Sive Morten
Special Consultant to the FPA
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- 18,644
Fundamentals
(Reuters) - Gold prices fell on Friday after a European Central Bank (ECB) official called for scaling back the bank's stimulus program, although losses were capped when weaker-than-expected U.S. economic data raised questions about further interest rate hikes.
ECB board member Sabine Lautenschlaeger made the most explicit call so far from an ECB policymaker for paring the bank's 2.3 trillion euros money-printing program.
"For gold this is bad news because this continues the trend of the market pricing in the normalization of monetary policy," said Jens Pedersen, senior analyst at Danske Bank in Copenhagen.
But he said there had already been plenty of headlines about the ECB planning an exit from its bond buying and the U.S. Federal Reserve reducing its balance sheet after its big quantitative easing program.
Spot gold was down 0.6 percent at $1,321.88 an ounce by 1:47 p.m. EDT (1747 GMT). It was down 1.8 percent for the week, on track for its biggest weekly decline since early July. U.S. gold futures for December delivery settled down 0.3 percent at $1,325.20.
Those "normalization" actions by central banks tend to pressure gold. Gold briefly pared losses on news that U.S. retail sales unexpectedly fell in August and industrial output dropped for the first time since January, in contrast to Thursday's strong U.S. inflation data.
Gold largely shrugged off North Korea's firing of another missile over Hokkaido, Japan. "Markets are paying much more attention to global economic data," said Rob Haworth, senior investment strategist at U.S.
Bank Wealth Management in Seattle. "The synchronized global growth story is gaining momentum
and the uptick in inflation seems to mean that the Fed has plans to make their planned moves."
The Fed's two-day monetary policy meeting begins on Sept. 19. Commerzbank said August gold imports into India, the world's second biggest gold consumer, were the lowest so far this year. In other precious metals, platinum's discount to gold fell to around $360, the lowest according to Reuters data dating back
to 1985.
Here guys, some brief look at possible results of Germany elections. Currently no surprises are expected, which should be positive for EUR. Thus let's keep in mind poll results and just watch how different real data will be in relation to polls. Most attention should be given to AfD that is becoming more popular in recent couple of years as many Germans are not happy with Merkel immigration policy and high degree of depending from US in political questions, including Russian sanctions.
Could the German election deliver a surprise result?
By HiFX
With a political system designed to ensure balance and stability, German politics tends to remain fairly free from surprises. Despite doubts about the reliability of opinions polls after the unexpected election results in the UK and USA recently, it is reasonable to expect German politics to remain relatively uneventful. But with national elections due to be held on 24th September, there is some uncertainty on the German political scene.
How does it work?
Germany’s complex voting system aims to balance a desire for choosing a local candidate with a system of proportional representation to ensure that parties are represented according to their vote share. As a result, it is rare for a party to win with an absolute majority and they are usually required to form coalitions.
One of the most common scenarios is the current coalition between Germany’s two largest parties, the centre-right Christian Democratic Union (CDU) and the centre-left Social Democratic Party (SPD). Recent coalitions have also involved the liberal Free Democratic Party (FDP) and the Greens.
But if smaller populist parties such as the Left party or the Alternative for Germany (AFD) rise in popularity, it could cause complications for coalition negotiations.
Can Merkel win a fourth term?
The CDU is currently in power, as it has been for much of the time since World War Two, often with the support of its Bavarian sister party, the Christian Social Union (CSU). Its leader, Angela Merkel, has been Chancellor of Germany since 2005. If she is successful in September, she would be only the second Chancellor to serve four terms in post-war times.
For much of that time, Merkel has enjoyed very high approval ratings. Her ratings dipped in late 2015, when she welcomed around a million asylum seekers into Germany. However, recent figures suggest she is regaining popularity, perhaps because she is viewed as a safe pair of hands in an uncertain global political climate.
Could Schultz revive SPD’s fortunes?
The SPD’s candidate for Chancellor is Martin Schulz, the former president of the European Parliament. A well-known supporter of the EU, he has pledged to pursue the creation of a United States of Europe if he gains power.
Despite an initial surge in popularity, Schultz was dealt a serious blow by Merkel’s CDU in May’s state elections in the historic SPD stronghold of North Rhine Westphalia. The CDU’s victory there was widely seen as a suggestion that Merkel’s popularity could be strong enough to take her to a fourth term as Chancellor.
Will anti-EU sentiment be reflected in the polls?
Both the CDU and the SPD want to strengthen relationships within the European Union. This follows on from the recent election of Emmanuel Macron, who describes himself as pro-European but believes that reform is required within the EU. Both Merkel and Schultz are keen to be seen as the candidate who can provide stability in Europe on a “Franco-German axis”.
