Gold GOLD PRO WEEKLY, October 28 - 01, 2019

Sive Morten

Special Consultant to the FPA
Messages
12,729
Fundamentals

Yesterday in EUR weekly report we've talked on fundamental issues that make impact on all markets and gold market as well. Beyond Brexit and Central bank rate decisions investors start worry on US economy as it starts to show worse data. This, in turn, also could make impact on gold market, but positively.

Gold has shown good performance last week and finally starts to move in direction that we were waiting for. We hope that this action will be just short-term splash but gradual action right to our target around 1567$ area.

As Reuters reports - Gold scaled a near two-week peak on Thursday after weak economic data from the United States raised expectations for another interest rate cut by the Federal Reserve.

“The bump we got now is because of the miss on durable goods numbers in the U.S.,” said Bob Haberkorn, senior market strategist at RJO Futures said.

“We had a couple of misses in the last few weeks on these numbers, be it retail sales or durable goods, and some of the PMI numbers. Overall, it lends support to another rate cut from the Fed before year-end.”

New orders for key U.S.-made capital goods fell more than expected in September and shipments also declined, the data showed.

New orders for key U.S.-made capital goods fell more than expected in September and shipments also declined, a sign that business investment remains soft amid the fallout from the U.S.-China trade war but other data on Thursday showed the spat has yet to have much effect on the overall jobs market.

Also adding to the concerns over the health of the global economy, euro zone business activity stagnated in October as demand withered, according to a survey published on Thursday.

Central banks globally are facing increasing pressure to dole out monetary support for flagging economies as the U.S.-China trade dispute continue to take toll on trade and business sentiment.

The Fed has cut interest rates twice this year and investors currently see another reduction in borrowing costs when policymakers meet next week.

Lower U.S. interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

“One thing that will help propel gold higher is yields. I reckon the downward trend for yields will resume because fundamentally, nothing has changed,” said Fawad Razaqzada, market analyst with Forex.com.

“We are still seeing central banks conveying a dovish message across the board and that should keep yields under pressure long-term,” he said.

Earlier in the day, the European Central Bank left key interest rates unchanged.

Holdings of the largest gold-backed exchange-traded-fund (ETF), New York’s SPDR Gold Trust, fell 0.13% on Wednesday from Tuesday, while the largest silver-backed ETF, New York’s iShares Silver Trust, remained unchanged during the same period.

Gold gained on Friday and was on course for its best week in five amid continued uncertainty around Brexit and the health of the global economy, while a sustained supply crunch propelled palladium to a record high.

“Brexit has gone into another limbo and there is still some uncertainty over the progress of (U.S.-China) trade talks. These are increasing risk aversion and pushing gold higher,” said FXTM analyst Lukman Otunuga.

The European Union agreed to London’s request for a Brexit deadline extension on Friday but set no new departure date, giving Britain’s divided parliament time to decide on Prime Minister Boris Johnson’s call for a snap election.

Johnson will push ahead with plans to leave the European Union and with the government’s domestic agenda even if lawmakers fail to back a snap election, his spokesman said.

On the trade front, top U.S. and Chinese trade officials will discuss plans on Friday for China to buy more U.S. farm products.

In return, Beijing will request the cancellation of some planned and existing U.S. tariffs on Chinese imports, people briefed on the talks told Reuters.

The U.S. Trade Representative’s office said on Friday deputy-level talks would carry on, but provided no details on the areas of progress. President Donald Trump said the United States was doing “very well” in the negotiations.

CNBC earlier reported that top negotiators from the two countries “made headway on specific issues” related to trade on a phone call.

Gold has gained about 17% this year mainly due to the U.S.-China trade spat and the resulting impact on the global economy.

Safe-haven buying is clearly a good solution for investors given the current geopolitical and economic scenario, said Afshin Nabavi, senior vice president at precious metals trader MKS SA.

Despite that we do not see real big shifts in driving factors - CFTC data shows that net long position slightly increased this week:

upload_2019-10-27_16-53-29.png

Source: cftc.gov
Charting by Investing.com


In fact, here we could repeat the same conclusion that we've made last week - "fundamental background mostly corresponds to the chart picture that we see on gold. Brexit postponing, weaker US data, coming rate cut and new comments from the Fed, which are widely expected to be more dovish, China slowdown - all these factors support gold. Technically, as we said previously gold keeps moderately bullish sentiment which is reflected in charts as well." We hope that this tendency will last for some time to hit our target.

