Sive Morten
Special Consultant to the FPA
- Messages
- 18,690
Fundamentals
(Reuters) Gold prices fell again on Friday as hawkish comments on U.S. interest rates from a top
Federal Reserve official helped lift the U.S. dollar, and as buyers continued to cash in on this week's price rally.
Spot gold was down 0.67 percent at $1,329.02 per ounce by 2:18 p.m. EDT (1818 GMT), while U.S. gold futures for December delivery settled down $7.1, or 0.53 percent, at $1,334.5 per ounce.
The metal stayed on track for a second successive weekly gain. Gold was 0.5 percent higher on the week, having jumped 1.8 percent to $1,352.65 an ounce on Tuesday. Soft jobs and services data this week have dented expectations that ultra-low interest rates, a key support for non-yielding gold, will rise this year. But investors remained uncertain on the outlook for rates, however, with Fed officials recently taking a more hawkish tone.
"Gold and silver really came under pressure on renewed expectation that the Fed is actively pursuing an interest rate hike. Before it seemed like more of a long shot," said Phillip Streible, senior market strategist for RJO Futures in Chicago. The dollar rose against a basket of major currencies after Boston Fed President Eric Rosengren said the U.S. central bank increasingly faces risks if it waits much longer to hike rates, pressuring gold.
Growing speculation that the Fed would stand pat on interest rates after hiking for the first time in nearly a decade in December have helped push gold 26 percent higher this year. "The problem with gold currently is that on the technicals side we've now twice been around $1,375-1,380, so if it gets back towards there, people are just taking profits," ABN Amro analyst Georgette Boele said.
Expectations for further policy divergence between the United States and the euro zone were dampened after the European Central Bank held off signalling a move towards further policy easing at a meeting on Thursday.
"The ECB's decision to leave policy unchanged may have refocused market participants on the possibility that the Fed sends a hawkish signal in the coming days before its pre-meeting quiet period begins next Tuesday," BNP Paribas said in a note.
Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 0.13 percent to 950.62 tonnes on Thursday. Gold demand in Asia remained subdued this week as higher prices kept buyers at bay.
COT Report
After shy decrease of speculative net long position 2 weeks ago - it has jumped back almost to all time highs. Open interest also has increased. But this data stands for last Wed. Recently we've got solid sell-off on daily gold and if it is accompanied by real porfit taking - we should see it next week. In this case action could become really strong.
Still, based on last numbers we could make the same conclusion - upside potential is limited, but investors still hold longs and massive sell-off, profit taking, has not started yet.
Here, guys I would like to say couple of words on Kerry and Lavrov meeting. This is absolutely major event of 2016 year. And this status is confirmed by absolute silence that stands around this event in mass media (that belongs to inner US enemy). Tell me, do you remember any case, when US and Russia holds coversation for 14 hours - and then no information in mass media? It means that they have made crucial decision, absolutely new globe order. Europe, Middle East are just fragments, the part of discussion and not major one. The major part is alliance of US and Russia that holds in secret. I will explain. Things that I will say are not mine, but person, policial analysts that I rely on and trust absolutely.
The necessity of this alliance comes form inner situtiation in US, when country in fact is governed by non-government shadow fources in interest of narrow group of people. Decisions that they make globally stand againt interest of US country and citizens. Official governors, Obama, Kerry and others now in trap and almost are hostages. I will show you just one example. Recall when Benjamin Netanyahu has come to US, ignore Obama and talked to Congress directly, demanding more weapon and support. Despite all objections from President, official position of US and obvious mismatch of this solution to US interests - he has got what he was asking. Why? Because US are rulling not by government and not in the interest of US.
So, Obama can't rely on nobody and on no entity in US to struggle this parazites that usurped power. They are everywhere - in Government department, Military Fources, CIA, FBI, Congress etc. He can't use Mass Media, because they also belong to inner US enemy group. He needs some power outside US that could support them in this struggle. Of course this will make impact on total World Order. And this bet was made on Russia.
