Sive Morten
Special Consultant to the FPA
- Messages
- 18,754
Fundamentals
Weekly Gold Tading Report prepared by Sive Morten exclusively for ForexPeaceArmy.com
As Reuters reports Gold edged lower on Friday as a rise in the dollar capped four days of gains, though the metal remained supported around the $1,220 level by the prospect of a widespread economic slowdown that could keep interest rates low.
Strength in the U.S. currency drove commodities lower across the board, with Brent crude oil futures earlier tumbling more than 1 percent towards a four-year low, while worries about the world economic outlook hit stock markets.
Brent crude ended slightly higher and S&P 500 index tumbled more than 1 percent.
Even with the Friday's weakness, gold posted its biggest weekly rise in four months at 2.8 percent, helped by easing fears over interest rate hikes by the Federal Reserve and tumbling equity prices.
"Gold’s recent gains are attributed to a covering of short positions from momentum investors which led to a pare back in losses from the year-to-date low of $1,183 an ounce on Oct 6," said James Steel, chief metals analyst at HSBC.
Gold hit a 15-month low of $1,183.46 on Monday after last week's strong U.S. jobs data fueled talk that U.S. interest rates could rise sooner rather than later.
The gold recovery gained momentum after minutes of the Fed's September meeting, released on Wednesday, showed that officials were struggling with how to deal with the dual threats of a stronger dollar and a global slowdown.
The minutes prompted investors to bet that the U.S. central bank is in no rush to tighten policy after years of monetary stimulus. Higher interest rates would hurt demand for gold, a non-interest-bearing asset.
The dollar rose on Friday, but ended a record-length rally with its first weekly fall in three months after Fed policymakers warned about the impact of the currency's strength.
On the main markets for physical gold, dealers reported a pick-up in Indian demand ahead of the Diwali festival, a key bullion-buying period.
Open Interest:
Longs:
Shorts:
Source: CFTC, Reuters
CFTC Report shows flat data mostly. No significant changes in all data. At the same time it means that speculators mostly hold short positions and has not started to close them yet. And this relatively confirms our view that chances on downward continuation is possible and current upside action is mostly retracement.
Monthly
From long-term picture we have two major levels – 1400$ and 1180$. First one is invalidation point of our bearish grabber. 1180$ in turn, is a target and significant low. Any action below this level could trigger more selling that could take the signs of panic and lead gold to YPS1. Shift in seasonal trend does not fascinate traders much. Physical demand stands weak, dollar strong, inflation weak and talks around rate hiking also does not add optimism to gold. Comments from physical traders on physical demand has appeared to be only comments. First, they told that demand should come below 1330, then 1300, then 1240, now speeches promise demand around 1180, let’s see, but CFTC data shows oposite information.
You probably already understand that primary question on big picture – how deep market could fall. Whether price will break 1180? Here I would like to remind pattern from which our gold analysis has started – Volatility breakout when we said that some 0.618 AB-CD down should happen. And what do we see right now... Pay attention that retracement up to 1400 was small, just 3/8 Fib level. It points on strength of the bears. Thus, following this logic – market should form 1. 618 Butterfly because it’s target coincides with AB-CD target. We will not promise reaching of 1025-1050 area definitely (although this is logical – action to YPS1) but chances that gold will break through 1180 seem significant, especially on a background of recent CFTC data.
Major factors are still valid - good economy data, that right now is confirmed by US companies earning reports, weak physical demand – all these moments prevent gold appreciation. As September bearish intentions look strong - tendency could take shape of butterfly as I’ve drawn on the chart, especially because it agrees with bearish grabber target.
It is interesting that during recent rally market was not able to re-test Yearly Pivot. Also we suspect that we could get bearish dynamic pressure here and probably already getting it. As you can see trend has turned bullish, but gold does not show any upward action. Splash in July has faded fast.. Finally, overall action since the beginning of the year mostly bearish. Take a look – in the beginning of the year market has tested YPP and failed, then continued move down. During recent attempt to move higher – has not even reached YPP again.
