.

So, on gold market situation changes slowly. It seems that market really has been shocked a bit by drop last week. As Friday's high wave pattern has been formed - price stands inside its range since then. Technical picture stands suitable for minor upside retracment, because 1250 level is rather strong support and oversold and upside reaction to 1285 level looks normal.
That's why we continue to watch for possible either B&B "Sell" or DRPO "Buy" pattern:

Intraday charts stand in favorite of DRPO. Thus, on 4-hour chart price is forming bearish dynamic pressure that could achieve it's target by butterfly pattern. Sometimes DRPO takes the shape of butterfly:

On hourly chart, although price has moved above trendline, but this action is too slow, no signs of thrust. So, this is probably more a smooth exit rather than breakout. That's why we will not be surprised if gold will drop right back down below it. Besides, although trend line was exceeded, price stands inside daily "high wave" range. So, this action has no features of breakout yet.

That's being said, our trading plan mostly the same - wait for upside reversal patterns. Use upside retracement for short entry on daily chart. Scalp traders could use this patterns for scalp bullish positions.
Let's hope that we will get something finally today - tomorrow...

 

[Sive Morten]

Good morning,

(Reuters) Gold edged lower on Friday as stocks firmed and the U.S. dollar rose on expectations the
Federal Reserve would raise interest rates by the end of the year.

Spot gold was down 0.2 percent at $1,255.50 an ounce by 0715 GMT. The metal was on track to end the week mostly flat. U.S. gold futures fell 0.1 percent at $1,256.80 an ounce.

"People are happy to buy at these levels. But, there are a lot of expectations of a Fed rate hike in December, which will be bearish for gold," said Ronald Leung, chief dealer, Lee Cheong Gold Dealers in Hong Kong. There will also be some uncertainty going into the elections, said Leung adding that if Democratic presidential candidate Hillary Clinton wins over Republican Donald Trump then the dollar could strengthen and pull gold down.

Spot gold may consolidate further in a narrow range of $1,250-$1,266 per ounce for one day before falling to the Oct. 7 low of $1,241.20, according to Reuters technical analyst Wang Tao.

Markets will next look to Friday's U.S. retail sales data and remarks from Fed Chair Janet Yellen, who will address a Boston Fed economics conference at which Boston Fed governor Eric Rosengren will also speak. "We think its (Federal Reserve's) rate hiking trajectory will remain very much intact," INTL FCStone analyst Edward Meir said in a note. "As a result, the dollar will likely push higher going into year-end, offering gold its most formidable headwind and even countering the impact of weaker equities."

The dollar index, which measures the greenback against a basket of six major currencies, gained 0.4 percent to 97.877. Asian stocks bounced on Friday, erasing some losses from the previous day. Global equity markets had slumped to a three-month low on Thursday.

"Physical demand and geopolitical risk may be the main supporting planks of the gold market going forward," HSBC analyst James Steel wrote in a note.

Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.28 percent to 961.57 tonnes on Thursday.

On Gold market just to moments to discuss right now. First - yesterday we've got 1st close above 3x3 DMA and we continue to watch for DRPO "Buy" pattern here that could trigger greater retracement up. It seems more logical right now, since gold stands at weekly oversold, it likes to show deep retracement and re-test former important level. Thus, re-testing of 6-month trend line is welcome from this standpoint:

Second issue is retail sales release. It could bring short-term volatility as this is major indicator of public consumtion that is tracked by analysts and Fed. That's why we continue to watch for bearish dynamic pressure and potential butterfly 4-hour chart. They are culmination part of potential daily DRPO: