GOLD PRO WEEKLY, September 05-09, 2016

[Sive Morten]

Fundamentals

(Reuters) Gold rose more than 1 percent on Friday after U.S. jobs growth came in below expectations, dampening the likelihood of an interest rate hike from the Federal Reserve this month, but bullion pared gains
after the dollar turned positive.

U.S. jobs increased by a slower-than-expected 151,000 in August, against expectations for a rise of 180,000.
Still, Richmond Federal Reserve Bank President Jeffrey Lacker said the U.S. economy appears strong enough to warrant significantly higher interest rates.

Spot gold jumped to a session high of $1,328.73 an ounce after the non-farm payrolls data, and was up 0.7 percent at $1,322.36 by 2:20 p.m. EDT (1820 GMT). It was on track to close the week up 0.15 percent.
U.S. gold futures settled up 0.7 percent at $1,326.70.

U.S. shares inched higher and European shares rallied after the data gave the Fed more leeway to stand pat on interest rates, while the dollar later turned higher and longer-dated Treasury yields edged up.

"It remains to be seen whether gold can capitalize on the reprieve granted by today's rather ordinary payrolls," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
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.

"The market was not expecting such a glum number from the U.S. ... it's evidence that the U.S. economy is still not strong enough to sustain another rate hike and that's positive for gold," said Jonathan Butler, commodities analyst at Mitsubishi. "This number means rake hikes could get pushed further into the future and gold will benefit from safe-haven buying and expectations that the macro environment will continue to be
favorable for even longer."

Many U.S. traders are expected to be away from their desks on Monday for the Labor Day holiday.
"A slightly higher number would have almost guaranteed a rate hike later this month but now the guessing game will continue," Ole Hansen, Saxo Bank analyst, told the Reuters Global Gold Forum on Friday.

COT Report
Here we do not see yet massive decline of net long position yet. Shy decrease has happened, but this is not enough yet to speak on massive off-load. Major stops have not been triggered, and based on price action most traders still keep longs. Still, since July we see gradual reducing as open interest as net-long speculative positions. Significant amount of longs on the hand of investors put limit on upside potential of the gold market and its ablitity to re-start upside trend.

Technicals
Monthly

August month right now stands inside one to July and mostly keeps our analysis the same, so it is difficult to say something really new here. Still, recently gold has started to move more active and it looks promising, since we could get finally some direction soon. Recent fundamental events were a bit contradictive - first is hawkish Yellen speech, then poor ISM and NFP data. But somehow it still has not led market to direct action.

Technically current upward action started in Dec 2015 is first one after long term of decreasing and it should be interrupted by deep retracement sometime. Probably it should happen but this potential downward action has a great chance to become just a retracement. Overall political and financial situation in the world probably will not give a chance to relax. Thus, we have a positive long-term view on gold market.

As market slightly has moved above YPR1 and our K-resistance area, something is starting to form here, I mean pattern by which long-term global trend could change on gold.

Take a careful look at the picture - could you recognize here possible reverse H&S pattern? Besides the shape itself, some features here that in general typical for H&S. For example, relation between head and shoulders - 1.618. Butterfly... very often first part of H&S takes the shape of butterfly pattern...

Finally take a look at action on downward slope and upward one of the head - last move down was slower than current move up. All these moments point on possible H&S pattern here.

If we really will get it - then we could make an assumption on possible depth of retracement. Now the bottom of shoulder stands approximately around 1160 area... Currently we could only gamble what event could push gold as low as 1160 again, but probably something will happen.

Now market is approaching to major, all time 3/8 Fib resistance @ 1380 level. First reaction already has followed, as gold has dropped. We even could speak here about bearish engulfing pattern, or at least about Cloud cover. It is interesting that August month has closed below July lows. If market would form new high - this could become a reversal months, more bearish pattern.

Still, drop has not taken the shape of tendency yet. September action now stands as minor back action after engulfing pattern has been formed - this is normal behavior. Taking in consideration all this stuff - gold could show ocasional spike up even to 1400 area, but it has no capacity to support bullish trend right now. That's why any upward action mostly will become an exhausted emotional activity, based on some event, probably.
It seems that market gravitates to downside retracement by its sentiment

Weekly

On weekly chart situation has changed significantly. All patterns that were formed previously were destroyed by price action, while no new patterns have appeared yet. Drop to 1305 area has made new bottom and erased as bullish grabber as potential butterfly "Sell" pattern

Overall action doesn't look like reversal. Action is too slow and mostly reminds some consolidation after major 0.618 target of AB-CD pattern has been hit. Take a look that gold has shown just minor retracement to nearest 1308 Fib support. This situation doesn't let us to speak about downward action yet and even vice versa, mostly hints on another leg up.