Now, first decision that has followed on recent meeting is treat Jabhat-an-Nusra (therrorist organisation, forbidden in Russia) not as moderate opposition but as real therrorist, as they really are. An-Nusra is an disguised army of Israel and Benjamin Netanyahu. They can freely move through the border on Golans, supported by Israel and now you probably understand for whom Netanyahu has asked weapon on his visit in Congress...
Obama already has warned people on possible turmoil in US, first this was on disaster speech in June (in FEMA), just few weeks ago - on possible civilian tragedies, growing of terror hazard, even in US. Because those who are rulling now - they do not want to loose this power and definitely will try to frighten people, spread chaos, break the people trusting and support to government, as they usually do.
That's being said - currently we do not see any signs of this yet on markets. But as soon as we will see first results of this battle - this will become very strong driving factor for all markets, especially for gold and USD. Keep up work with technical analysis, but keep in mind what we've just said here and don't be surprised when you will see some strange events and decisions in US.
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
Last week gold has turned down precisely around higher border of daily triangle without any attempt to break it up. As longer gold stands around this top challenging the patience of investors as weaker market will become and downside pressure will gradually increase.
Weekly
On weekly chart shape of the tope has changed slightly and now looks more like flag pattern. We know that on a way up market has completed 0.618 AB-CD target, 1.618 butterfly - both of them stand around 1380 area.
But right now, this flag pattern will take absolutely special meaning for us, due its feature. We know that flags are continuation patterns, which means that gold should show upside breakout. At the same time we know another two things. First is - gold stands at 1380 resistance for a long time already, and long positions are overloaded. Finally we know that market expects rate hike and more hawkish comments on Sep. Fed meeting.
This leads us to following conclusion - market could show either bullish trap, i.e. failure upside breakout of the flag, or, downside breakout directly. Both of them will be a bearish signal. But former is more typical for gold market.
That's being said, whater will happen - keep an eye on flag and we will get the answer what to do.
Daily
In two words, situation on daily chart looks bearish. Although DiNapoli setup of failure triangle breakout has worked nice and gold even has reached opposite border of triangle, now, as we've said above, overall shape of consolidation has changed to channel or flag pattern.
Right now market stands in a 5th wave inside of it, and usually breakout takes place on 5th leg which stands to the downside. Take a look that gold almost erased ISM upside candle.
Based on how market reacts on failure triangle breakout - it mostly suggests that this was a reaction on strong support and Agreement area, pure technical one, but not some shift in sentiment. That's why we haven't got any upside continuation and any upside breakout. So, bounce up mostly was technical.
Finally, take a look that price has stopped right at MPR1 and now is dropping down. It easily could drop below MPP next week. This moment suggests 2 things. As price was stopped on MPR1 - this action is just upside retracement, not a new bull trend. Second - next destination point is MPS1, according to pivot framework that stands around 1286 area....
That's being said, we continue to wait breakout, as our major driving factor. Still we could use some very short-term setups on intraday chart as we've done last week.
Hourly
So, as you can see our suggestion on Friday was correct - market indeed has dropped lower, completed 1.618 AB-CD target and even has continued move down. Right now it stands around support cluster - couple of Fib levels and MPP.
Since gold already has passed down all targets of small AB-CD (dot line), we should treat this whole downward action as single leg, i.e. increase scale of retracement. It means that as soon as this leg will stop, we should get some upside retracement, which will become BC leg and then we should get an extension down. This is what we will be watching for in the beginning of the week. If we will get attractive sell signals, we will try to join bearish party.
Probably we could provide some argues here - what if we will get butterfly "Sell" on daily chart? Theoretically this is possible, but recent action shows downward acceleration at every drop. This kind of action is not very suitable for patterns with upside direction. Only if some supportive fundamental event will be released...
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 shows fast bearish action in last 2 sessions. This gives us a hint that may be gold will take downside breakout on coming week.
