Gold GOLD PRO WEEKLY, October 23 - 27, 2023

Sive Morten

Special Consultant to the FPA
Messages
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Fundamentals

It seems guys that gold analysis very soon will turn to some political report. Seriously. What sense to discuss fundamental economical driving factors if gold shows no reaction on them. US interest rates has skyrocketed but gold as were moving higher and is moving higher, looking absolutely unstoppable. Thus, we could speak about some holding factors and they really are, but in a moment they have no impact on gold performance. Now it seems that the major driver is the length and the shape of the conflict. It will be longer and wider gold will get additional upside impulse. If counterparties will finally find some points for compromise - rally could take a pause...
This is probably among factors that we need to consider as well.

Market overview

Gold rose to a more than two-month peak as the escalating conflict in the Middle East sent investors flocking towards the safe-haven metal. old, considered a safe store of value amid political and financial uncertainty, has climbed more than 5% so far in October. Wall Street's main stock indexes have dipped amid risk aversion.

"Gold could breach $2,000 in the near-term if there is an escalation of geopolitical conflict. Additionally, having the Fed pause rate increases or hint at a lower probability of increases in the future would be viewed positively," said Ryan McIntyre, senior portfolio manager at Sprott Asset Management.

"Gold will pull back if the Middle East situation simmers down, but right now the market place is expecting a further escalation," said Jim Wyckoff, senior analyst at Kitco Metals.
With the dollar maintaining its bullish trend and bond yields on the rise again, it is not going to take much to slam gold back down, Fawad Razaqzada, market analyst at City Index, wrote in a note.

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While Ole Hansen, head of commodity strategy at Saxo Bank, highlighted in a note that asset managers, many of which trade gold through exchange-traded funds (ETFs), continue to focus on U.S. economic strength, rising bond yields and potentially another delay in peak rates. Officials in the US and the region were increasingly worried they wouldn’t be able to keep the conflict from spreading should Israel go ahead with a ground invasion. Biden has already sent two aircraft carriers to the region and put troops on alert to send a message of deterrence to Iran and its ally Hezbollah, whose thousands of missiles could pose a severe threat to Israel.

The threat of escalation continues to provide support for bullion, which has gained since Hamas’s surprise attack on Israel earlier this month. Previously, the metal was trading near a seven-month low, with a steep sell-off in Treasuries weighing heavily on the non-yielding asset.

Standart Chattered, Cooper said:
We saw a lot of those macro headwinds starting to build and we were starting to look like we were going to get a re-test of that 1800 level. But yes, it's been the resurgence in safe haven buying that has buoyed prices higher. What we tend to see when we have heightened geopolitical risks is that we have the initial rally as we see a move into the safe haven assets that safe haven feel. But thereafter, we tend to see that move tends to fade. We saw a very similar price reaction when Kuwait was invaded, Zimbabwe and where prices are currently trending at a very similar level to back then as well. And so it's great to see you. I should point out that you're looking at the Gold Futures contract for December. Spot gold is still at 1990, so not at that 2000 yet, but you can definitely see a getting there.

It depends on which period are looking at here in the short term. Gold We think that could be exposed to further upside risk, but we think that the geopolitical premium that's been priced in the moment is likely to be short lived. But beyond this, going into the back end of 2024, that's when we think that we're more likely to see upside risk for gold materialising. When we see confirmation that the Fed is likely to cut rates and interest rates around the world are likely to start to ease.

Some political conclusions

I'm not a political expert, that's why I share here with the view that hardly you will read on Bloomberg, Reuters or whenever else but it is very logic. This chain of events and its explanation by experts shed some light on real political game that stands on the back of Middle East conflict. Unfortunately, based on this logic, this conflict hardly will be over any time soon. Although, this is supportive for the gold, despite how cynic it sounds:

The operation to eliminate Israel has begun.
• The key event of the week is Putin's visit to Beijing.
• The "One Belt, One Road" summit showed the presence of 150 countries in the project.
• Now it is clear to everyone that the European Union expects a whole bunch of problems. And 150 countries have not gone away.
• The United States has a clear and understandable plan: to "squeeze" Southeast Asia from China.
• China has no plan yet.
• If China has to fight with the United States, it needs a strong rear – Russia. China asks Russia for ideological support and guarantees that Russia will not give up.
• "One belt, one road" does not contradict our interests Putin said.
• Putin gave China a guarantee that Russia would not betray it.
• Russia is ready to provide theoretical assistance to China.
• The need for cooperation is greater for China than for Russia, and Putin got everything he could from China.
• It is fundamentally important for Americans that the cost of energy resources in Western Europe has to be higher than in the United States. It is this task that they will solve.
• It is important for the UK to keep Turkey as a hub. Otherwise, it cannot control Western Europe.
• Turkey needs money. The only source of money is the offshore gas field in the Mediterranean.
• At the slightest attempt to negotiate, some rocket will hit some Israeli hospital. The key thing is that there should be no peace.
• The United States is well aware that they are trying to detain them. As soon as resources are needed in the Southeastern region, they will be transferred there from Israel.
• The US wants to control only Western Europe, but cutting it off from the resources of the Asian East. In fact, they return to the Monroe doctrine.
• As part of the agreement with China, Russia received its Eurasian piece. Kazakhstan, Eastern Europe, Iran, Turkey and the Arab world can go there.
• Russia will start creation of Eurasian currency zone.


That is what has been told in short. I do not know whether you're interested with political details or not, but for the gold market it means that supportive factors will last longer and this is not just short-term event as it has been described by Copper from Standard Chartered. Now there are two major direction of competition. In Middle Asia, as most densely populated region between US and China and Europe and competition inside the AUKUS between UK and US.

Now it has become clear for the US that they can't restore its economy power by only domestic consumption. It is strong enough. And they need urgently new markets, where people have more or less good income and large population. The only region is - Middle Asia. And the US primary task for now is to conquer this market in struggle with China. So, Israel turmoil right now form them is undesirable factor and they would like to stop it as soon as possible to focus on China.

UK now doesn't have Imperial ambitions. They would like to create their own currency zone in Europe and control it. So, the US and UK have absolutely different targets in EU. UK tends to control Turkey, making them gas hub, because EU right now is too depended from delivery by sea, which is under control of the US. Delivery by land could provide freedom, decrease cost and keep EU as an economical rival to the US. While the US wants the opposite - totally control EU energy supply and use it to avoid economical competition, just eliminating this competitor.

Finally, China strategy of "One belt - one road" was planned as goods delivery to EU by land - the way that US can't control. But now EU doesn't consider any more as primary consumer of Chinese goods due to deterioration of national economy and reduce of consumption ability. China also is aimed to control Middle Asia area for its expansion. But it vitally needs very reliable ally and back, that could provide only Russia, which has its own strong commodities basis, high military technologies and power. It seems, based on how Putin was met by Xi, that this agreement has been achieved.

But China needs time for preparation. Supposedly, something has been promised to UK in exchange of delay of the US in Middle East conflict. And the US understand this, but can't do anything. It explains why they start pressing on Zelensky in direction of negotiations with Russia, they try to stop conflict on MIddle East as soon as possible, but once again their efforts were in vain.

Inside the US is also big struggle going. THe soap opera with the Speaker election, and showing J. Biden not in a best side, I mean this CNN video from the plane, hints that Joe is loosing ground in political struggle, or his person is not considered any more for next President's election round. At the end of the week, the US president delivered a keynote speech (after the failure of his mission in Jordan), in which he delivered a principled thesis sounds like this:

"America's leadership is what unites the world."

Since the profound inadequacy of this thesis is obvious to everyone, even to those who sincerely support the United States (for example, to those leaders of Israel who want to preserve this country), its voicing cannot cause anything but very serious suspicions that the United States has no positive ideas.

The last stage of financial capitalism is entering its final stage , it is on the verge of collapse. And this collapse will mark the transition to a new paradigm and complete the transformation process. And what will happen after the transformation is another story. There are few options, but there will be echoes all over the world. Because, apparently, it was not possible to make a choice in favor of expanding consumption, over-consumption. Energy is becoming more expensive in terms of the production of this very energy . And until a cheap source of energy is created or found, there is no way out.

Therefore, there is a common interest in this conflict - to start an energy crisis as soon as possible. The only thing that is happening in the Middle East now is a catalyst that will really begin to speed up the process, because the situation around Ukraine has hit Europe. As we can see from macro indicators, Europe is cracking, but not yet breaking. It will be achieved through a real energy shock, because Europe depends on energy supplies by sea.