So, weekly chart doesn't bring us much clarity yet and shows a bit contradictive signs. Yes, we have bearish divergence around monthly resistance, bullish pattern have been vanished, but at the same time, market action is very choppy, mostly typical for retracement and price stubbornly holds above minor 1308 support, which usually suggests some upside action in short-term perspective:

Daily
So, culmination of our analysis was Friday NFP release and you can see how perfect DiNapoli "Triangle failure" setup has worked. Market has reversed up precisely in area that we've specified - Agreement and K-support area. Price has returned back in triangle body.

This action is difficult to treat as "bearish". Failure breakout and W&R of 1310 lows mostly are bullish signs. But now this is a question of how extended this upside reaction will be. Will it really lead market to upside breakout of triangle?

Here we could say only two things. First - don't be short. Short entry will be safe only when investors will start to close long positions massively. Currently this has not happened.
Second - if you have taken long position based on this DiNapoli setup - you can keep it, but move stops to breakeven. As we do not have long-term direction yet on monthly/weekly chart, we probably again will have to deal only with some tactical, intraday setups on gold market...

Hourly
On intraday charts we also do not see something really fascinating. Minor H&S pattern that we've discussed on Fri has been completed. Gold hit it's target around MPP. Thus, on Mon (or Tue due Labor day), we should get bounce down.
Here gold has chance to form greater reverse H&S with right shoulder bottom around 1315 area. This is the only pattern that we could see here for now.
Overall indecision sentiment on gold market makes impact on all time frame. Usually it leads to lack of clear patterns that could show direction even in the short-term perspective. This is what we have right now on gold market. But this is also an experience and sometimes you need to work with such markets also.
That's being said, currently we keep door open with careful long positions. Its not time yet for thinking about shorts, at least until market stands inside triangle. We will return back to bearish view if gold will drop out from triangle and break daily K-support.

Conclusion:
We continue to keep long-term bullish view on gold market. But now chances on deep retracement are very high due combination of as sentiment as technical moments. Partially we even could recognize thrilling pattern on monthly chart which brings more clarity and shows definite levels to watch for. Now is the major question whether it will be formed or not. Yellen speech indicates that pressure on gold from rising rates perspective is growing.

In short-term gold mostly stands indecision and investors can't choose direction. This sentiment makes impact on market and leads to lack of clear patterns even on short-term charts. As gold has shown failure triangle breakout - upward action has chances to continue, while bearish setups will appear only if gold will break daily K-support area.

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 held steady on Tuesday as the dollar weakened on expectations that the U.S. Federal Reserve will not raise rates in September, but the yellow metal's gains were limited by stronger equity markets.

Spot gold was slightly up at $1,327.80 per ounce by 0658 GMT. The metal rose 0.1 percent on Monday.
U.S. gold futures were up 0.4 percent at $1,331.40. The fact that gold did not move much despite disappointing U.S. nonfarm payroll numbers reflects the extensive level of speculative position in the gold markets either through futures or exchange traded funds, said Dominic Schnider of UBS Wealth
Management in Hong Kong.

"The idea that the Fed is going to move, if not in September but in October, is limiting people from buying gold," he said, adding that prices could drop below $1,300 in the short term, with a good resistance level of $1,275. Money managers held a net-long position of 231,594 U.S. gold futures contracts in the week to Aug. 30, the Commodity Futures Trading Commission said on Friday. That's up from 40,597 contracts a year ago.

The U.S. Labor Day holiday kept volumes subdued on Monday. New U.S. data releases and any speeches from Fed officials will be watched closely for clues to the timing of any rate hikes. Gold could run into upside headwinds as the U.S. jobs number was not excessively weak and recent Fed official's comments have
been hawkish, HSBC analyst James Steel said in a note.

However, if oil prices can gain upward traction on an agreement between top producers Saudi Arabia and Russia to cooperate in world oil markets, gold may be a beneficiary, Steel said. Crude prices extended gains on Tuesday, buoyed after top producers Russia and Saudi Arabia agreed to cooperate on stabilising the oil market.

