Nov 3, 2010
Technical Analysis 03.11.2010
Today, the harmonic formation mentioned yesterday will be discussed, while the harmonic formation for the weekly report is still valid. The provided four hour chart suggests that more historical prices are under way as far as the trading remains above 1345.00 – B level-. On the other hand, the AB=CD pattern of the weekly report is valid as far as 1372.00 remains intact. Thereby, the neutrality is still in favor between 1345.00 and 1372.00. We recommend reviewing yesterday's report and the weekly report for more details.
The trading range for today is among the key support at 1300.00 and key resistance now at 1404.00.
The general trend over the short term basis is to the upside, targeting $ 1400.00 per ounce as far as areas of 1120.00 remain intact.
Resistance 1358.00 1365.00 1372.00 1385.00 1388.00
Recommendation Based on the charts and explanations above our opinion is, staying aside
until a clearer sign appears to pinpoint the upcoming big move.
News and gold strategy 03.11.2010
Gold Marginally Up Ahead of U.S Election Results and FOMC Meeting Statement
| 03 Nov 2010 | 1st resistance | 2nd resistance | 3rd resistance |
| Today’s resistance US$ | 1361 | 1365 | 1371 |
| | 1st support | 2nd support | 3rd support |
| Today’s support US$ | 1342 | 1346 | 1342 |
| Today’s pivot point US$ | 1356 | | |
The Day’s Story:
Spot gold ended marginally high on Tuesday in a quiet trading session ahead of eagerly awaited FOMC meeting outcome later today. Gold advances came as U.S dollar came under selling pressure due to its technical and fundamental weakness. Gold traded within $10 range throughout Tuesday session on a day when no significant data was due to be released. The main event on the day was U.S midterm congressional election but final results will not be known until late U.S time so the effect of that on prices was minimal. Gold has advanced in last quarter of the year since 2003 and is already up by 4% this quarter so far. Regardless of gold’s reaction to the details of widely anticipated QE2 package gold looks set to record its 10th annual gain.
Major U.S indices ended with decent gains in anticipation of fresh stimulus package to jump start the economic recovery which has been bumpy since the start of this year. Market did not have any significant data to react to so gains were largely due to an anticipated Republican Win in congress to take control of the House and size of stimulus package to be announced. Stocks largely have tread water in recent days amid uncertainty over the outcome of midterm elections, and over the scope of a second round of quantitative easing which is estimated at $500 Billion. Analysts believe any amount less that that figure will disappoint the market and recent gains in stocks and commodities will be trimmed by any such news although U.S dollar can bounce back with such an outcome. Stocks in Europe also finished with heavy gains at the back of some positive data from European Union.
Analysts’ are concerned about amount of money to be employed by FED in an effort to help sustain economic recovery as it could disappoint investors who have already gone on buying spree in anticipation of Trillions of dollars of fresh round of monetary easing. Last week report in Wall street Journal however, contradicted market perception and revealed that FED may employ much smaller QE2 measures stretched over several months. In such a scenario we may see gold to give away some of its recent gains as much of QE2 is already
factored in the price according some market analysts although Bullion’s outlook remains bullish due to certain
factors. One of the main concerns will be heightened inflation caused by new money.
U.S dollar remained under selling pressure after recovering a little a day earlier. Dollar losses paved way for gold to claim back some of its lost ground from previous day due to their negative correlation. The negative correlation between the dollar and gold has gone a step further in recent months, since fears of inflation and currency debasement have been at the root of gold’s recent run up to record highs. We are in the middle of an important week and once FOMC releases the details about its QE2, next crucial data to watch for is Friday’s Non-farm Payroll report which will give us an idea how the labour market of World’s biggest economy is doing and that will definitely have an impact on price of gold before the end of this week. Tonight’s ADP report will give us a clue how well labour market has done during last month although we will have to wait for Friday’s numbers for in-depth analysis. In other outside markets Crude Oil rose to its six month high supporting other metals prices as a result.
Gold price started its first session of the day with minor gains and continued to climb throughout the session although gains were limited due to quiet trading. Gold continued its upward momentum during early European session and peaked to its intraday high of $1359.7 by mid European session. Gold was hit by some profit taking at that point and gave away all its gains and fell into red zone by the time markets in North America started their trading day. Gold managed to erase its losses in later part of U.S session and finished in positive territory, closing its day at $1357.2 an ounce.
Coming Up Today: ADP Non-Farm Employment Change
FOMC Statement
Unemployment Rate
Other Metals:
Silver futures for December delivery closed up 28.0 cent to $24.84 an ounce on Tuesday.
Platinum futures for January delivery rose by $7.60 to $1,719.10 an ounce on NYMEX.
Palladium futures for December delivery rose by $3.25 to $645.45 an ounce.
December N.Y. Copper closed up 5 cent $3.84 a pound on Tuesday.
Gold (News and Views):
December Comex gold closed up $2.40 at $1,353.20 an ounce on Tuesday. The London P.M. gold fixing was $1,351.00 on Tuesday compared to its previous P.M fixing $1,354.50. The world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, said its holdings fell to 1293.101 tons on October 28 down from 1298.166. The dollar index, which measures the U.S. currency against a basket of six major currencies, fell 0.55 to 76.69 on Tuesday. Crude Oil for October delivery rose by $0.95 to settle at $83.90 on Tuesday on New York Mercantile Exchange. Gold hit its true peak on Jan. 21, 1980, when it rose to $825.50 an ounce. Adjusted for inflation in 1980 dollars, that translates to an all-time record of $2,184.08 an ounce, in 2010 dollars. Turkey's gold imports rose to 9.07 tonnes in October, compared with 2.45 tonnes the previous month, the Istanbul Gold Exchange said on Tuesday. Turkey is the world's third-biggest gold consumer.