Nearly all of the main parties in Germany are pro-European and support some degree of further European integration. The main exception is the AfD. Founded as an anti-Euro party in 2013, it has more recently turned its attention to immigration and Islam. This approach helped to boost its popularity in 2016, when Angela Merkel’s immigration policy was under scrutiny, but appeared to lose this momentum in early 2017. Nevertheless, with MPs in nine of Germany’s 16 state parliaments, the AfD is hoping to acquire its first seats in the national government this year.
Recent opinion polls place the parties as follows:
What does this mean for the Euro?
Elections in general tend to cause uncertainty, which can have a weakening effect on a currency. Earlier this year, the Euro dropped against the Pound and the US Dollar in the run-up to the French election, but strengthened again when Macron won against Marine Le Pen. It is possible that we could see similar volatility as the German election draws closer, particularly if there is uncertainty around potential coalitions.
COT Report
Recent CFTC data doesn't show yet all the pressure on gold that is announced. Actually it still shows normal bullish sentiment - net long position and open interest are growing. Still, total position is coming closer to ultimate levels and that could be a barrier for further upside action in futures. But right now sentiment analysis shows nothing bad for gold market.
Still we should be on guard as indeed, coming events could make an impact on gold market. As we see nothing serious and sentiment is not changing yet, we will treat recent action as retracement by far:
Technical
Monthly
Nothing significantly has changed yet on big picture. Price just step up a bit out from the top of September. All other things stand mostly the same.
As market has shown strong close on August, we probably could put aside our bearish scenario for awhile. If gold will start to show strong bearish action again, we will return back to it. But right now upside scenario has more chances to happen.
On July and August we have tail close. Right now market has reached solid 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 and 0.618 AB-CD target. Right now market still stands close to it.
Next major target will stand around 50% Fib level and Agreement, as it coincides with AB=CD objective point as well. Market could take the shape of butterfly to get there. 1.27 extension also stands in the same area:
Weekly
Weekly picture is very important as for bulls as for bears. So, market finally has broken through 1295 area that it was challenging since the beginning of the year. Trend stands bullish on weekly chart and price is not at overbought by far. In fact, guys, gold market doesn't have any significant resistance till the next 1380 target, which is strong monthly level.
Here we have two AB-CD patterns of different scale. First one is large monthly AB-CD that we've mentioned above and this is 0.618 target that has been hit at 1326$.
Second AB-CD is a minor one and it stands inside CD leg of larger one. Right now we hear a lot of forecasts on gold's weakness, some of the we've put in previous research - it's an opinion of Goldman Sachs and Morningstar. But we also have here technical pattern that could encourage bears. This is possible large weekly "222" Sell that will be formed as soon as price will complete our smaller AB-CD pattern.
Still, right now we see a bit late reaction on our 1330 area. It should happen earlier as market 2 weeks ago has reached this area and completed 1326 target, but probably due significant geopolitcal tensions around N. Korea and other stuff, it was postponed. Now it seems that some reaction has started, well later is better than never. As this is just minor AB-CD target and price is not at OB, reaction should not be too deep. Thus, right now we could watch for 1285-1300 area:
Daily
So, we're returning back to the same picture that we've talked about last week. Trend is bearish here. As upside reaction on 1316 support area was finished, price continues downside action. Actually, on Friday gold almost has formed reversal session - as it has moved above the high and closed rather deep, although not below previous lows.
Here we still watching for some deeper retracement. Probably some kind of AB-CD action should be formed here to 1300 target:
Hourly
Here we have a shape of potential H&S pattern that we've discussed on Friday. Theoretically price still stands relatively close to the level where theoretically the bottom of right shoulder should be. At the same time, overall price action mostly shows irrational behavior for H&S. Here is clear some bearish pressure exists and this is not typical for last stage of bullish reversal pattern. It means that there are big chances that H&S pattern will fail.
As market already has shown response to 1316 Fib support area, it shows downside continuation. As price is not at OS on daily chart, it could proceed to next strong support around 1300 area.
Since gold has failed to re-establish upside bounce from 1323 level, where it should to, it means that chances on upside AB-CD significantly diminished. If H&S will fail, we could get 1.618 3-Drive Buy pattern, as 1.618 extension of recent retracement stands precisely around 1300 area:
Conclusion
Long term perspective of gold market looks positive. Although crucial price levels have not been broken yet, but overall performance looks good.
In shorter term perspective due some fundamental and geopolitical events previous driving factors are exhausted a bit. Thus, retracement should be deeper and first level that we will watch for is 1300 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.
