GOLD PRO WEEKLY, October 30-03, 2017

[Sive Morten]

Fundamentals

(Reuters) - Gold edged higher on Friday, reversing earlier losses after the Catalonian parliament's independence declaration from Spain led investors to seek safety from political upheaval. Catalonia's declaration was in defiance of the Madrid government, which was preparing to impose direct rule over the
region.

"Catalonia is a small microcosm of the total European situation. But what it represents is the idea of an unstable European Union," said Dan Huffey, senior market strategist at RJO Futures in Chicago."(These are) all reasons why we would look for a safe haven like gold to rally," he added.

Bullion is often used as a safe haven in times of geopolitical and economic uncertainty, while riskier assets such as equities are generally sold off. Spot gold was up 0.3 percent at $1,270.36 an ounce by 2:02 p.m. EDT (1802 GMT), heading for its second consecutive weekly decline. Gold had earlier dropped to a three-week low of $1,263.35. U.S. gold futures for December delivery settled up $2.20, or 0.2 percent, at $1,271.80 per ounce.

"Gold went up on the back of the Catalonia independence, but I still think it's not going to last long because the dollar is still trading at high levels," said Forex.com analyst Fawad Razaqzada.

The dollar index came off its session high on a Bloomberg report of U.S. President Donald Trump eyeing Federal Reserve Governor Jerome Powell as his pick to head the U.S. central bank. Yet, the greenback was still trading near a three-month high, limiting gold's gains as it makes dollar-priced commodities costlier for non-U.S. investors.

According to a Politico report, Trump's search for the next Fed chair has come down to Fed Governor Jerome Powell and Stanford University economist John Taylor. "The market is not pricing in more aggressive rate hike from the Fed even given a potential change in leadership next year. We are likely to see the same rate hike path," ETF Securities commodity strategist Martin Arnold said.

Elsewhere, the U.S. House of Representatives helped pave the way on Thursday for deep tax cuts sought by Trump and Republican leaders, underpinning the greenback.

Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares , fell by 1.2 tonnes on Thursday, data from the fund showed, its first outflow in more than two weeks.

Chart of the Week: Trump’s Tax Plan Gets a Little Help From Some Friends
by Fathom Consulting

The so-called ‘Trump trade’ may have shown a flicker of life following the passing of a 2018 budget blueprint last Thursday, but we do not expect US tax reform to be enacted until Q1 or Q2 next year.

Last Thursday, Republican senators passed a 2018 budget blueprint by a narrow 51 – 49 margin, with Democrats unanimously opposed. Thursday’s vote is one significant hurdle cleared for the administration’s recent tax proposal; the US dollar, Treasury yields and the probabilities that investors assign to future interest rate increases rose in response. But overhauling the tax code and cutting taxes significantly, as planned by the president, is a very complex process and it will be no easy task for the administration to please all sides and get enough support for the final tax bill to be passed. As we explained in a recent note, we believe that large corporate tax cuts will eventually be enacted, but this is more likely to happen in Q1 or Q2 next year, and not later this year, as the administration hopes – Thursday’s developments do not change that view. The upshot is that we expect the so-called ‘Trump trade’ to come back to life as tax reform progresses, although it may be a bumpy ride as delays occur and divisions between Republicans are made public. The bigger picture though, as we discuss in our latest Global Economic and Markets Outlook, is that the effective rate of corporation tax would have to turn negative in order to render current US equity valuations sustainable over the medium to long term.

COT Report

Recent CFTC numbers shows that careful attempts to go short are started to appear. While gold is dropping from extreme levels of net long position, last 4 weeks decreasing of open interest has slowed. It means that in addition to long closing some new shorts have joined. Currently it is too early to talk on bear trend, but definitely some new shorts have been taken.

SPDR fund shows mostly flat action. The only interesting moment here is - investors totally have ignored short-term rally to almost 1300 area. While gold has jumped for 30$, storages were stand the same. This is also warning sign that difficult to call as bullish.
Now storages are decreasing gradually:

Although we do not have any clear bearish signs here yet, but it is also hard to call overall picture as "bullish". It seems that it is more suitable to call it as "light weakness".

Technical
Monthly

Recent events, guys, make us take critical look at action on gold market. Key markets show hints on dollar strength that could last for 6-8 months. As we coming closer to 2018 and December Fed meeting, as stronger pressure of anticipating of dollar strength becomes.
Thus, on Friday and recent weekly research on EUR we've shown long-term charts on 10-year Notes, Dollar Index. They are suggest strong growth of US Interest rates that will be supportive for dollar, but deadly for gold market.

And now perspectives of upside action do not look as promising as it was 2-3 months ago.

