GOLD PRO WEEKLY, October 12-16, 2015

[Sive Morten]

Fundamentals

Reuters reports - Gold rose to a seven-week high on Friday after minutes from the Federal Reserve's last policy meeting showed the U.S. central bank was in no hurry to raise interest rates, pressuring the U.S. dollar.

The U.S. futures contract for December delivery settled up 1 percent at $1,155.90 an ounce.

Prices were supported by Fed minutes released on Thursday, suggesting the central bank was deeply cautious about tightening monetary policy even before last week's soft jobs data showed a sharp slowdown in U.S. hiring.

"There is less of a sentiment in the market that an interest rate hike will take place anytime soon," said Bernard Dahdah, metals analyst at Natixis. "The data that has come out of the U.S. lately hasn't been very positive."

But the market remained somewhat cautious, taking note that the minutes also revealed most Fed policymakers thought the central bank's first rate increase in nearly a decade should still come in 2015.

Weak U.S. economic data and worries about the global economy have prompted many to push back expectations for an interest rate hike, which has helped gold rise nearly 4 percent so far this month.

The U.S. dollar hit multi-week lows against the euro and Swiss franc while stocks on major world markets were on track for their biggest weekly gain since 2011.

Precious metals with industrial uses garnered some support from the surging base metal prices, such as copper and zinc, after commodities group Glencore said it would cut its zinc output by a third.

Platinum rallied 4.2 percent to $983 a tonne, the highest since Sept. 18, and was on track to close the week up 7.7 percent, its strongest in four years after Glencore's announcement that it will shut its Eland platinum mine in South Africa.

"The market was ripe for a bit of short covering. Platinum's been beaten down for quite some time now," said one U.S. refiner.

"The dollar has weakened a bit and that has definitely helped precious metals. We might not see an interest rate in 2015 now."

Palladium rose as much as 3.4 percent to a four-month high at $722 an ounce, heading for its fifth straight weekly gain.

Silver was up 0.8 percent at $15.78 a tonne.

Recent COT data shows solid jump in open interest of gold:

What is more interesting that COT shows decrease of short positions and simultaneous increase of speculative longs:
LONGS

SHORTS

At the same time, longs-to-total ratio stands around 75% and still has room to increase more. SPDR data last week shows mostly flat results, storage stands at 687 tonnes. In general we see that COT data looks supportive for recent rally and this increase chances of its continuation.

Technical
Monthly
As we've said last week - it is difficult to make any far going conclusions yet and mostly right now started upside action looks like tactical bounce from strong support area. To get another status market should show significant upside action and form bullish reversal swing.

Right now we could acknowledge that action has become more serious. As Middle East drop in turmoil, our thought is major driving factor right now is geopolitics. With growing tensions and uncertainty, when major information stands unknown for public - markets become nervous and first of all this will make effect on gold as safe-haven asset. Fed rate right now moves to backstage.

Recently we we've got impressive rally on gold. On monthly chart it is still looks small and can't change situation yet, but we also see support of this action from investors positions. Yes, this support is mild yet, but it doesn't mean that it can't increase.

Currently we have two bearish grabbers, October month is still small. Market has to move above the grabbers' top to change situation here.

Grabber on monthly chart suggests moving below 1080 area. This is the answer on our questions - how far upside action could climb. To erase this bearish setup - market should erase the grabber first and form reversal swing second, i.e. move above 1300 area.

We have just one long-term pattern in progress that has not achieved it’s target yet. This is VOB pattern. It suggests at least 0.618 AB-CD down. And this target is 1050$. Besides, in the same area we have 1.618 target of most recent butterfly pattern.

If somehow gold will drop below 1050. Next destination will be 890-900$ area - major 5/8 Fib support and Agreement !!! with AB=CD pattern down, the same one that points VOB target.

So, currently despite on solid upside rally, bearish monthly setup is still valid and current upside action is still retracement. Whether it will shift to reversal - we will see...

We do not know how far upside rally could proceed. May be it will keep bearish scenario valid and still keep feature of retracement. May be not, may be it will turn to full reversal on gold market. In current situation, since war is driving factor, somehow I feel that we will get second scenario... despite how awful it will be.

