Sive Morten
Special Consultant to the FPA
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Fundamentals
Weekly Gold Tading Report prepared by Sive Morten exclusively for ForexPeaceArmy.com
As Reuters reports Gold edged lower on Friday as U.S. equities rebounded, but posted a second straight weekly gain as concerns over the global economy have raised speculation that the U.S. Federal Reserve could keep interest rates low for longer.
Palladium rallied 2 percent, partly recovering from Thursday's losses, as broad-based gains in global markets lifted demand hopes for the metal mostly used in auto catalytic converters.
The dollar index rose, and the S&P 500 index gained about 1 percent after data showed U.S. housing starts and permits rose in September, a signal the market's modest recovery is supporting what appears to be growing strength in the broader economy.
U.S. equities, however, are on track for their fourth straight weekly decline, their longest streak in more than three years, on concerns about the economy and the spread of the Ebola virus.
"Gold has had a good week because just about everything else has had a bad week," Macquarie analyst Matthew Turner said. "The rally has paused today, however, as the wider markets are wondering whether things really are quite as bad as they thought they were yesterday."
The metal is up about 1 percent for the week after reaching a one-month high of $1,249.30 on Wednesday.
U.S. COMEX gold futures settled down $2.20 an ounce at $1,239 in lighter-than-usual turnover, preliminary Reuters data shows.
The U.S. dollar rose against a basket of major currencies on Friday after strong data on U.S. consumer sentiment calmed nerves following a week of severe market volatility
Also underpinning gold were Thursday's comments by U.S. central banker James Bullard that the Fed should keep buying bonds for longer than planned in the face of volatile markets and falling inflation expectations.
Gold has benefited from the low interest rates and central banks' liquidity that have prevailed in the years after the 2008 financial crisis.
Despite Friday's drop, holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, rose 0.2 percent to 760.94 tonnes, latest data shows.
In spot gold market news, five companies have been shortlisted to replace the century-old London gold benchmark with a new electronic system, which is expected to be in place within the next few months.
Source: CFTC, Reuters
CFTC Report shows shy increase in open interest with growth in net long position. This combination mostly typical for bullish market, but right now it is too early to make such conclusion. This is just first bounce in net long position and we need to see some real tendency there to start speak about reversal.
Monthly
From long-term picture we have two major levels – 1400$ 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 yet. 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, despite the fact that last week has shown some upward change.
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.
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. Fall of crude oil prices also is supporting factor for economy in long term, because household and industry will get signficant economy on energy expenses, especially on coming winter.
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. Recent retracement on many markets – oil, equities, gold is mostly triggered not by sentiment changing but strong oversold. Markets probably overreacted a bit under pressure of Ebola fever spreading, surprisingly bad data from China and EU, sophisticated geopolitical situation. All these factors have coincided and hit markets. Right now situation has got some relief.
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 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. It does not mean that you can’t trade it up, but it means that you have to take profit fast.
We also know that until MPR1 holds upside retracement – bearish trend stands valid. It means that market could show retracement even into 1260 K-resistance area and WPR1 and this will not mean that bearish trend has been broken. Somewhere around stands the target of engulfing pattern. At the same time this level simultaneously will become an indicator of breakout. Any action above MPR1 will suggest that sentiment has changed and this is not just retracement already. But currently market just has reached nearest resistance and done this not very steadily.
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.
That’s being said, weekly chart leads us to conclusion that right now as market has some upside reserve – it is too early to treat it as reversal and shift in long-term sentiment. Still, we can’t exclude this scenario totally, as we see some shifting in CFTC data, although it is mostly anemic by far. The key to success here is to keep watching on combination of action and CFTC/SPDR data around important 1260 area.
Daily
Although has drifted slightly higher last week – situation has not changed much. Price has reached WPR1 and stand below it. This is the sign of validation current bear trend. Overall action is not thrusting and recent two sessions were mostly inside one to Wednesday.
We know the habit of gold market to re-test previously broken significant lows and now we see it. This low coincides with daily OB, WPR1 and Fib level as well and this has held price from further upside action.
Right now price has hit all short-term targets. Significant level of resistance has been hit, engulfing target has been completed, as well as intraday AB-CD. It means that before any upside continuation will follow – price could turn to some retracement to create AB-CD pattern and probably this BC leg will be deep. Also we do not exclude that market could just turn down on a trip to 1180. We will find out it later, but right now – odds do not support long entry right here.
4-hour
As we’ve said – market has reached solid resistance and completed all our intraday targets – hit WPR1 on previous week, AB-CD here and all extentsions that we’ve treated as potential 3-Drive “Sell” pattern. At the same time market shows very harmonic retracements. Usually first sign of changing tendency is a breaking of harmonic swings. Thus, if gold will show deeper retracement than harmonic swing suggests – this probably will be first bell of downward turning.
Second important moment here is trendline. Market has re-tested it but has not returned right back down. If it will do this – this also will be important sign. Despite that gold has reached important objects – it’s action does not look like reversal yet, mostly as consolidation and this does not encourage us with taking short position yet.
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 gold has taken some pause and turn to upside retracement under impact of external fundamental and geopolitical factors. Currently we treat it as retracement and will do this till 1260 and MPR1. So, it will not be surprise and shock if gold will go further and it will not mean yet that bearish trend has been broken.