Currently gold has formed "222" Sell pattern on monthly chart. When price has started up from 1050 lows - long-term bear trend line has been broken and re-tested later. But after that upside action has slowed significantly. Besides, this upside action has taken the shape of AB-CD pattern, that is typical for retracement.

This makes us doubt on upside continuation here and we suspect that this AB-CD action of "222" pattern mostly should be treated as retracement after drop out from 1380 area rather than new upside leg.

September month has shown reversal shape and if it would have closed slightly lower, we could call it as "reversal candle".

October doesn't bring a lot of new inputs as trading range is rather small and mostly as September as October still stand in August range. But next week we will get NFP report, last week GDP numbers were not bad - 3% growth.

Besides, market stands at strong resistance area around 1330. It already has been tested once, but it is still valid. This is not just 3/8 major monthly Fib level. This is also Yearly Pivot Resistance 1.

Year is coming to an end and the fact that upside action was stopped by YPR1 tells that 2017 upside price action mostly a retracement of long-term bear trend.

Yes, we have bullish scenario as well. Next major target will stand around 50% Fib level and Agreement, as it coincides with upside AB=CD objective point as well. Market could take the shape of butterfly to get there, if our "222" pattern will fail. 1.27 extension also stands in the same area. But to keep this scenario valid price should not drop too deep. If gold will break 1205 lows, it will suggest deeper downside continuation and put butterfly and any upside continuation under question.

Finally, gold is turning to seasonal bearish trend that starts in February, but most active stage of bullish trend ends in August - October. As you we can see market was not able to get some advantage from it.

Weekly

This chart shows that gold has dropped back to major K-support area. And this recent drop is important, if we will take a look first at the strength of preceding upside action. Rally from 1205 to 1350 was rather strong, a lot of tail closing candles. In our "morning star" pattern 3rd candle was also rather strong.

Gold has uncompleted AB-CD pattern inside "222" and all these reasons were not enough to start upside action. Market has dropped back to K-support area and mostly erased "morning star". This price action mostly shows weakness rather than normal bullish market behavior. This is most important detail here, on weekly chart.

Besides, gold has completed harmonic swing of retracement once "morning star" has been formed, but it was not able to re-establish upside action.

Daily

Daily chart doesn't bring something special yet. Trend is bearish here as well. Most important here is multiple failure of different bullish patterns through last week. Recall - daily bullish grabber in the beginning of the week, later was intraday reverse H&S pattern and some others. So, gold has not formed bullish reversal patterns at support levels where it could.

This put big shadow on bullishness of the market and should be treated as warning sign probably that market is not as bullish as it seems.

Now, gold has big chances to stay in triangle consolidation as price has dropped back to Fib support area. So, on next week, in the beginning gold really could fluctuate inside triangle and even some upside action could start on Monday. But appearing of triangle after drop has more chances to be broken down as soon as consolidation will be over. May be this will happen on Friday, on NFP release...

Intraday

So, 3/8 retracement already has been done here and gold will open around WPP. Most probable first destination is K-resistance area and WPR1 - 1280-1283. Following action will depend on whether market will form any patterns here. For example, appearing of reverse H&S could push price to 1289 Fib level first but potentially even to upper border of triangle around.

Fluctuations inside of consolidation could be different but they will not change overall situation on the market until breakout of triangle will happen.

Conclusion

On longer term perspective now more factors have appeared that indicate more pressure on gold due coming USD strength.

Coming week gold could spend inside daily triangle which could be broken on NFP release. Thus, it seems that only short-term intraday setups will be possible on gold market.

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.

 

[Sive Morten]

Good morning,

(Reuters) - Gold prices were largely unchanged on Tuesday after the Bank of Japan kept its monetary policy steady, with investors shifting their attention to other central bank meetings and economic events due this week.

Gold markets remained cautious ahead of a two-day U.S. Federal Reserve policy meeting beginning Tuesday, the likely announcement of the next Fed chair on Thursday and U.S. payrolls data on Friday.

Ongoing political unrest in Catalonia was also in focus, along with the Bank of England's meeting this week to discuss interest rate policy.

Spot gold was little changed at $1,275.54 per ounce at 0417 GMT. It has shed about 0.3 percent so far in October, in what could be its second straight monthly decline. U.S. gold futures for December delivery were down 0.1 percent at $1,276.50.

"The market is catching its breath for what will be a very data-heavy second half of the week," said Jeffrey Halley, a senior market analyst with OANDA. "Gold itself appears to have lost any risk-aversion premium
for now and is thus completely at the mercy of the nuances of the U.S. bond and stock market, and by default the U.S. dollar," he added.