That’s being said, situation on the monthly chart does not suggest yet taking long-term long positions on gold. Fundamental picture is moderately bearish in long-term. Possible sanctions from EU and US could hurt their own economies as well, especially EU. Many analysts already have started to talk about it. And we already see data from Germany. It means that economies will start to loose upside momentum and inflation will remain anemic. In such situations investors mostly invest in interest-bear assets, such as bonds. Approximately the same comments we saw for recent 1-2 months from physical gold traders. Besides, on current gold rally – US gold mining companies dropped for 3-4%. This could be just general sell-off due QE ending in US, but still, this is a worrying sign.
On monthly chart we have chain of targets. First one stands at former lows at 1180. Next one is 1125$ - butterfly 1.27 target and then ultimate combination of 1.618 target and YPS1 around 1020-1050 area. 1180 seems most probable not only because it stands closer but also because this is the target of the grabber and bearish dynamic pressure, but some patterns and details do not exclude even reaching of 1025-1050 area.
Weekly
On weekly chart market has reached strong support area that includes targets, MPS1, butterfly extension and others. As you can see gold has confirmed this level by nicely looking weekly engulfing pattern that could trigger in short-term upside retracement. We suggest that even action to 1250 will not lead to breaking bearish sentiment (as it is shown by CFTC) and will not mean that downward trend is over.
Even Vice versa - taking in consideration gold’s habits, we could suggest that 1180 will be reached and washed out. We suggest that current move up is some sort of bulls’ trap to involve more traders in upside action and then grab their stops either. Relative confirmation of this stands at CFTC data – no purchases has followed. It does not mean that you can’t trade it up, but it means that you have to take profit fast.
As we’ve said on previous week - as soon as gold will reach 1180 – we will watch for reversal patterns. If we will get any – then market could turn to retracement and we will take close look at SPDR fund and CFTC data. Weak support of retracement will mean that we should ready for downward continuation. As we know – economical situation hardly will change till mid 2015. That’s why action below 1180 does not look impossible. Also we should not forget about “Panic” sell-off below 1200$ that was mentioned by many traders. On coming weeks we will watch over it as well.
Finally, as closer to New Year we are, as closer seasonal trend to the end. Bullish seasonal phase mostly ends on February, but active part of it fades even earlier.
Daily
Although our long-term view suggests moving to 1180, we still can play with scenario that is forced to us by the market. Recall that on daily chart we’ve discussed B&B “Sell”. As we have engulfing on weekly, very often before upward action starts – market shows shy retracement back inside the body of the pattern. This particularly could be due daily B&B “Sell”. Later we could get some sort of AB=CD up to WPR1, test of MPP, re-testing of previous 1240 lows in shape of some AB=CD.
4-hour
This chart shows that if B&B “Sell” on daily will work – that could lead to appearing of reverse H&S pattern on 4-hour chart. Chances on this are significant, because previously market stand in solid thrust down with good bearish momentum. As market has shown reversal swing up – retracement down should be deep. 1232 level was daily 3/8 Fib resistance and 0.618 AB=CD Agreement as we’ve discussed this on Friday.
Conclusion:
Situation on gold market remains sophisticated. Due bearish moments, such as bullish USD sentiment, lack of physical demand, gold has re-established recently downward action. On a way down market could pass through multiple target and nearest one is 1180$. We even have setup on big picture that suggests moving to 1025-1050 area.
In short term perspective market has turned to upside retracement that is not supported by real physical demand. It means that bearish trend and power are still valid but disguised by this current action. So, as we are enforced to deal with this setup – we can try to play with it. Thus there are two opportunities probably will appear on coming week. First is B&B “Sell” on daily with 1202 target. Second – buy opportunity at 1202 or somewhere around for those who wants to deal with weekly bullish engulfing. When these setups somehow will over – we will shift to our primary object 1180 lows.