Technical
Monthly

Despite that we've got nice rally this week - it has no impact yet on monthly chart. Gold stands in reaction to strong resistance area and October is inside month by far. The resistance here is strong and valuable and it deserves meaningful retracement. But currently it is too few signs of real retracement. September drop was too small and mostly reminds consolidation around the level rather than retracement, and October performance just confirms this.

Price doesn't go down and stands near the target. Major Fib level has not been reached as well. This is not the way how usually bearish reaction develops. It means that gold keeps bullish sentiment and could prepare for upside action. But, for the truth sake, potential upside action has limited chances to become a breakout. Most probable that upside action will happen but not exceed our 1585$ border.

Thus, we keep this area - 1530-1585 as tactical ceil by far, but, as we have additional driving factors, we should pay attention to daily and intraday performance, just to not miss the signs of upside continuation.

In general, combination of butterfly target, major 5/8 Fib resistance and monthly overbought is rather strong barrier. Something really outstanding has to happen to force gold break it without respect. At the same time, the way how this respect will start is still unclear. Gold has a lot of freedom in this subject as it could flirt with resistance some time before major reaction will start.

gold_m_28_10_19.png


Weekly

We still keep our suggestion of DRPO "Sell" pattern and appearing of its 2nd top. This week market was not able to close above 3x3 DMA again, but we will keep watching.

As we said previously weekly chart is the one that explains why we think that gold is bullish still. As we know any real retracement should be strong, because drop always faster than rally due emotions. Fear is stronger than greed. But gold doesn't show any fear. Pullback is slow and small as price has not reached even near standing Fib support. XOP is still untouched. So, our suggestion - gold is forming consolidation before final upside leg.

So, we need price close above 3x3 DMA, preferably forming a new top of DRPO pattern reaching XOP target.

That' being said, despite that smell of the retracement in the air - gold stands stubbornly too tight to the top - which means that major downside action is somewhere in the future and we can't ignore possible return back to the tops.

gold_w_28_10_19.png


Daily

This week we haven't expected that gold will pass through 1520 area, because of strength of this level. In fact we have Agreement as COP target stands in the same area. Thus, our suggestion was correct and we see that once gold has hit it - it has turned down a bit.

We have the chain of the targets, based on the same AB=CD pattern. Its XOP absolutely satisfies us, because it stands above weekly XOP and our weekly setup will be completed. Now, for the gold market is vital to proceed higher and not return back in flag consolidation. 1520 area must be broken to keep bullish sentiment here:
gold_d_28_10_19.png


Intraday

Gold has shown sharp reaction on COP target and formed bearish engulfing pattern of solid length. It means that downside action probably will continue and most probable it will take shape of AB=CD pattern on 1H chart.

Here is 1490-1495 area is crucial. This is strong support, two pivots and trend line of daily flag pattern. Gold should hold above it to keep bullish context. At the same time this is an area where we consider another long entry. Scalp traders could trade gold bearish, based on engulfing pattern. For instance, you could watch for small "222" Sell on 1H chart.
gold_4h_28_10_19.png


Conclusion

Gold has started well and next week we will keep watching, whether it will be able to support this startup. Fundamental background mostly stands supportive to gold upside action.
 

Sive Morten

Special Consultant to the FPA
Messages
12,729
Greetings everybody,

So, our weekend suggestion on another leg down was correct, but despite it has happened it brings no optimism in short-term view as we've got "Evening star" pattern on daily, which again suggests another leg down, at least for 10-11$ per contract.