The dollar was flat against the yen after the BOJ's decision to keep monetary policy steady even as it slightly cut its inflation forecast for the current fiscal year. The greenback slipped 0.4 percent against a basket of
currencies on Monday after reports that former aides of U.S. President Donald Trump, including former campaign manager, Paul Manafort, were charged by federal authorities probing Russian interference in the 2016 election.

"The focus (for gold investors) is on the Fed meeting and the apparent transfer to the new chair next year. Everything else is secondary unless it moves the dollar much ... Investors are really cautious going into that," said ANZ analyst Daniel Hynes.

Trump is likely to pick Fed Governor Jerome Powell as the next head of the U.S. central bank, a source familiar with the matter said on Monday. Powell is seen as being more dovish on monetary policy than
other contenders for the post, especially compared to Stanford University economist John Taylor, who has been regarded as another top challenger for the position.

Spot gold may test resistance at $1,281 per ounce, a break above which could lead to a gain to the next resistance level at $1,286, according to Reuters technical analyst Wang Tao.

So, gold mostly confirms our idea of triangle consolidation on daily chart. It seems the most part of the week price will spend inside of it. There are only 2 expected driving factors that could theoretically push gold out from it . They area FOMC and NFP. But until this has not happened - we will watch for patterns inside daily triangle:

Our first suggestion on weekend was upside action to 1280 K-resistance and it is mostly done. Market could flirt a bit more with this level, but after than drop at least to 1270 looks very probable. If this really will happen, then we could get reverse H&S pattern here and next target around 1300. This scenario we will be watching for within nearest 2-3 sessions:

Meantime, on hourly chart we have "222' Sell, that could trigger action back to 1270. This pattern will be valid until market stands below it's top and inside initial XA swing:

 

[Sive Morten]

Good morning,

(Reuters) -
* U.S. consumer confidence jumped to a near 17-year high in October, with households upbeat about the labor market and business conditions, which could underpin consumer spending and boost the economy in the final three months of the year.

* The Fed is scheduled to release its statement following its meeting on Wednesday at 2 p.m. EDT. Investors are also awaiting the naming of the next Fed chair likely on Thursday, the Bank of England policy meeting on Thursday and more data, including U.S. payrolls figures on Friday.

* A driver in a rented pickup truck mowed down pedestrians and cyclists on a bike path alongside the Hudson River in New York City on Tuesday, killing eight people and injuring about a dozen others in what authorities said was an act of terrorism.

The United States is quietly pursuing direct diplomacy with North Korea, a senior State Department official said on Tuesday, despite U.S. President Donald Trump's public assertion that such talks are a waste of time.

* Asian shares looked set to extend their gains into a fourth straight day on Wednesday on the back of solid economic growth, while oil prices were on a bull run on hopes of an extension of output cuts by major oil producers.

* Catalonia's ousted leader Carles Puigdemont agreed on Tuesday to a snap election called by Spain's central government when it took control of the region to stop it breaking away, but he said the fight for independence would go on.

* The U.S. Mint sold 15,500 ounces of American Eagle gold coins in October, up 34.8 percent from the previous month, according to the latest data.

On Gold market daily picture mostly stands the same. As we’ve suggested in our weekly research, while we will not get major driving factor, gold will stay inside daily triangle. And it is. Still, there are a lot of important events are coming, so may be we will get breakout even this week.

On 4-hour chart, despite all efforts, gold can’t break downside channel and still keeps tendency of lower highs and lower lows. Theoretically we could get AB-CD upside action to 1280-1283 area, as we’ve suggested, but not occasionally. Some push is needed and it is possible only by some driving factor – either Fed speech or ADP report…

Conversely if upside breakout will not happen, we could get Ab-CD down inside the channel that is easier to do as no breakout is needed. In this case market will drop back to previous lows.

So, as you can see overall situation doesn’t look too fascinating. Overall background stands not in favor of gold and picture is not very attractive for trading by far.

 

[Sive Morten]

Good morning,

(Reuters) - Gold advanced on Wednesday as traders repositioned themselves after the Federal Reserve said it will keep target interest rates unchanged for the time being. Prices held onto earlier gains after statements from the U.S. central bank indicating that while it would leave rates unchanged, it was on track to lift borrowing costs again in December.

The Fed will leave rates unchanged at 1-1.25 percent. Gold is highly sensitive to rising U.S. interest rates, as these lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Spot gold was 0.4 percent higher at $1,276.37 an ounce by 3:26 p.m. EDT (1926 GMT) , having earlier peaked at $1,280.87. Its upward move accelerated after it broke through its 100-day moving average at $1,275 an ounce, a key chart level.
U.S. gold futures for December delivery settled up $6.80, or 0.5 percent, at $1,277.30 per ounce.

