Gold Trend April 29th 2014

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Gold Trend April 29th 2014

Long Term ~ Neutral - Need a monthly close above 1800 to confirm the bull market final phase underway.
Medium Term ~ Neutral – Need a close above 1292 in April to maintain neutral trend. A close below 1272 bearish.
Intermediate Term ~ Neutral– 1265-1272 downside target met, now need close above 1312 for neutral reading and 1322 for bullish.
Short Term ~ Neutral– The next cycle turn is due April 29th (plus or minus 72 hours) this week.  Last week’s low at 1268 met target 1265-1272. Need close above 1312 for bullish reading. 

Initial Resistance 1303-1307 2nd tier 1312-1317
Initial Support 1282-1293 and 2nd tier 1272-1277
The last update listed resistance at 1307-1312 and the high was 1306.80.
Support was listed at 1293-1297 and the low was 1292.

San Francisco (Apr 28)   Gold futures closed under $1,300 an ounce on Monday, giving back part of the gains they saw in the previous session, but prices managed to settle off the day’s low as benchmark indexes tracked U.S. equities lower.

Gold for June delivery fell $7.20 to settle at $1,296.10 an ounce on Globex, off the low of $1,292.10 seen in electronic trading.

Gold prices also fell in the wake of data showing that U.S. pending-home sales rose 3.4% in March, marking the first gain in nine months. (Year over year they are still down 7.7%)

Tuesday, US Case-Shiller home prices for February will be released and the US conference board reports its April consumer confidence reading. The UK prints its Q1 GDP with the market’s growth expectations ranging from 0.7% to 1.0%. France’s parliament will consider and vote on President Hollande’s Stability Program which lays out fiscal policy over 2014 to 2017. Our European economists note that the Stability Program technically complies with the 3% deficit target for 2015, albeit on optimistic assumptions, but the tension with the parliamentary majority is unusually high by French standards. Tuesday will be an important day for tech earnings with Twitter and eBay reporting.

THE FOMC meeting also begins on Tuesday.  Don’t forget the BIG EVENT THIS WEEK will most likely be on Friday with NFP (non-farm payroll report).

FOMC Expected to Stand Pat...Gold may react less than usual

Washington (Apr 28)  The U.S. Federal Open Market Committee is expected to largely stand pat when a two-day policy meeting wraps up on Wednesday.

If so, this could mean a limited reaction for prices of gold and other precious metals, at least compared to past meetings, analysts said. That would mean the metal mainly could make a big move if there were some sort of major surprise.

Central bankers begin a two-day meeting on Tuesday and conclude Wednesday, with a post-meeting statement scheduled for release at 2 p.m. EDT.

“They are probably going to stay the course,” said Phil Flynn, senior market analyst with Price Futures Group.

After a meeting wound up last month, the Fed scaled back the bond-buying program known as quantitative easing by another $10 billion, as expected. Members’ forecasts for the future of short-term interest rates were seen as more hawkish than anticipated, however, as was a comment from Fed Chair Janet Yellen at a press conference in which she suggested rates could start rising six months after the end of QE.

Since, however, Fed commentary has been deemed more dovish than initially thought after the last FOMC meeting, with Yellen characterizing the labor market as still soft. Also, minutes from the last meeting, released earlier this month, showed policy-makers feared that their collective interest-rate forecasts might overstate the pace at which eventual tightening likely would occur, assuming the economy recovers sufficiently.

“I don’t look for much (new) to happen at this meeting,” said Frank Lesh, broker and futures analyst with FuturePath Trading.

Economists and market participants look for the $10 billion-per-meeting tapering to continue.

“Communications from the FOMC suggest that asset purchases are on track to step down in a steady way between now and the end of the year unless there is some drastic change in activity and/or the outlook,” said a research note from Nomura’s economic team.

Most observers do not expect any major changes to the Fed statement or forward guidance.

Brown Brothers Harriman said the Fed meeting likely will be a “non-event,” with markets anticipating that the first hike in short-term rates likely is still more than a year away. Markets anticipate one of the few changes to the Fed statement might be that the U.S. economy has picked up after a slow start to the year, Lesh and BBH said.

