Sive Morten
Special Consultant to the FPA
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- 18,527
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:
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.
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.
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:
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.
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.
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:
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.
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.
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:
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.
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.