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.
(Reuters) Gold prices fell again on Friday as hawkish comments on U.S. interest rates from a top
Federal Reserve official helped lift the U.S. dollar, and as buyers continued to cash in on this week's price rally.
Spot gold was down 0.67 percent at $1,329.02 per ounce by 2:18 p.m. EDT (1818 GMT), while U.S. gold futures for December delivery settled down $7.1, or 0.53 percent, at $1,334.5 per ounce.
The metal stayed on track for a second successive weekly gain. Gold was 0.5 percent higher on the week, having jumped 1.8 percent to $1,352.65 an ounce on Tuesday. Soft jobs and services data this week have dented expectations that ultra-low interest rates, a key support for non-yielding gold, will rise this year. But investors remained uncertain on the outlook for rates, however, with Fed officials recently taking a more hawkish tone.
"Gold and silver really came under pressure on renewed expectation that the Fed is actively pursuing an interest rate hike. Before it seemed like more of a long shot," said Phillip Streible, senior market strategist for RJO Futures in Chicago. The dollar rose against a basket of major currencies after Boston Fed President Eric Rosengren said the U.S. central bank increasingly faces risks if it waits much longer to hike rates, pressuring gold.
Growing speculation that the Fed would stand pat on interest rates after hiking for the first time in nearly a decade in December have helped push gold 26 percent higher this year. "The problem with gold currently is that on the technicals side we've now twice been around $1,375-1,380, so if it gets back towards there, people are just taking profits," ABN Amro analyst Georgette Boele said.
Expectations for further policy divergence between the United States and the euro zone were dampened after the European Central Bank held off signalling a move towards further policy easing at a meeting on Thursday.
"The ECB's decision to leave policy unchanged may have refocused market participants on the possibility that the Fed sends a hawkish signal in the coming days before its pre-meeting quiet period begins next Tuesday," BNP Paribas said in a note.
Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Shares, fell 0.13 percent to 950.62 tonnes on Thursday. Gold demand in Asia remained subdued this week as higher prices kept buyers at bay.
COT Report
After shy decrease of speculative net long position 2 weeks ago - it has jumped back almost to all time highs. Open interest also has increased. But this data stands for last Wed. Recently we've got solid sell-off on daily gold and if it is accompanied by real porfit taking - we should see it next week. In this case action could become really strong.
Still, based on last numbers we could make the same conclusion - upside potential is limited, but investors still hold longs and massive sell-off, profit taking, has not started yet.
Here, guys I would like to say couple of words on Kerry and Lavrov meeting. This is absolutely major event of 2016 year. And this status is confirmed by absolute silence that stands around this event in mass media (that belongs to inner US enemy). Tell me, do you remember any case, when US and Russia holds coversation for 14 hours - and then no information in mass media? It means that they have made crucial decision, absolutely new globe order. Europe, Middle East are just fragments, the part of discussion and not major one. The major part is alliance of US and Russia that holds in secret. I will explain. Things that I will say are not mine, but person, policial analysts that I rely on and trust absolutely.
The necessity of this alliance comes form inner situtiation in US, when country in fact is governed by non-government shadow fources in interest of narrow group of people. Decisions that they make globally stand againt interest of US country and citizens. Official governors, Obama, Kerry and others now in trap and almost are hostages. I will show you just one example. Recall when Benjamin Netanyahu has come to US, ignore Obama and talked to Congress directly, demanding more weapon and support. Despite all objections from President, official position of US and obvious mismatch of this solution to US interests - he has got what he was asking. Why? Because US are rulling not by government and not in the interest of US.
So, Obama can't rely on nobody and on no entity in US to struggle this parazites that usurped power. They are everywhere - in Government department, Military Fources, CIA, FBI, Congress etc. He can't use Mass Media, because they also belong to inner US enemy group. He needs some power outside US that could support them in this struggle. Of course this will make impact on total World Order. And this bet was made on Russia.