The only factor that could re-establish status quo is Fed statment. Dovish comments could cancel potentially bearish pattern. At the same time, if we wouldn't have Fed on horizon - I would suggest another drop here.
So, you have to answer on a question - wether you would like to make bet and follow to Fed driving factor or not. If you believe that, indeed, Fed will come with dovish statement and "Evening star" will fail - then you could try to go long. Conversely - it would be better to sit on the hands till the end of the week.
gold_d_29_10_19.png


On 4H chart our target is reached - 4H Bearish engulfing pattern triggered downside action right to 1490 support area. The one thing that still worth to mention here is momentum - take a look, drop was rather fast, which is not good sign for the bulls. Despite that market stands at trend line and Fib level support - it could drop more, following to daily pattern:
gold_4h_29_10_19.png


On 1H chart we have detailed extensions. OP is reached, next one is XOP around 1480$ area. Now gold has turned to upside bounce, which means that we should get larger AB=CD pattern, where AB leg is whole downside action to current OP. It is most probable that gold could start dropping again from K-resistsance. If, somehow it will be able to reach 1507 major 5/8 level, in this case large AB=CD will have OP target at the same 1480 level:
gold_1h_29_10_19.png


That's being said, currently the long position could take only traders who believe that Fed statement will trigger strong upside action on gold. Those, who doesn't want to rely on events should do nothing, because technical picture suggests downside continuation.
 

Sive Morten

Special Consultant to the FPA
Messages
12,729
Greetings everybody,

As we've suggested yesterday, gold should drop a bit more and it did. But drop was not dramatic so, it is nothing lost yet for the bulls. In general we suggest that gold keeps positive mood, especially on weekly chart, and now we wait for Fed to get clear confirmation of that.

Meantime, on daily chart gold stabbornly stands in sideways consolidation above "C" point, which is a positive thing. In general, while price above "C" point - upside action is possible. Besides, today we could get bullish grabber here:

Gold Daily Chart

On 4H chart gold slides a bit lower, but still is coilng around trend lines' cross and 5/8 Fib level:

Gold 4H Chart


On 1H chart price stands at moderate support- minor trend line and WPS1. Upside bounce doesn't look impressive, which means that this is just a retracement. Here we could suggest forming of butterfly pattern, that could finalize XOP target. Drop to OP was fast, reaction on OP was weak, thus, from technical point of view - action to XOP looks reasonable

Gold 1H Chart


So, if you prefer to take "accurate" trades that are based on clear patterns and stop order that relates to this pattern - current situation is not for you yet. Gold doesn't provide clear setup by far, and keeps some degree of uncertainty although overall mood is positive. It means that only those traders who would like to bet on Fed statement and expect that it could trigger rally on gold, could try to buy by market with extended stop somewhere below "C" point on daily chart. As you understand this approach is not for everybody.
 

Sive Morten

Special Consultant to the FPA
Messages
12,729
Greetings, mates

So, Fed speech has made a positive impact on Gold market as well. Despite that in recent three weeks we talk about bullish sentiment, but still we do not have clear patterns, which makes difficult to trade market. Indirectly gold stands in tight range just below the lows, which means that bullish power is growing and some day it will be released. Traders with solid balance could take position with extended stops, but others are not.

But yesterday we've got the bullish grabber pattern, which also is bullish reversal candle. This is not superb add-on but at least something that traders could use:

Gold daily chart

On 4H chart Fed speech helped gold to climb above support cluster again. Now price stands above the cross of trendlines and 1490 Fib level:

Gold 4H chart

On 1H chart our XOP target a bit surprisingly but has been hit. Now gold has climbed above K-resistance which is a good sign. Thus, to make position based on daily grabber we could use one of the supports of recent upside swing:

Gold 1H chart
 

Sive Morten

Special Consultant to the FPA
Messages
12,729
Hi mates,

Hope you enjoy the holidays, so I will not bother your too much ;)

Just minor update on gold. Price shows nice performance, confirming our suggestion and finally our long-term expectations are rewarded. Patterns that we've discussed yesterday - grabber and reversal session at onces, are working nice as gold again has come to 1520 resistance. This level has been tested 3 times already.

Based on our AB-CD pattern, now we stand in extention leg to OP which is 1534$.
gold_d_01_11_19.png


On 1H chart we have few levels, but in current circumstances there should not be deep retracement. I gravitate to idea that it should be somewhere 1506-1508 nearest levels, but definitely not below 1500 K-support. That's because major retracement already is done, as reaction to COP. Now all downside AB-CD's are vanished. Upward action shows thrust and price is not at overbought:
gold_1h_01_11_19.png
 
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