Factors Affecting Gold Price Yesterday:
Gold thrived on a trio of uncertainties hovering markets on Tuesday -- election results and the new make-up of the U.S. Congress, the much-hoped-for Fed announcement about quantitative easing on Wednesday, and the ADP unemployment figures also due Wednesday, said Bill O’Neill, a principal with Logic Advisors in New Jersey.
People are convinced that QE will be substantial. (They are) buying the rumor said VTB Capital analyst Andrey Kryuchenkov. "The Fed does not want to disappoint the market."
Indian gold consumers kept buying ahead of the key Dhanteras festival, which celebrates prosperity. It is swiftly followed by the Diwali festival of light, another key gold-buying occasion for the world's biggest bullion consumer.
"I think it's a reflection of what we've been seeing all along: the extensive monetary policy coming from the Fed. Until the U.S. starts taking austerity steps to bolster the value of the dollar, this trend we've been seeing in the last ten years (the rise of gold prices on dollar weakening) will continue." DiGeorgia maintains that gold prices will reach $1,400 by the end of the year.
“Gold is poised to move higher on the weaker dollar,” said Frank Lesh, a trader at FuturePath Trading in Chicago.“The dollar is gold’s main driver, and how much and how fast it moves lower depends on what the Fed says.”
“The whole world is expecting a substantial amount of quantitative easing from the Fed,” said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago. “If it’s just talk, then gold is mispriced.”
Gold Future Outlook:
MKS Finance suggests precious-metals investors “remain cautious” ahead of the outcome of an FOMC meeting Wednesday, with markets collectively anticipating further quantitative easing in which the Federal Reserve buys more Treasury securities in a bid to push down long-term interest rates. The metals “could be vulnerable to price dips this week should the Fed’s Treasury purchasing program disappoint (relative to) market expectations,” the trade house says in its daily report. Still, it may be “judicious” to “remain slightly long” in gold and silver since the immediate market reaction to Fed purchases of Treasury securities may be to buy precious metals, MKS says.
“Moreover, with its bid to boost the economy by essentially printing money, some worry the Fed’s policies will further weaken the dollar and spark inflation in coming years, both of which would be supportive for gold as a perceived store of value in times of rising consumer prices,” MKS says. MKS analysts anticipate that the gold market has already priced in a $500 billion Treasury-buying program.
"I suspect there could be a sell-the-news type of reaction" because of a knee-jerk dollar rally, and the gold market looked overextended, said James Dailey, portfolio manager of the TEAM Asset Strategy Fund .
U.S. mid-term elections Tuesday may not have much impact on precious metals such as gold, but a Federal Open Market Committee decision on whether to embark upon a second round of quantitative easing Wednesday will, say analysts with GoldCore. “The election outcome should not have any material impact on the precious-metal markets as the size of the fiscal and economic challenges facing Democrats and Republicans is such that gold should be supported no matter who gains power,” GoldCore says. “Should QE2 be less than expected, then there could be an initial sell off in all markets (equity, commodity, bond and the gold and silver markets). A higher amount (close to $1 trillion) would likely see further gains in all these markets. Any sell-off in the gold market is likely to be greeted by eager buyers who continue to buy on the dips.”
Base metals are higher with the euro, but some caution may be in order ahead of U.S. elections Tuesday and a Federal Open Market Committee meeting that ends Wednesday, says MF Global analyst Edward Meir.
“Right now, the consensus view is that the Fed will purchase at least $500 billion of long-term securities, but the timing, the type of securities to be purchased, and whether $500 billion will be the actual number, all remain to be revealed. U.S. election results out later today could also be of consequence to the markets (via the dollar), although of the two events, the Fed decision is far more important. We reiterate our cautious view at this stage in practically all the markets, as we think many complexes could pull back once these two key events are out of the way,” Meir said.
Technical Analysis (by Jim Wyckoff):
Technically, December Comex gold futures prices closed near mid-range Tuesday. Bulls have some upside technical momentum on their side. Bulls also still have the overall near-term and longer-term technical advantage.
Bulls' next near-term upside technical objective is to produce a close above solid technical resistance at the all-time record high of $1,388.10, scored in mid-October.
Bears' next near-term downside price objective is closing prices below solid technical support at $1,315.60. First resistance is seen at Tuesday's high of $1,359.90 and then at this week's high of $1,366.40.
Support is seen at this week's low of $1,349.10 and then at $1,340.00.
Wyckoff's Market Rating: 7.5.
More Technicals:
Gold may advance toward a record after closing above a resistance level last week, according to technical analysis by Barclays Capital.
The daily chart shows the metal surpassed $1,350 an ounce on Oct. 29, a level “needed to confirm a resumption of the bull-trend,” Phil Roberts, a London-based analyst at Barclays Capital wrote in a report yesterday. Prices remained below that level in the seven sessions prior to Oct. 29 and reached a record
$1,387.35 on Oct. 14.
“With daily momentum oscillators rolling bullish we look for further gains in the week ahead for a move towards the $1,387 highs of mid-October,” Roberts said. “There remains significant capital still on the sidelines to push gold well beyond its all-time highs towards secular channel resistance in the $1,461 area.”
Chart shows speculators’ net long position in New York gold futures, or bets prices will rise, is below the peak seen in 2009, according to data from the Commodity Futures Trading Commission. Gold for immediate delivery traded at $1,357.75 an ounce at 6:16 a.m. in London.
Daily Gold and Silver Expected Range:
Gold: US$1334- $1375
Silver: US$24.38 - $25.30
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