“But it’s not enough to change or alter the course of the Fed at the moment,” Lesh said.

In other news;

The Elephant In The Room: Deutsche Bank's $75 Trillion In Derivatives Is 20 Times Greater Than German GDP

Submitted by Tyler Durden on 04/28/2014 - 14:56

The conclusion of this story has not changed one bit from last year: this epic derivative exposure is the primary reason why Germany, theatrically kicking and screaming for the past five years, has done everything in its power, even "yielding" to the ECB, to make sure there is no domino-like collapse of European banks, which would most certainly precipitate just the kind of collateral chain breakage and net-to-gross conversion that is what causes Anshu Jain, and every other bank CEO, to wake up drenched in sweat every night.

GoldTrends is not the only ones who worry about deflation and not inflation.

Saxo Warns "Markets Are Drifting Into Dangerous Territory"
Submitted by Tyler Durden on 04/28/2014 - 17:58

A lack of volatility in the markets is dangerous, according to Saxo Bank's Chief Economist Steen Jakobsen, who says we need to know why the danger will be with us for some time. In this brief clip he warns, "...the world seems to think there is a stable permanent equilibrium which doesn't make sense if you think about it, unemployment is still rising, debt to GDPs are still rising, the Crimea situation is increasing in tension, not decreasing, The US still has a lot of stuff to do on social security and welfare spending…for two or three years down the road, with no activity, the world will fall into not only deflation, but also a recession." Jakobsen predicts that, year on year, world growth will actually be "a big fat zero" and therefore the markets are drifting into dangerous territory.

There’s an awful lot going on in the Ukraine and it’s a wild card for gold.

Today, geopolitical tensions have deepened with President Obama saying that the United States will impose additional sanctions on Russia targeting individuals and companies.

The move is expected to be followed by separate sanctions from the European Union. Washington said at the weekend the new sanctions would target individuals and companies close to Russian President Vladimir Putin, as well as new restrictions on high-tech exports to Russia's defense industry.

The geopolitical risks may overshadow a number of important reports on the U.S. economy this week.

The conflict reached a new level over the weekend, when a group of international observers from the Vienna-based Organization for the Security and Cooperation in Europe (OSCE) were abducted by pro-Russian groups. The separatists later released one of the captives due to a medical condition requiring treatment, but also said they had no intention of freeing the others. Negotiations for the release of the observers are underway, Russia saying it will help as much as possible with the situation.

Western diplomats will hold high level talks today, with the goal of agreeing further and tougher sanctions against Moscow. The BBC reported that, according to sources familiar with developments, this round of asset freezes and travel bans may target individuals at the top of Russia’s energy industry. There is even speculation that Putin himself and his considerable net worth may be targeted.

Russia will likely react to these sanctions and retaliate. This could come in the form of financial, economic or currency warfare.

One unappreciated risk is that state sanctioned Russian hackers may target U.S. exchanges and financial infrastructure. Bloomberg reports that “U.S. officials and security specialists are warning that Russian hackers may respond to new sanctions by attacking the computer networks of U.S. banks and other companies.”

Cyber security specialists consider Russian hackers among the worlds best at infiltrating networks and say evidence exists that they already have inserted malicious software on computers in the U.S.

There are concerns that small numbers of computer experts could have the ability “to cripple the U.S. economy in a few days.”

Veteran gold analyst, George Gero, who is the precious metals analyst at RBC is not a man for hyperbole or overstatement. Indeed, he has been quite bearish on gold in recent years. However, he believes that Ukraine and the deepening crisis, could have a “massively bullish impact on gold prices.”

He told CNBC the following:

"One of the largest suppliers of gold, and of course platinum, is Russia and if they're going to be involved in sanctions, and more problems with Ukraine, and deliveries are curtailed and there is already a problem in South Africa between the miners of platinum, palladium and the mining companies. All of that could somehow explode on the upside and curtail deliveries, meaning higher prices."

Russia is the fourth-largest producer of gold, outputting 7% of the world's total supply according to the British Geological Survey. Were Russia to retaliate by banning the exports of all precious metals and by selling some of their large foreign exchange reserves and diversifying into gold, silver, platinum and palladium, it would likely lead to might higher prices for all precious metals.