(Reuters) - Gold prices fell on Friday after a European Central Bank (ECB) official called for scaling back the bank's stimulus program, although losses were capped when weaker-than-expected U.S. economic data raised questions about further interest rate hikes.
ECB board member Sabine Lautenschlaeger made the most explicit call so far from an ECB policymaker for paring the bank's 2.3 trillion euros money-printing program.
"For gold this is bad news because this continues the trend of the market pricing in the normalization of monetary policy," said Jens Pedersen, senior analyst at Danske Bank in Copenhagen.
But he said there had already been plenty of headlines about the ECB planning an exit from its bond buying and the U.S. Federal Reserve reducing its balance sheet after its big quantitative easing program.
Spot gold was down 0.6 percent at $1,321.88 an ounce by 1:47 p.m. EDT (1747 GMT). It was down 1.8 percent for the week, on track for its biggest weekly decline since early July. U.S. gold futures for December delivery settled down 0.3 percent at $1,325.20.
Those "normalization" actions by central banks tend to pressure gold. Gold briefly pared losses on news that U.S. retail sales unexpectedly fell in August and industrial output dropped for the first time since January, in contrast to Thursday's strong U.S. inflation data.
Gold largely shrugged off North Korea's firing of another missile over Hokkaido, Japan. "Markets are paying much more attention to global economic data," said Rob Haworth, senior investment strategist at U.S.
Bank Wealth Management in Seattle. "The synchronized global growth story is gaining momentum
and the uptick in inflation seems to mean that the Fed has plans to make their planned moves."
The Fed's two-day monetary policy meeting begins on Sept. 19. Commerzbank said August gold imports into India, the world's second biggest gold consumer, were the lowest so far this year. In other precious metals, platinum's discount to gold fell to around $360, the lowest according to Reuters data dating back
to 1985.
Here guys, some brief look at possible results of Germany elections. Currently no surprises are expected, which should be positive for EUR. Thus let's keep in mind poll results and just watch how different real data will be in relation to polls. Most attention should be given to AfD that is becoming more popular in recent couple of years as many Germans are not happy with Merkel immigration policy and high degree of depending from US in political questions, including Russian sanctions.
Could the German election deliver a surprise result?
By HiFX
With a political system designed to ensure balance and stability, German politics tends to remain fairly free from surprises. Despite doubts about the reliability of opinions polls after the unexpected election results in the UK and USA recently, it is reasonable to expect German politics to remain relatively uneventful. But with national elections due to be held on 24th September, there is some uncertainty on the German political scene.
How does it work?
Germany’s complex voting system aims to balance a desire for choosing a local candidate with a system of proportional representation to ensure that parties are represented according to their vote share. As a result, it is rare for a party to win with an absolute majority and they are usually required to form coalitions.
One of the most common scenarios is the current coalition between Germany’s two largest parties, the centre-right Christian Democratic Union (CDU) and the centre-left Social Democratic Party (SPD). Recent coalitions have also involved the liberal Free Democratic Party (FDP) and the Greens.
But if smaller populist parties such as the Left party or the Alternative for Germany (AFD) rise in popularity, it could cause complications for coalition negotiations.
Can Merkel win a fourth term?
The CDU is currently in power, as it has been for much of the time since World War Two, often with the support of its Bavarian sister party, the Christian Social Union (CSU). Its leader, Angela Merkel, has been Chancellor of Germany since 2005. If she is successful in September, she would be only the second Chancellor to serve four terms in post-war times.
For much of that time, Merkel has enjoyed very high approval ratings. Her ratings dipped in late 2015, when she welcomed around a million asylum seekers into Germany. However, recent figures suggest she is regaining popularity, perhaps because she is viewed as a safe pair of hands in an uncertain global political climate.
Could Schultz revive SPD’s fortunes?
The SPD’s candidate for Chancellor is Martin Schulz, the former president of the European Parliament. A well-known supporter of the EU, he has pledged to pursue the creation of a United States of Europe if he gains power.
Despite an initial surge in popularity, Schultz was dealt a serious blow by Merkel’s CDU in May’s state elections in the historic SPD stronghold of North Rhine Westphalia. The CDU’s victory there was widely seen as a suggestion that Merkel’s popularity could be strong enough to take her to a fourth term as Chancellor.
Will anti-EU sentiment be reflected in the polls?
Both the CDU and the SPD want to strengthen relationships within the European Union. This follows on from the recent election of Emmanuel Macron, who describes himself as pro-European but believes that reform is required within the EU. Both Merkel and Schultz are keen to be seen as the candidate who can provide stability in Europe on a “Franco-German axis”.