Now, first decision that has followed on recent meeting is treat Jabhat-an-Nusra (therrorist organisation, forbidden in Russia) not as moderate opposition but as real therrorist, as they really are. An-Nusra is an disguised army of Israel and Benjamin Netanyahu. They can freely move through the border on Golans, supported by Israel and now you probably understand for whom Netanyahu has asked weapon on his visit in Congress...
Obama already has warned people on possible turmoil in US, first this was on disaster speech in June (in FEMA), just few weeks ago - on possible civilian tragedies, growing of terror hazard, even in US. Because those who are rulling now - they do not want to loose this power and definitely will try to frighten people, spread chaos, break the people trusting and support to government, as they usually do.
That's being said - currently we do not see any signs of this yet on markets. But as soon as we will see first results of this battle - this will become very strong driving factor for all markets, especially for gold and USD. Keep up work with technical analysis, but keep in mind what we've just said here and don't be surprised when you will see some strange events and decisions in US.
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
Last week gold has turned down precisely around higher border of daily triangle without any attempt to break it up. As longer gold stands around this top challenging the patience of investors as weaker market will become and downside pressure will gradually increase.
Weekly
On weekly chart shape of the tope has changed slightly and now looks more like flag pattern. We know that on a way up market has completed 0.618 AB-CD target, 1.618 butterfly - both of them stand around 1380 area.
But right now, this flag pattern will take absolutely special meaning for us, due its feature. We know that flags are continuation patterns, which means that gold should show upside breakout. At the same time we know another two things. First is - gold stands at 1380 resistance for a long time already, and long positions are overloaded. Finally we know that market expects rate hike and more hawkish comments on Sep. Fed meeting.
This leads us to following conclusion - market could show either bullish trap, i.e. failure upside breakout of the flag, or, downside breakout directly. Both of them will be a bearish signal. But former is more typical for gold market.
That's being said, whater will happen - keep an eye on flag and we will get the answer what to do.
Daily
In two words, situation on daily chart looks bearish. Although DiNapoli setup of failure triangle breakout has worked nice and gold even has reached opposite border of triangle, now, as we've said above, overall shape of consolidation has changed to channel or flag pattern.
Right now market stands in a 5th wave inside of it, and usually breakout takes place on 5th leg which stands to the downside. Take a look that gold almost erased ISM upside candle.
Based on how market reacts on failure triangle breakout - it mostly suggests that this was a reaction on strong support and Agreement area, pure technical one, but not some shift in sentiment. That's why we haven't got any upside continuation and any upside breakout. So, bounce up mostly was technical.
Finally, take a look that price has stopped right at MPR1 and now is dropping down. It easily could drop below MPP next week. This moment suggests 2 things. As price was stopped on MPR1 - this action is just upside retracement, not a new bull trend. Second - next destination point is MPS1, according to pivot framework that stands around 1286 area....
That's being said, we continue to wait breakout, as our major driving factor. Still we could use some very short-term setups on intraday chart as we've done last week.
Hourly
So, as you can see our suggestion on Friday was correct - market indeed has dropped lower, completed 1.618 AB-CD target and even has continued move down. Right now it stands around support cluster - couple of Fib levels and MPP.
Since gold already has passed down all targets of small AB-CD (dot line), we should treat this whole downward action as single leg, i.e. increase scale of retracement. It means that as soon as this leg will stop, we should get some upside retracement, which will become BC leg and then we should get an extension down. This is what we will be watching for in the beginning of the week. If we will get attractive sell signals, we will try to join bearish party.
Probably we could provide some argues here - what if we will get butterfly "Sell" on daily chart? Theoretically this is possible, but recent action shows downward acceleration at every drop. This kind of action is not very suitable for patterns with upside direction. Only if some supportive fundamental event will be released...
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 shows fast bearish action in last 2 sessions. This gives us a hint that may be gold will take downside breakout on coming week.
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.