There is also the strong possibility of increased safe haven demand. This is likely to materialize should economic or even military conflict materialize.

HSBC point out that geopolitical incidents and a short term increase in geopolitical tensions However, the risk of conflict between Russia and the U.S. and EU is more than a short term risk. It is one of the greatest geopolitical challenges since the end of the Cold War.

Therefore, it is likely to have a more material impact on gold prices.

The concept of MAD or mutually assured destruction was what prevented war between the superpowers during the Cold War. Today, there appears to be a lack of awareness regarding the risk of mutually assured economic destruction.

Russia Voices "Disgust" At New US Sanctions, Warns "Won't Go Unanswered"

Submitted by Tyler Durden on 04/28/2014 - 09:40

Russia's Deputy Foreign Minister Sergei Ryabkov has come out swinging after US issued a new round of sanctions against citizens and companies of the nation:

• RUSSIA WON'T LET SANCTIONS GO UNANSWERED: INTERFAX
• RUSSIAN DEPUTY FOREIGN MINISTER RYABKOV VOICES "DISGUST" AT WHITE HOUSE STATEMENT ON NEW U.S. SANCTIONS -INTERFAX

Gold short term

The 1265-1272 target was reached last Thursday but it would have been much cleaner if the drop was inside the short term cycle window which is now in play until Friday. We discussed support was 1282-1292 for Monday and the low was 1292.10.

Tuesday’s support at the purple channel lines is the 1282-1288 area watch that Green 200 hour moving average near 1292 as it gave us support on Monday. Resistance is 1303-1308 and 1312-1316 at the dual gold lines.  From a trend line perspective we don’t show additional resistance until 1340-1347 but the 1322-1331 area should also be a consideration. 1322 has been a major number since it made the crash low on April 15,2013 and is a weekly reversal number.  The 1331 area is where price would be above February and into March territory in price and is also the April high.

 The FOMC meeting begins Tuesday.  Any pullbacks to the purple channel line MIGHT be considered potential short term trade to buy. The problem that exists is the NON FARM PAYROLL is on FRIDAY.  That is yet another obstacle in front of us if we choose a long trade in gold. That is usually the most volatile day for gold and it is the last day for the Short term cycle turn window.  So it is not out of the question to test 1272-1282. It’s also important that the short term trend does not turn up until the dual gold channel lines become support. So there is a lot of consideration as to the risk of entering at the moment. 

The consideration for a long entry might therefore be better to wait and see if the 1272-1282 area is tested or perhaps lowering buy intentions there.  There is nothing to say that the control boyz cant challenge that Fib support area at 1265 or more.  One look at the hourly chart still shows a downtrend.  The only clue we have of a potential low in place is the FLUSHOUT that occurred on Thursday.  We do have to admit that the move there does hold a high potential that a low was made.  At  minimum we would need to be above that dual blue downtrend line to say that the trend has turned up.  Even the HUI has pulled back to just below the moving averages on Monday.  So there’s a lot of uncertainty that still engulfs gold at the moment.

 
What Next?

There really is a lot of apprehension in the charts as the short term ones go back and forth between the moving averages.  On Monday night, the HUI, NUGT, GLD and GDX are below the averages but oh so slightly. The hourly gold chart has not broken the downtrend channel (neither has silver). The daily chart shows the 1272-1277 area as a good support point and with last week’s low at 1268 we could still pullback to that area without breaching last week’s low.

We looked at the seasonal and May is one of the strongest months of the year, but only when gold is in a bullish trend.  2012 and 2013 did not play out on the seasonal.
The other thing is that as we have discussed, price has not CONFIRMED yet that the medium term trend has turned bullish.  In fact we tested the medium term averages today with a 1292 low which is exactly the RED moving average and a 1296 close which is exactly the blue 34 week average.  We need to CLOSE APRIL ABOVE 1292-1296 to maintain Neutral readings and not bearish ones.  Thus we can’t rule out another May surprise to the downside at the moment.  This is what price is giving us to work with.  Recall March, where price dropped over 100 dollars the last two weeks to avoid a bullish medium term signal.  There is a short term cycle low due between now and Friday.  But the FOMC and the NFP payroll is also between now and Friday.  Those are the two most important monthly events that rank as high as options expiration on the big contract months.  And on top of all that we don’t have an UPTREND in gold’s hourly, daily or weekly charts at the moment.