It is clear that the main goal of the conflict is to involve Iran. At any cost. And this whole situation arose, as we see, as if unexpectedly. It was as if nothing was foreshadowed. If you look at the map, we have Turkey, which is still on the side of, let’s say, the conditional Islamic world. Well, Turkey also rests on one person, on one personnel - and this is a shaky foundation.

Therefore, if this plan is implemented, they will deal with Turkey faster, because a powerful crisis is coming to Turkey. It's inevitable. Young people are used to living well, their lira is falling, naturally there will be dissatisfied people. And the rural population that supports Erdogan does not live in large cities, so a powerful financial crisis cannot be avoided. This crisis will lead to either a regime change or a transformation of the governance system.

And the task of these forces is to drag Iran into the war. And even understanding that the country is mountainous, it is difficult to fight, but the calculation is made that Iran will struggle economically with the war, the economic crisis there will expand, the population of large cities will take to the streets and this, supposedly, will help change the regime.

Then they approach Central Asia, completely blocking Russia from all sides. And they are approaching China. This is the political aspect they are pursuing. And the geo-economic aspect is an energy crisis as a side effect that will lead to the final collapse of the European economy and the further collapse of the European Union. This is the minimum plan. Well, at most the plan will probably be different.

️ But so far they have not decided to involve Iran to the fullest due to the fact that Iran still has verbal support from Russia and China. Oil target is $250 for Brent . But this can only happen in one case - if a global showdown happens in the Persian Gulf. And this will solve all the problems. The energy crisis is increasing investment in green energy, finishing off the European economy, which is falling apart. And it will be possible to further absorb it and pull out the last capital.

And this all solves problems in America. Because Brent may be 250, and taking into account the fact that oil supplies from America will be forced to decrease, they will have an excess of their oil. Therefore, it will be less painful for them. This is an option that needs to be calculated from the point of view of when this will happen.

Next year we have an election year in the USA, and a new cycle of the American president begins from 25-28. Everything will happen in the next presidential cycle. Now there is only one variable. It is not profitable for them to promote rising oil prices at the moment - they do not change horses at the crossing. But if the horse drowns, then everything changes.

So, here is just brief explanation the real processes that stand behind this conflict. As you could see, really big net of events. For gold it means solid and stable demand in nearest 1-2 years maybe, or even longer. Thus, our long-term view is not changing and we still recommend to gradually keep buying physical gold and keep it in different places. If you have your own view - please don't hesitate to share on the forum. Whether we would like it or not, but gold is becoming a "political asset" and now its analysis impossible without consideration of political picture. Just take a look at factors that are driving it now.

Technicals
Monthly

Probably it is a bit too early to talk about, since it is more than a week until October close, but right now monthly chart shows few bullish signs. First is - potentially huge bullish engulfing pattern, bullish reversal month and potentially stop grabber, suggesting action at least above 2057 top. But from the view of pivot points picture also looks bullish - market shows strong rally not just from nearest 3/8 support area, but from YPP, keeping long-term sentiment positive. If we get the grabber - it suggests jump above YPR1 that already has been tested this year. Potentially it suggests long term trend continuation.

From the technical point of view, we could use any pullback in the October range to consider the long entry. But the major question for now - whether this pullback happens at all and when...
gold_m_23_10_23.png


Weekly

Weekly trend turns bullish. Downside AB-CD has been erased as price has formed bullish reversal swing. Here gold is not at overbought yet, which stands around 2020$ area. Although we have hoped on the pullback last week, because of huge "Morning star" pattern but it has not happened. Now we will be watching for the pullback, based on monthly engulfing pattern:

gold_w_23_10_23.png


Daily

Market is overbought around 1975 Fib resistance. As we've agreed on Friday - this is next area where we will be watching for response, because, actually this is the last resistance on the way to previous top. From the technical point of view - we have no other options but wait. Buying around resistance and overbought is not good idea. But, of course, you could follow your own driving factors.

Here we're watching first - for the pullback and big reverse H&S pattern. Second, we also could keep an eye on daily DiNapoli patterns, because upside thrust looks great and we could get DRPO or B&B "BUy" which is more logical right now. Potentially 1917 K-support looks interesting because it matches to the left side valley harmonically, and also strong support area:
gold_d_23_10_23.png


Intraday

On 4H chart market hits our XOP and still stands there, without any hints on reversal by far:
gold_4h_23_10_23.png


While on 1H chart we have just a hint on small H&S pattern that is yet to be completed. Still, this pattern looks too small for our purposes. Let's hope that it will become part of something bigger. Although it is not forbidden but in current environment we do not consider any short positions, if even we get good intraday patterns. For now, the primary object is to get a good long entry.