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.
Weekly Gold Tading Report prepared by Sive Morten exclusively for ForexPeaceArmy.com
As Reuters reports Gold edged lower on Friday as a rise in the dollar capped four days of gains, though the metal remained supported around the $1,220 level by the prospect of a widespread economic slowdown that could keep interest rates low.
Strength in the U.S. currency drove commodities lower across the board, with Brent crude oil futures earlier tumbling more than 1 percent towards a four-year low, while worries about the world economic outlook hit stock markets.
Brent crude ended slightly higher and S&P 500 index tumbled more than 1 percent.
Even with the Friday's weakness, gold posted its biggest weekly rise in four months at 2.8 percent, helped by easing fears over interest rate hikes by the Federal Reserve and tumbling equity prices.
"Gold’s recent gains are attributed to a covering of short positions from momentum investors which led to a pare back in losses from the year-to-date low of $1,183 an ounce on Oct 6," said James Steel, chief metals analyst at HSBC.
Gold hit a 15-month low of $1,183.46 on Monday after last week's strong U.S. jobs data fueled talk that U.S. interest rates could rise sooner rather than later.
The gold recovery gained momentum after minutes of the Fed's September meeting, released on Wednesday, showed that officials were struggling with how to deal with the dual threats of a stronger dollar and a global slowdown.
The minutes prompted investors to bet that the U.S. central bank is in no rush to tighten policy after years of monetary stimulus. Higher interest rates would hurt demand for gold, a non-interest-bearing asset.
The dollar rose on Friday, but ended a record-length rally with its first weekly fall in three months after Fed policymakers warned about the impact of the currency's strength.
On the main markets for physical gold, dealers reported a pick-up in Indian demand ahead of the Diwali festival, a key bullion-buying period.
Open Interest:
CFTC Report shows flat data mostly. No significant changes in all data. At the same time it means that speculators mostly hold short positions and has not started to close them yet. And this relatively confirms our view that chances on downward continuation is possible and current upside action is mostly retracement.
Monthly
From long-term picture we have two major levels – 1400$ and 1180$. First one is invalidation point of our bearish grabber. 1180$ in turn, is a target and significant low. Any action below this level could trigger more selling that could take the signs of panic and lead gold to YPS1. Shift in seasonal trend does not fascinate traders much. Physical demand stands weak, dollar strong, inflation weak and talks around rate hiking also does not add optimism to gold. Comments from physical traders on physical demand has appeared to be only comments. First, they told that demand should come below 1330, then 1300, then 1240, now speeches promise demand around 1180, let’s see, but CFTC data shows oposite information.
You probably already understand that primary question on big picture – how deep market could fall. Whether price will break 1180? Here I would like to remind pattern from which our gold analysis has started – Volatility breakout when we said that some 0.618 AB-CD down should happen. And what do we see right now... Pay attention that retracement up to 1400 was small, just 3/8 Fib level. It points on strength of the bears. Thus, following this logic – market should form 1. 618 Butterfly because it’s target coincides with AB-CD target. We will not promise reaching of 1025-1050 area definitely (although this is logical – action to YPS1) but chances that gold will break through 1180 seem significant, especially on a background of recent CFTC data.
Major factors are still valid - good economy data, that right now is confirmed by US companies earning reports, weak physical demand – all these moments prevent gold appreciation. As September bearish intentions look strong - tendency could take shape of butterfly as I’ve drawn on the chart, especially because it agrees with bearish grabber target.
It is interesting that during recent rally market was not able to re-test Yearly Pivot. Also we suspect that we could get bearish dynamic pressure here and probably already getting it. As you can see trend has turned bullish, but gold does not show any upward action. Splash in July has faded fast.. Finally, overall action since the beginning of the year mostly bearish. Take a look – in the beginning of the year market has tested YPP and failed, then continued move down. During recent attempt to move higher – has not even reached YPP again.