I’ve highlighted the Key trend line in white on the hourly and I’m reposting it here so you can see for yourself that the trend even on the hourly chart is still down since the Mid-March high. The only bullish action at the moment is the Thursday flush out at 1268 and the one hour reversal to 1299. Right now we are testing the green 200 hour moving average but we still have the FOMC which are favored to continue tapering and then NFP on Friday.  That means that we can still test the purple lines at 1282-1288 and even the 1272-1277 weekly reversal area.  If Wednesday does not close above 1292 it will be the 2nd monthly close below the medium term moving averages and unless we close above that level this Friday, technically, the medium term trend will be considered bearish if the following Monday does not close above 1292.

Bottom Line

Although the trend looks to be turning up from the flush out last Thursday, the TRENDLINE on the HOURLY has not been taken out and while the low could be in place, as we enter Tuesday and the FOMC begins.  At the beginning of the report we listed the events for Tuesday.  But let’s look at the rest of the week as part of our consideration. 

The direction gold takes is uncertain at the best, at the moment. At a moment’s notice, something in Ukraine can develop that can change the course of where the FOCUS will be.  Here is the agenda beginning Wednesday.

Wednesday will be a big day on the macro calendar. The FOMC winds up its two-day meeting and will likely continue with its gradual QE taper - but there will be more interest in whether we see a change in the tone of the policy statement after the hawkish surprise from the March meeting. We note that the S&P500 and 10yr UST yields are both broadly unchanged since the March 19th FOMC. It will also be interesting to see the Fed’s take on the recent positive US economic data surprises. The Fed is not the only G3 central bank meeting on Wednesday with the BoJ finishing its second April meeting on the same day.

Though the market expects the central bank to stay put for the time being in terms of policy as the effects of recent sales hikes wash through the economy, there will be some focus on its updated semi-annual outlook including GDP and inflation forecasts from 2014 to 2016. Wednesday’s data docket is pretty full.

The US will print its advanced Q1 GDP – consensus is for growth of 1.2% on an annualized q/q basis in what was a weather-affected quarter. The ADP employment report will give us a preview of what to expect for Friday’s payrolls. The Chicago PMI for April will be released, as will German and Italian unemployment data. Amid all the recent talk about the possibility of ECB easing, Wednesday’s Euro area CPI report for April takes on additional significance. Consensus expects headline CPI of 0.5%, the lowest in four years. The US treasury will announce its quarterly refunding plans.

With the Q1 GDP data out of the way on Wednesday, the focus shifts to the more forward-looking manufacturing activity data for April on Thursday. The US ISM manufacturing index will be released but our economists warn that there are two technical factors that are impacting the ISM headline which are simply delayed reactions to recent weather events this is occurring in the employment and supplier delivery subcomponents. As such, they think the growth rebound is more pronounced than the ISM headline implies. China also releases its official manufacturing PMI. The latest US consumer spending report will be published together with the PCE deflators. Janet Yellen speaks at a Community Bankers of America meeting at 08:30 in Washington. Chancellor Merkel begins a two-day trip to Washington. Oil giants, Exxon Mobil and ConocoPhillips report earnings the same day.

The busy week will be capped off by Friday’s US payrolls (biggest event of the week). The unemployment rate is expected to drop by 0.1ppt to 6.6% and average hourly earnings and weekly hours are expected to be unchanged at 2.1% y/y and 34.5hrs respectively. Friday also sees the release of March US factory orders.

AS YOU CAN SEE, THERE ARE MANY THINGS TO CONSIDER THIS WEEK AND WHAT THE POTENTIAL EFFECTS ARE WILL BE IN THE END, WHAT THE CONTROL BOYZ IMPLEMENT.  AND THAT'S USUALLY TO TAKE OUT THE MAJORITY OF THE PLAYERS BEFORE THE NEXT MOVE BEGINS.

Samer Al Reifae
support5002@vantagefx.com

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