Weekly
As we've mentioned last time Weekly chart in fact shows tricky picture and makes overall situation a bit complex. Trend here is bullish and we have two in a row bullish grabbers. It means that theoretically we can't take short until these grabbers will fail and trend will shift bearish.
The trick stands around grabbers. The point is they assume taking out of 1180 top, i.e. erasing of monthly pattern. So, we have two opposite patterns in different time frames. Some of them should fail probably.
At the same time we have pattern of another sort. This is upward AB-CD with 1193 target. And now situation is turning so, that we probably will think on taking long rather than short...It seems that monthly grabber right now has more chances to fail.

As market has continued move up last week, it does it as normal bullish market should to. If do not take in consideration too deep retracement after 0.618 target has been hit (that almost has led us to conclusion of possible bearish reversal previously) - gold behaves well.

This rally also simplifies overall situation, because bullish market has no choice here but to continue move up. This is just how AB-CD works. As soon as market has re-established upside action to next target and finished retracement after the first one (this is in fact what we see right now), it has no choice but just continue to it. If it will not do this, then it will be clear signal that upside scenario fails.

As result, we mostly stand at the same conclusion here. If market will move above 1155-1165, then we probably will see 1193-1200 area and monthly grabber will be erased. If market will not be able to do it and will start dropping, (especially below 1100 area), this will be clear signal of bearish reversal and road to 1050 target. Butterfly pattern is still possible here...

Daily
On daily chart, guys, we see normal bullish market. AB-CD progression holds well. Trend is bullish here. On Friday market was challenged major resistance area around 1160. Here we could say that further success will depend on what will happen around 1160. If market will break it (and if gold is indeed bullish, it should do this), then we will see next upside leg to 1193-1200.
As we've said previously this breakout will not be an easy thing to do. Here we have solid resistance cluster of pivots, Fib level, overbought and previous tops. So market could challenge this area even not once or twice. But anyway major condition is absence of deep pullbacks. We need to see that gold is coiling around this resistance.
Also good sign is that market right now sands above WPR1. This confirms the thought about possible new bullish trend.

4-hour

In short-term perspective our major driving pattern is AB=CD. And here we have some clarity. It seems that it could be finalized by 3-Drive "Sell" pattern. If we assume that 1st drive is in place, on coming week we will have nice support of WPP+MPS1. For bullish market it is nice area to re-establish move up to final destination of AB=CD.
If this really will happen, then it will be 3-Drive "Sell". As soon as it will be completed we will turn to our final step - expecting of deep to buy. Scalp traders also could trade this 3-Drive directly

Conclusion:
On long-term charts bullish positions are becoming stronger but not dominant yet. With recent changes in gepolitical situation and investors' sentiment by COT numbers, we gradually turn to opinion that upward progress at least to 1200 area looks more probable now than bearish reversal.
In short-term perspective we will wait for minor retracement after completion of AB=CD pattern and will try to take long position there, if overall situation will not change and will be supportive to this operation.

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.

 

[Sive Morten]

Good morning,

Reuters reports today gold fell nearly 1 percent on Tuesday, retreating from a three-month high on profit-taking after a two-day rally triggered by expectations the Federal Reserve will not hike U.S. interest rates this year.

Spot gold fell 0.6 percent to $1,156.30 an ounce by 0643 GMT, after earlier dropping as much as 0.9 percent. The metal hit a three-month high of $1,169 in the previous session.

U.S. gold futures fell 1 percent to $1,152.

"It has been an impressive rally for the precious complex since the nonfarm payrolls 10 days ago, however it looks like the momentum is now starting to wane," said James Gardiner, a bullion trader with MKS Group.

"Overnight weakness in the oil price may also flow through the commodity complex and put additional pressure on precious metals and a bid on the dollar," he said. A stronger dollar would make gold expensive for holders of other currencies.

Bullion has gained $50 an ounce, or nearly 5 percent, since a surprisingly weak U.S. nonfarm payrolls report on Oct. 2. The data prompted the market to shift expectations of a Fed rate hike to 2016 and sell the dollar.

Gold, as a non-interest-paying asset, benefits from ultra-low interest rates.

However, comments from Fed officials signalling that the U.S. central bank was in no hurry to raise rates did not offset the profit taking on Tuesday.

The Fed should hold off on any rate hike until it is clear that a global slowdown, trouble in China and other international risks will not push the U.S. recovery off course, Fed Governor Lael Brainard said on Monday in one of the strongest defenses yet of a go-slow approach to rate policy.

The Fed refrained from hiking rates at its last meeting in September, citing concerns with the global economy and volatility in financial markets. It holds two more policy meetings in 2015: on Oct. 27-28, and then in December.