At the same time, as market right now stands at solid resistance and completed all important intraday targets – retracement is possible. This retracement will lead to some bigger AB=CD pattern, if gold has intention to move higher, or will shift to downward action to 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 U.S. equities rebounded, but posted a second straight weekly gain as concerns over the global economy have raised speculation that the U.S. Federal Reserve could keep interest rates low for longer.
Palladium rallied 2 percent, partly recovering from Thursday's losses, as broad-based gains in global markets lifted demand hopes for the metal mostly used in auto catalytic converters.
The dollar index rose, and the S&P 500 index gained about 1 percent after data showed U.S. housing starts and permits rose in September, a signal the market's modest recovery is supporting what appears to be growing strength in the broader economy.
U.S. equities, however, are on track for their fourth straight weekly decline, their longest streak in more than three years, on concerns about the economy and the spread of the Ebola virus.
"Gold has had a good week because just about everything else has had a bad week," Macquarie analyst Matthew Turner said. "The rally has paused today, however, as the wider markets are wondering whether things really are quite as bad as they thought they were yesterday."
The metal is up about 1 percent for the week after reaching a one-month high of $1,249.30 on Wednesday.
U.S. COMEX gold futures settled down $2.20 an ounce at $1,239 in lighter-than-usual turnover, preliminary Reuters data shows.
The U.S. dollar rose against a basket of major currencies on Friday after strong data on U.S. consumer sentiment calmed nerves following a week of severe market volatility
Also underpinning gold were Thursday's comments by U.S. central banker James Bullard that the Fed should keep buying bonds for longer than planned in the face of volatile markets and falling inflation expectations.
Gold has benefited from the low interest rates and central banks' liquidity that have prevailed in the years after the 2008 financial crisis.
Despite Friday's drop, holdings of SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, rose 0.2 percent to 760.94 tonnes, latest data shows.
In spot gold market news, five companies have been shortlisted to replace the century-old London gold benchmark with a new electronic system, which is expected to be in place within the next few months.
CFTC Report shows shy increase in open interest with growth in net long position. This combination mostly typical for bullish market, but right now it is too early to make such conclusion. This is just first bounce in net long position and we need to see some real tendency there to start speak about reversal.
Monthly
From long-term picture we have two major levels – 1400$ 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 yet. 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, despite the fact that last week has shown some upward change.
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.
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. Fall of crude oil prices also is supporting factor for economy in long term, because household and industry will get signficant economy on energy expenses, especially on coming winter.
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. Recent retracement on many markets – oil, equities, gold is mostly triggered not by sentiment changing but strong oversold. Markets probably overreacted a bit under pressure of Ebola fever spreading, surprisingly bad data from China and EU, sophisticated geopolitical situation. All these factors have coincided and hit markets. Right now situation has got some relief.
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 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. It does not mean that you can’t trade it up, but it means that you have to take profit fast.
We also know that until MPR1 holds upside retracement – bearish trend stands valid. It means that market could show retracement even into 1260 K-resistance area and WPR1 and this will not mean that bearish trend has been broken. Somewhere around stands the target of engulfing pattern. At the same time this level simultaneously will become an indicator of breakout. Any action above MPR1 will suggest that sentiment has changed and this is not just retracement already. But currently market just has reached nearest resistance and done this not very steadily.
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.
That’s being said, weekly chart leads us to conclusion that right now as market has some upside reserve – it is too early to treat it as reversal and shift in long-term sentiment. Still, we can’t exclude this scenario totally, as we see some shifting in CFTC data, although it is mostly anemic by far. The key to success here is to keep watching on combination of action and CFTC/SPDR data around important 1260 area.
Daily
Although has drifted slightly higher last week – situation has not changed much. Price has reached WPR1 and stand below it. This is the sign of validation current bear trend. Overall action is not thrusting and recent two sessions were mostly inside one to Wednesday.
We know the habit of gold market to re-test previously broken significant lows and now we see it. This low coincides with daily OB, WPR1 and Fib level as well and this has held price from further upside action.
Right now price has hit all short-term targets. Significant level of resistance has been hit, engulfing target has been completed, as well as intraday AB-CD. It means that before any upside continuation will follow – price could turn to some retracement to create AB-CD pattern and probably this BC leg will be deep. Also we do not exclude that market could just turn down on a trip to 1180. We will find out it later, but right now – odds do not support long entry right here.
4-hour
As we’ve said – market has reached solid resistance and completed all our intraday targets – hit WPR1 on previous week, AB-CD here and all extentsions that we’ve treated as potential 3-Drive “Sell” pattern. At the same time market shows very harmonic retracements. Usually first sign of changing tendency is a breaking of harmonic swings. Thus, if gold will show deeper retracement than harmonic swing suggests – this probably will be first bell of downward turning.
Second important moment here is trendline. Market has re-tested it but has not returned right back down. If it will do this – this also will be important sign. Despite that gold has reached important objects – it’s action does not look like reversal yet, mostly as consolidation and this does not encourage us with taking short position yet.
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 gold has taken some pause and turn to upside retracement under impact of external fundamental and geopolitical factors. Currently we treat it as retracement and will do this till 1260 and MPR1. So, it will not be surprise and shock if gold will go further and it will not mean yet that bearish trend has been broken.
At the same time, as market right now stands at solid resistance and completed all important intraday targets – retracement is possible. This retracement will lead to some bigger AB=CD pattern, if gold has intention to move higher, or will shift to downward action to 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.