Asian shares advanced on Tuesday, while the dollar index, which measures the greenback against a basket of six major currencies, slipped 0.2 percent to 95.688.

Spot gold may retrace to a support at $1,315 per ounce, as it failed to break a resistance at $1,330 again, according to Reuters technical analyst Wang Tao.

So, as market was closed yesterday, we have not much changes. Still, on daily chart, take a look - gold still stands inside triangle and doesn't drop out there. So, it looks like this is not just occasional return after poor NFP. Thus, on current week gold could show some upward contination, But as we've said - currently we could talk only some short-term tactical setups:

For example, on 1-hour chart gold has completed 1.618 AB-CD and now shows some signs of bullish dynamic pressure. At the same time, price could form larger reverse H&S pattern by retracement to 1315 area and forming of right shoulder:

That's being said, first, let' wait for some spike up, to complete bullish dynamic pressure and second - retracement down to 1315$ area. If we will get all this stuff - then we could turn to next stage - discussion of reverse H&S pattern.

 

[Sive Morten]

Good morning,

(Reuters) Gold rose to a fresh two-and-a-half-week high on Wednesday after gaining nearly 2 percent in the previous session, as disappointing U.S. economic data reinforced expectations the U.S. Federal Reserve will keep rates on hold in September.

U.S. services sector activity slowed to a 6-1/2-year low in August amid sharp drops in production and orders, pointing to slowing economic growth that further diminished prospects for a near-term interest rate hike. The U.S. non-manufacturing new orders index for August fell to its lowest since December 2013.
Spot gold was up 0.1 percent at $1,351.10 per ounce by 0643 GMT. The metal touched a high of $1,352.65, its best since Aug. 19. U.S. gold futures rose 0.2 percent to $1,356.

The market sentiment has certainly changed since Tuesday's poor economic data, MKS PAMP Group trader Alex Thorndike said. The U.S. dollar remains on the backfoot as the chances of a Fed rate hike in September have diminished even further, he added. Spot gold may extend its gains to $1,358 per ounce, as it has cleared a resistance at $1,347, according to Reuters technical analyst Wang Tao.

"Markets are expected to be quiet till European Central Bank's interest rate decision on Thursday," said Kent Li, deputy in-charge for bullion desk, Wing Fung Precious Metals. "We could see gold move in the $1,350-$1,360 range with a support at $1,345 and resistance at $1,365." The dollar took a tumble and Asian stocks rose to one-year highs on Wednesday after surprisingly weak U.S. services sector activity.

"The recent rally is impressive. But absence of a rate hike in September may largely be priced into gold. Also there has been some tightening of real yields," HSBC analyst James Steel said in a note."This may limit gains just as ongoing geopolitical tensions, public discontent, and threats to free trade and globalization
will likely support the bullion markets. This leaves us price positive but likely with limited upside."

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.52 percent, its best one-day gain since July 5, to 952.14 tonnes on Tuesday from 937.89 tonnes on Friday.

The Perth Mint's sales of gold and silver products fell in August, in line with a trend reported by precious metal businesses worldwide, the mint said in a blog post on its website on Wednesday.

On gold makret we see buity of DiNapoli directional pattern "Failure breakout". Looks like recent poor US data has helped investors to choose short-term direction. And it seems that goldgradually follows our suggestion on cunning actoin - grabbing stops above 1370 area and then start dropping. Since we think that gold right now doesn't have sufficient purchase power to support new bull trend.
Based on daily chart market could reach 1384 target - butterfly 1.27 upside destination, but as stops will be triggered, price could show spike up even to 1400 area...

Still, recent action was strong and gold right now stands at resistance of triangle border, WPR1 and 5/8 Fib level. Thus, some minor retracement could happen. 1335 K-support area looks like most probable destination for that:

Reversal could take a shape of DRPO "Sell" pattern on hourly chart. It has 1339 target very close to K-support area:

 

[Sive Morten]

Good morning,

(Reuters) Gold edged higher on Thursday on a weaker dollar, with investors looking to the outcome of a European Central Bank policy meeting later in the day for signs of economic stimulus. The euro zone economy is widely expected to need more stimulus from the ECB, but it may not come at Thursday's meeting.

"There are just not enough (assets) for the ECB to buy. If we see more buying, it will give a fillip to gold," said Jeffrey Halley, business development and market strategist with OANDA Asia Pacific.