Among other precious metals, silver fell as much as 1.2 percent, after hitting a 3-1/2-month high of $16.10 last week.

Platinum fell 1 percent, dropping from a one-month high of $998.50 an ounce in the previous session. Palladium recovered from earlier losses to trade up 0.4 percent.

So, gold has turned to retracement that we have intended to use for long entry. Market stands above MPR1, and exceeded minor AB-CD 0.618 target. Also it has hit overbought at major 5/8 Fib resistance of 1173$

On 4-hour chart we've waited for completion of AB=CD pattern and reaching of strong resistance area, including WPR1. Now this has happened and market has turned to retracement down. It seems logical, especially taking in consideration overbought on daily, if Gold will drop to an area around WPS1, slightly lower that 3/8 Fib level. This is also natural support cluster stands there:

 

[Sive Morten]

Good morning,

Recent Reuters comments - Gold extended gains to a fourth straight session on Wednesday, hitting a fresh three-month high, bolstered by a weaker dollar and comments from Federal Reserve officials cautioning against a rate hike this year.

Bullion has gotten a boost since the weak U.S. nonfarm payrolls report earlier this month that prompted the market to shift expectations of a U.S. rate hike to 2016 and sell the dollar.

Weak Chinese data on Wednesday added to global growth concerns, another factor investors believe could deter the Fed from hiking rates this year.

Charts were also looking good for bullion, analysts said.

"The precious complex continues to look bid-ish and participants should be prepared for both gold and silver to break through their upcoming technical resistance points," said James Gardiner, a trader at MKS Group.

The immediate resistance for gold was at $1,170-71, he said.

Analysts at ScotiaMocatta said a close for gold above $1,170 should see the metal go all the way to $1,192.

Helping gold's move higher was a sluggish dollar, which was trading near its lowest in 3-1/2 weeks against a basket of major currencies as further signs of weakness in China fanned expectations that the Fed will have to wait longer before any policy tightening.

Consumer inflation in China cooled more than expected in September while producer prices extended their slide to a 43rd straight month, adding to concerns about deflationary pressures in the world's second-largest economy.

The Fed refrained from hiking rates at its September meeting, citing concerns about the global economy, although Fed Chair Janet Yellen said later the central bank was on track to raise rates this year.

However, Fed Governor Daniel Tarullo said on Tuesday the Fed should not hike interest rates this year, in comments that point to sharp divisions within the U.S. central bank over America's readiness for higher rates.

Tarullo, who rarely comments in public on monetary policy, is the second Fed governor this week to urge caution on the timing of rate hikes.

Fed Governor Lael Brainard on Monday said the Fed should hold off on rate hikes until it is clear that trouble in China and other international risks will not push the U.S. recovery off course.

So Gold continues its victorious march. Yesterday we've expected deeper retracement, but it was just minor re-testing of broken tops. This confirms strength of gold right now. Market right now mostly has broken 1173 resistance and stably stands above highs. It means that there was a true breakout and hardly we will see any W&R or something of this kind. Thus, next target will be 1193 - 1200 area as butterfly, target, large AB=CD and small 1.618 AB-CD:

On 4-hour chart Gold turns to harmonic upside action. Usually retracements just re-test previous local tops. Thus, as soon as market will complete next AB-CD and 1.618 extension, we could get another minor bounce:

 

[Sive Morten]

Good morning,

Recent Reuters comments - Gold held near a 3-1/2-month high on Thursday, following a four-day rally, as sluggish economic data from China and the United States stoked speculation the Federal Reserve will not raise rates this year.

Data on Wednesday showed U.S. retail sales barely rose in September and producer prices recorded their biggest decline in eight months. Consumer inflation in China cooled more than expected in September, while producer prices extended their slide to a 43rd straight month.

Investors believe the sluggishness in the U.S. economy amidst a weak global economic backdrop may cause Fed policymakers to delay the first rate increase in nearly a decade to 2016. Gold, as a non-yielding asset, tends to benefit from ultra-low rates.

"Soft U.S. retail and inflation combined with disinflationary China data undercut the rationale for a rate rise in some investor's view and helped propel gold," said HSBC analyst James Steel.

"But more than that, we continue to sense changing attitudes to gold from investors, with recent positive comments from some fund managers," he said.