"The price action in gold was most likely positioning reversals. We saw some shorts cover and then the market came back," said Daniel Ghali, commodities strategist for TD Securities in Toronto.

The latest Fed statement came a day ahead of confirmation of a new chair, likely replacing incumbent Janet Yellen. Fed Governor Jerome Powell is widely seen as the favorite to take over next year. He is considered less hawkish and therefore more bullish for gold than his main challenger. Gold prices have recovered from Friday's three-week low, but they remain within a less than $15 an ounce range.

"Coming closer to the end of the year and two FOMC meetings in a month and half, which could determine the direction of monetary policy, is what has been keeping gold rangebound," Capital Economics analyst Simona Gambarini said.

Wall Street held onto modest gains on Wednesday, while the dollar recovered against a basket of major currencies. Oil prices retreated. Traders also awaited U.S. President Donald Trump's tax plan, which Republicans plan to release Thursday morning.

As mostly nothing is going on on Gold and it just waits for NFP release, as other markets do, today we will take a look at NZD. Previously we already talked about it and we were watching for the end of political turmoil, but it were lasting and lasting while kiwi erasing all potential reversal setups. And we've left it for some time.

Now, as market stands show some minor upside action we have to warn you that it is too early to take long position by far. We mostly expect at least another leg down to 0.6750. Mostly because NZD has incompleted AB-CD 1.618 target slightly below current lows. Right now, upside action stands due reaching of OS and completion of intraday AB=CD pattern. Daily OB stands around 0.6980:

It means that most probable upside target for this retracement is 0.6980 - daily OB, harmonic swing, 3/8 Fib resistance WPR1 and MPP:

As this level will be hit, kiwi should start dropping again and tending to 0.6750 target.

 

[Sive Morten]

Good morning,

(Reuters) - Gold firmed on Friday but stuck to a narrow range below the previous session's highs as the dollar steadied amid caution ahead of U.S. jobs data later in the day. Spot gold edged up 0.1 percent to $1,277.04 per ounce at 0327 GMT, and was on track for its first weekly gain in three. It hit its highest in about two weeks, at $1,284.10, in the previous session.


U.S. gold for December delivery was mostly unchanged at $1,277.70 per ounce. The dollar held steady versus a basket of currencies on Friday, as focus shifted to U.S. jobs data, with President Donald Trump's nomination of Federal Reserve Governor Jerome Powell to be the next Fed chair coming as no surprise. The greenback had slipped on Thursday after Republicans in the U.S. House of Representatives released proposals to overhaul the tax code.


Asian share markets edged higher on Friday as investors gave a guarded reception to the plans for massive U.S. tax cuts, while welcoming the appointment of a centrist at the helm of the Fed.


A holiday in Japan kept volumes light, while investors observed the usual caution ahead of the U.S. payrolls report which is expected to show a big bounce back from September's hurricane-hit result. "Gold seems to be broadly flat. The announcement of Jerome Powell as the new Fed Chair was broadly in line with expectations," said John Sharma, an economist with National Australia Bank.


"Markets are waiting for the U.S. payrolls data. A strong result here would not be supportive of gold." Trump's appointment of Powell broke with precedent by denying Janet Yellen a second term but signalling a continuation of her cautious monetary policies. Spot gold looks neutral in a narrow range of $1,263-$1,281 per ounce, and an escape could suggest a direction, according to Reuters technical analyst Wang Tao.


"If the market somehow believes that Powell will not be aggressive in raising interest rates next year, then gold might have possibly bottomed at $1,260 already," said Samson Li, an analyst with Thomson Reuters GFMS. Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.


Meanwhile, holdings of the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell 0.4 percent to 846.04 tonnes on Thursday.


Today, guys we will take a look at GBP instead of Gold.

Recent GBP collapse is important as technically as fundamentally. From fundamental point of view it mostly confirms that market doesn’t expect some rate cycle as from Fed. Because instead of rising price has dropped, although rate was raised. It means that possession was mostly speculative and was closed as soon as event has happen.

This , in turn, leads us to suggestion that collapse could continue. Technically we have two patterns with the same target – AB-CD and butterfly. Both suggest that price could reach 1.2950 area.

Now price stands at minor support – WPS1 and MPS1. Also small AB=CD pattern has been completed on 4-hour chart. As you can see, our strategy with entry stop orders shows good results as price return back inside triangle has led to downside continuation and opposite breakout, while stop on long entry has not been touched:

Now, till NFP price could show minor upside bounce. Hardly it will be significant. Most probable is just re-testing of triangle border, or 3/8 Fib level, as maximum. If, of course, NFP will be good.