"As long as the dollar remains weak, we can see gold test $1,350 and make its way up to $1,375-80 levels," he said. Spot gold was up 0.2 percent at $1,347.01 an ounce by 0657 GMT.

U.S. gold futures rose 0.2 percent to $1,351.70 "While weaker-than-expected U.S. economic data over the past week point to diminished market-expected probability of a rate hike in September, we believe that the outlook for gold price movements is likely to be mildly bearish over the rest of 2016," said NAB analyst Vyanne Lai.

Several U.S. Federal Reserve officials have made hawkish comments in the past couple of days, making a push for rate increases. Rising U.S. interest rates increase the opportunity cost of holding non-yielding bullion and boost the dollar, in which gold is priced. "In the absence of bullish factors, gold tends to recede
rather than hold steady. This may be the case now, and we may see further profit-taking near term," HSBC analyst James Steel said.

"The next rate rise should put a near-term floor on gold prices. Also bond yields remain low, another supportive factor. That said, gold looks to be on the defensive, at least near term."

Spot gold faces resistance at $1,352 per ounce, it may either hover below this level or retrace to support at $1,327, according to Reuters technical analyst Wang Tao. The dollar index, which measures the greenback
against a basket of currencies, was down about 0.1 percent at 94.890.

A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.03 percent to 951.81 tonnes on Wednesday.

So, on Gold market we do not see big changes by far. As we've suggested yesterday, gold could show minor retracement, since it has reached MPR1 and 5/8 1350 Fib resistance. At the same time, gold stands very tight below triangle line. Usually this kind of action suggests attempt of breakout in nearest future. From this point of view gold supports our thoughts on this subject.

On 4-hour chart price could show AB=CD retracement right to K-support area around 1335 level:

This action down should help to complete our DRPO "Sell" target on hourly chart. Current upward action shows no signs of thrust, just overlapping candles with long tails in both direction. This points on contraction phase and probably this is retracement after drop dop. It means that downward AB=CD looks indeed possible:

 

[Sive Morten]

Good morning.

(Reuters) Gold edged lower on Friday as the dollar recovered some of its early losses, but the bullion was still on track for its second successive weekly gain.

Spot gold was slightly down 0.2 percent at $1,335.90 per ounce by 0724 GMT. The metal was set for a nearly 1 percent gain this week. U.S. gold futures were also slightly down at $1,340.60.

"Gold is going to follow the dollar so closely till the U.S. Federal Reserve meeting in September and could trade within a range of $1,335-$1,365," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

The metal has given up much of its strong gains from earlier this week, when weak U.S. jobs data led investors to bet that a September rate rise was no longer on the cards, weakening the dollar.
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 the metal is priced. The dollar index, which measures the greenback against a basket of currencies, was down 0.1 percent at 94.929, after touching a low of 94.803.

Spot gold may retrace to $1,327 per ounce as it failed to break a resistance at $1,352, according to Reuters technical analyst Wang Tao.

The European Central Bank held interest rates at record lows and kept the door open to more stimulus on Thursday but gave few hints about its next move, disappointing markets that had priced in a decisively dovish tone. Accommodative monetary policies favor gold and equities because low interest rates encourage investors to opt for assets that do not rely on interest yields.

"Gold prices have had ample of opportunity to sell-off, but there has been a lack of follow through selling. Conversely there has been regular dip buying," analysts at ScotiaMocatta said in a note. "As such, we think Gold's bull market remains in force, but upside progress may be gradual. In turn, this means it may be
more sustainable."

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.13 percent to 950.62 tonnes on Thursday.

So, guys, on gold market nothing really special. As we've said - major setup will be formed on attempt of breakout in any direction. Actually as you can see, triangle shape has shifted to rectangle and, in fact, this is flag pattern on weekly chart, which is theoretically should be continuation pattern. That's why it's breakout will have special meaning for us.
By far, as we've suggested yesterday, gold has met 1350 resistance around triangle border and MPR1 and turned to retracement:

Although our minimum DRPO "Sell" target has been completed and market has reached 1335 area, it seems that gold could drop a bit further, because we have acceleration on CD leg. Thus, market at least could reach 1.618 AB-CD extension near the bottom of K-support.

So, if you've thought about long entry here - it's better to wait as for 1.618 AB-CD target completion as for appearing of some bullish reversal patterns on lower time frames.