Nearly all of the main parties in Germany are pro-European and support some degree of further European integration. The main exception is the AfD. Founded as an anti-Euro party in 2013, it has more recently turned its attention to immigration and Islam. This approach helped to boost its popularity in 2016, when Angela Merkel’s immigration policy was under scrutiny, but appeared to lose this momentum in early 2017. Nevertheless, with MPs in nine of Germany’s 16 state parliaments, the AfD is hoping to acquire its first seats in the national government this year.
Recent opinion polls place the parties as follows:
- CDU/CSU: 38.4%
- SPD: 24%
- Left: 9.2%
- AfD: 8.5%
- FDP: 8.2%
- Green: 7.3%
What does this mean for the Euro?
Elections in general tend to cause uncertainty, which can have a weakening effect on a currency. Earlier this year, the Euro dropped against the Pound and the US Dollar in the run-up to the French election, but strengthened again when Macron won against Marine Le Pen. It is possible that we could see similar volatility as the German election draws closer, particularly if there is uncertainty around potential coalitions.
COT Report
Recent CFTC data doesn't show yet all the pressure on gold that is announced. Actually it still shows normal bullish sentiment - net long position and open interest are growing. Still, total position is coming closer to ultimate levels and that could be a barrier for further upside action in futures. But right now sentiment analysis shows nothing bad for gold market.
Still we should be on guard as indeed, coming events could make an impact on gold market. As we see nothing serious and sentiment is not changing yet, we will treat recent action as retracement by far:
Technical
Monthly
Nothing significantly has changed yet on big picture. Price just step up a bit out from the top of September. All other things stand mostly the same.
As market has shown strong close on August, we probably could put aside our bearish scenario for awhile. If gold will start to show strong bearish action again, we will return back to it. But right now upside scenario has more chances to happen.
On July and August we have tail close. Right now market has reached solid 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 and 0.618 AB-CD target. Right now market still stands close to it.
Next major target will stand around 50% Fib level and Agreement, as it coincides with AB=CD objective point as well. Market could take the shape of butterfly to get there. 1.27 extension also stands in the same area:
Weekly
Weekly picture is very important as for bulls as for bears. So, market finally has broken through 1295 area that it was challenging since the beginning of the year. Trend stands bullish on weekly chart and price is not at overbought by far. In fact, guys, gold market doesn't have any significant resistance till the next 1380 target, which is strong monthly level.
Here we have two AB-CD patterns of different scale. First one is large monthly AB-CD that we've mentioned above and this is 0.618 target that has been hit at 1326$.
Second AB-CD is a minor one and it stands inside CD leg of larger one. Right now we hear a lot of forecasts on gold's weakness, some of the we've put in previous research - it's an opinion of Goldman Sachs and Morningstar. But we also have here technical pattern that could encourage bears. This is possible large weekly "222" Sell that will be formed as soon as price will complete our smaller AB-CD pattern.
Still, right now we see a bit late reaction on our 1330 area. It should happen earlier as market 2 weeks ago has reached this area and completed 1326 target, but probably due significant geopolitcal tensions around N. Korea and other stuff, it was postponed. Now it seems that some reaction has started, well later is better than never. As this is just minor AB-CD target and price is not at OB, reaction should not be too deep. Thus, right now we could watch for 1285-1300 area:
Daily
So, we're returning back to the same picture that we've talked about last week. Trend is bearish here. As upside reaction on 1316 support area was finished, price continues downside action. Actually, on Friday gold almost has formed reversal session - as it has moved above the high and closed rather deep, although not below previous lows.
Here we still watching for some deeper retracement. Probably some kind of AB-CD action should be formed here to 1300 target:
Hourly
Here we have a shape of potential H&S pattern that we've discussed on Friday. Theoretically price still stands relatively close to the level where theoretically the bottom of right shoulder should be. At the same time, overall price action mostly shows irrational behavior for H&S. Here is clear some bearish pressure exists and this is not typical for last stage of bullish reversal pattern. It means that there are big chances that H&S pattern will fail.
As market already has shown response to 1316 Fib support area, it shows downside continuation. As price is not at OS on daily chart, it could proceed to next strong support around 1300 area.
Since gold has failed to re-establish upside bounce from 1323 level, where it should to, it means that chances on upside AB-CD significantly diminished. If H&S will fail, we could get 1.618 3-Drive Buy pattern, as 1.618 extension of recent retracement stands precisely around 1300 area:
Conclusion
Long term perspective of gold market looks positive. Although crucial price levels have not been broken yet, but overall performance looks good.
In shorter term perspective due some fundamental and geopolitical events previous driving factors are exhausted a bit. Thus, retracement should be deeper and first level that we will watch for is 1300 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.