So, in this report we see very interesting thing - as geopolitical background as technical analysis of long-term charts point on something really big. And it seems positive to gold.
 
Greetings everybody,

It seems that gold now is getting into "win-win" situation. Once Middle East conflict has helped it to overcome US yields and dollar rally pressure - now retracement starts on the yields and dollar due to the monthly yields overbought. And this seems right in time as the news stream from the M. East narrows. Situation turns to uncertainty. As a result we could not get the pullback that we've discussed. Gold could take some sideways action before attempt of upward breakout:
gold_d_24_10_23.png


In current situation it is definitely not safe to take short positions. Which we do not intend to do. On 4H chart market also shows no bearish signs. Or even better - pennant as a rule, is upside continuation pattern. Although it could become a bit more extended:
gold_4h_24_10_23.png


For now the only combination is possible, that could trigger the pullback - real easing of the M. East conflict, some negotiations on horizon etc. and strong PCE and GDP data in the US, suggesting more activity from the Fed. Otherwise, gold has no big reasons for solid pullback. As you could see rumors on BTC ETF approvement has not triggered andy sell-off here...
 
Greetings everybody,

Just brief update on Gold, as nothing is going on here by far. Still couple of moments seem interesting. First is, while FX market collapsed, following reversal on DXY, we do not see the same on Gold. This is obviously bullish sign.

For now, daily time frame is our primary one. Here we could get DiNapoli patterns as thrust is really great. Even DRPO "Failure" might be really handy in current situation. Gold keeps bullish context. And even deep 5/8 retracement is acceptable, because it is normal retracement after forming of bullish reversal swing. So, potentially even DRPO "Sell" could work fine here:
gold_d_25_10_23.png


Meantime, on 4H chart we see nothing but just flag consolidation which is also bullish. Hopefully we will get some better entry levels, so it makes sense to wait a bit. Concerning short entry - our plan doesn't suggest it, as it could be only intraday.

gold_4h_25_10_23.png
 
Welcome back,

So, gold doesn't happy us with activity. Still there are few moments that seem important today. At least for those who consider short positions taking. Take a look that gold is turning up again. It already stands above "last" major 5/8 resistance, and it is not at Obought anymore. Now OB level is around 2030 - as weekly as daily one.

Second is, gold is raising together with dollar and US yields, which is a clear sign of geopolitical factor. Now is the most interesting thing - it is happening on a background of recent J. Biden statement, which was significantly more peaceful than two weeks ago. If previously US and Israel have hoped to resolve all problems by force, yesterday Biden told "Two countries for two nations", indirectly hinted on independent Palestine country. And now we should ask - why gold is raising again? There are only two options - either we do not know something, or the reasons are not of geopolitical nature.

Today we get GDP report, so, let's see... the one thing is clear, short position might become a not pleasant procedure.
gold_d_26_10_23.png


On 4H chart, as we've said - bullish flag has been broken up and we haven't got any meaningful retracement:
gold_4h_26_10_23.png


Those who consider short entry should watch for OP target on 1H chart. If bearish action starts at all - it should start somewhere around, once OP will be done. In fact here we get "222" Sell... Otherwise, gold just keep going higher, breaking out on operational space until major top:
gold_1h_26_10_23.png
 
Greetings everybody,

Gold itself doesn't show any patterns, but its behavior mostly looks bullish. Price stands stubbornly around resistance, without any signs of pullback. This is usually the sign of preparation for upside action, despite how strong it might be. Besides, DXY and GBP show grabbers, suggesting some dollar weakness. Both things together means that maybe it makes sense to not hurry up with bearish position here:
gold_d_27_10_23.png


On 4H chart we also have couple of grabbers but of a smaller scale:
gold_4h_27_10_23.png


That's why, it seems that OP is the least that gold should touch. Potentially, depending on some other factors - PCE numbers, amount of stops above the top etc, it could proceed higher where we have multiple targets in the range of 2010-2025$
gold_1h_27_10_23.png
 
It does not necessarily mean anything good for the world, but man I personally love the break out to +2000 per ounce for the long term. Hope it stays above on monthly
 
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