That’s being said, situation on the monthly chart does not suggest yet taking long-term long positions on gold. Fundamental picture is moderately bearish in long-term. Possible sanctions from EU and US could hurt their own economies as well, especially EU. Many analysts already have started to talk about it. And we already see data from Germany. It means that economies will start to loose upside momentum and inflation will remain anemic. In such situations investors mostly invest in interest-bear assets, such as bonds. Approximately the same comments we saw for recent 1-2 months from physical gold traders. Besides, on current gold rally – US gold mining companies dropped for 3-4%. This could be just general sell-off due QE ending in US, but still, this is a worrying sign.
On monthly chart we have chain of targets. First one stands at former lows at 1180. Next one is 1125$ - butterfly 1.27 target and then ultimate combination of 1.618 target and YPS1 around 1020-1050 area. 1180 seems most probable not only because it stands closer but also because this is the target of the grabber and bearish dynamic pressure, but some patterns and details do not exclude even reaching of 1025-1050 area.
Weekly
On weekly chart market has reached strong support area that includes targets, MPS1, butterfly extension and others. As you can see gold has confirmed this level by nicely looking weekly engulfing pattern that could trigger in short-term upside retracement. We suggest that even action to 1250 will not lead to breaking bearish sentiment (as it is shown by CFTC) and will not mean that downward trend is over.
Even Vice versa - taking in consideration gold’s habits, we could suggest that 1180 will be reached and washed out. We suggest that current move up is some sort of bulls’ trap to involve more traders in upside action and then grab their stops either. Relative confirmation of this stands at CFTC data – no purchases has followed. It does not mean that you can’t trade it up, but it means that you have to take profit fast.
As we’ve said on previous week - as soon as gold will reach 1180 – we will watch for reversal patterns. If we will get any – then market could turn to retracement and we will take close look at SPDR fund and CFTC data. Weak support of retracement will mean that we should ready for downward continuation. As we know – economical situation hardly will change till mid 2015. That’s why action below 1180 does not look impossible. Also we should not forget about “Panic” sell-off below 1200$ that was mentioned by many traders. On coming weeks we will watch over it as well.
Finally, as closer to New Year we are, as closer seasonal trend to the end. Bullish seasonal phase mostly ends on February, but active part of it fades even earlier.
Daily
Although our long-term view suggests moving to 1180, we still can play with scenario that is forced to us by the market. Recall that on daily chart we’ve discussed B&B “Sell”. As we have engulfing on weekly, very often before upward action starts – market shows shy retracement back inside the body of the pattern. This particularly could be due daily B&B “Sell”. Later we could get some sort of AB=CD up to WPR1, test of MPP, re-testing of previous 1240 lows in shape of some AB=CD.
4-hour
This chart shows that if B&B “Sell” on daily will work – that could lead to appearing of reverse H&S pattern on 4-hour chart. Chances on this are significant, because previously market stand in solid thrust down with good bearish momentum. As market has shown reversal swing up – retracement down should be deep. 1232 level was daily 3/8 Fib resistance and 0.618 AB=CD Agreement as we’ve discussed this on Friday.
Conclusion:
Situation on gold market remains sophisticated. Due bearish moments, such as bullish USD sentiment, lack of physical demand, gold has re-established recently downward action. On a way down market could pass through multiple target and nearest one is 1180$. We even have setup on big picture that suggests moving to 1025-1050 area.
In short term perspective market has turned to upside retracement that is not supported by real physical demand. It means that bearish trend and power are still valid but disguised by this current action. So, as we are enforced to deal with this setup – we can try to play with it. Thus there are two opportunities probably will appear on coming week. First is B&B “Sell” on daily with 1202 target. Second – buy opportunity at 1202 or somewhere around for those who wants to deal with weekly bullish engulfing. When these setups somehow will over – we will shift to our primary object 1180 lows.
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.