Elliott Management Chief Executive Paul Singer said on Wednesday every institutional portfolio should be 5-10 percent invested in gold to protect against zero interest rates that are degrading the value of paper currency.

Gold was the one tradable asset that has been "treated unfairly", he said at the Sohn Investment Conference, adding that his fund holds gold through options.

Steel said $1,200, however, may still be a tough resistance level.

Bullion was also supported on Thursday by weakness in the dollar.

The greenback wallowed around seven-week lows against a basket of currencies, after weak U.S. data prompted investors to scale back bets that the Fed would hike interest rates by the end of 2015.

Physical buying of gold, however, softened due to the rise in prices.

Premiums on the Shanghai Gold Exchange, an indication of demand in top consumer China, fell to about 50 cents an ounce on Thursday from $2-$3 in the previous session. Earlier in the day, the Chinese prices had even dipped to a small discount.

Investors will be watching for more data due later in the session, including weekly jobless claims, for clues about the economy and its impact on the Fed monetary policy.


So Gold acts with faster pace that we've expected. On daily chart market has completed our 1193 target just within 1 session. Now market stands at strong resistance and overobught and hardly will move significantly higher within today-tomorrow. We continue to treat geopolitics as major driving factor for gold but not Fed policy and China economy weakness. As we stand far from end of turmoil, Gold will have support in one way or another. Seasonal bullish trend on gold will stand till Feb:

The only pattern that we have right now, that could trigger retracement is 4-hour 3-Drive "Sell". It suggests bounce to 1150 level. Probably we will see something else on hourly chart a bit later, but right now it is too few time spent and nothing has been formed yet

That's being said, for bulls - wait for pullback, since market at resistance. For bears - wait confirmation on hourly chart, some reversal bearish pattern and then you could try to trade 3-Drive with 1150 target. But this setup is secondary, only for scalp traders, since it is does not correspond our major trend. It is mostly tactical and very short-term. We do not call everybody try to do it.

 

[Sive Morten]

Good morning,

Reuters reports today Gold fell on Friday, retreating from a 3-1/2-month high after strong U.S. inflation data supported the dollar, but the metal was set to post its biggest weekly jump in four weeks on bets the Federal Reserve will not hike interest rates this year.

Traders cautioned gold could give back some of its sharp gains as it nears the key $1,200-an-ounce level.

"Gold is thrown a lifeline as investors eye a delay to U.S. rate hike," HSBC said. Gold may tread higher but "faces stiff resistance at the psychological $1,200 level," it added.

Bullion was also losing some support from the physical markets, where consumer buying interest dropped due to the recent price rally.

Prices on the Shanghai Gold Exchange, an indication of demand in top consumer China, were at a discount of 50 cents to a $1 an ounce on Friday. They were at a premium of $2-$3 earlier in the week.

Some modest selling from China was evident early in the day, MKS Group trader Sam Laughlin said, adding that gold should see support at the $1,180 level.

Despite the losses on Thursday and Friday, gold was on track for a 2-percent weekly jump as markets believe other disappointing U.S. data in the backdrop of sluggish economic indicators out of China would prompt the Fed to stand pat on rates until next year.

Bullion benefits from low interest rates that cut the opportunity cost of holding non-yielding assets.

Investor sentiment towards bullion has improved. Holdings in SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, rose 0.73 percent to 700 tonnes on Thursday, their highest since mid-July.

Many Fed watchers are exasperated by the mixed messages from the U.S. central bank in recent weeks. Fed Chair Janet Yellen and other officials have said they expect a rate hike will be needed by the end of this year, but two Fed governors this week urged caution.

Among other precious metals, silver was headed for a third straight weekly gain, while platinum was eyeing its second weekly jump. Palladium , however, snapped a five-week winning streak, and was headed for a 1-percent drop.


Gold has turned to technically logical retracement as major short-term targets and levels have been hit, as well as daily overobught. US Inflation data was additional factor for retracement.

The the major thing right now is support from investors' money. SPDR fund has ~13 tonnes surplus this week and this brings confidence to upside action.

Next upside target will be 1245-1250 - 1.618 extension of the same AB-CD pattern.

Meantime, downward retracement, as we've said could take the shape of 3-Drive pattern. It's target stands at the bottom between 2 and 3rd drives and coincides with 3/8 Fib support of AB=CD pattern, which is minor retracement. So, initially we probably should watch for this level as retracement target.

 

[kamau1910]

Thanks.
Comprehensive analysis