Nov 4, 2010
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.
Support 1350.00 1345.00 1339.00 1330.00 1320.00
Resistance 1365.00 1372.00 1385.00 1388.00 1395.00
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 04.11.2010
Gold Upward Momentum Continues for Fourth Straight Session
QE2 Failed to Shake Gold Lovers Confidence - Market Focus at Friday’s Jobs Report
| 04 Nov 2010 | 1st resistance | 2nd resistance | 3rd resistance |
| Today’s resistance US$ | 1367 | 1385 | 1406 |
| | 1st support | 2nd support | 3rd support |
| Today’s support US$ | 1327 | 1307 | 1288 |
| Today’s pivot point US$ | 1346 | | |
The Day’s Story:
Spot gold finished 0.5% lower in a volatile trading session after falling as much as 2.4% earlier during the session. Gold losses came ahead of FED’s announcement after their two day’s meeting in which details of highly anticipated quantitative easing measures were announced. Federal Reserve Bank pledged to buy $600 billion of Treasury Securities over a period of eight months, including $75 Billion this month to aid anemic recovery. Such measures are referred to as quantitative easing aimed at pushing down long-term yields, which move inversely to the price of the securities. Gold losses came as better than expected economic data started to filter in just before U.S session and investors locked some of their profits from earlier gains to position themselves ahead of FED’s announcement. Gold is already up by 25% this year and looks well on its way to post its 10th annual gain.
U.S stocks finished higher at the news of fresh round of monetary easing measures in a statement by FED after FOMC monthly meeting. DOW finished to its highest level since September 2008 when recession deepened after the collapse of Lehman Brothers. S&P500 also moved closer to 1200 level with financial sector the strongest among its 10 industrial groups. Market had a lot of economic data to digest before U.S market open as ADP report revealed that Private sector hired 43,000 people last month which was more than market consensus. The ISM services index expanded in October, while a separate report from the government had factory orders up 2.1% in September. Stocks did not respond to spate of economic reports before U.S market open as traders had only one thing in mind and that was exact amount of QE2 and terms attached. Gold however, was hit by profit taking as day’s economic data painted a brighter picture of the economy which off course takes shine away from precious metal as it loses its appeal in times of economic stability.
U.S dollar had a mixed day, trading higher earlier in the session but finished lower at the end of the session. U.S dollar was boosted in an aftermath of FED’s announcement but quickly gave away those gains as FOMC statement is considered dollar bearish because more money in the economy means cheaper dollar. Gold also
reacted strongly to the news and fell deep into the red in a knee jerk reaction but managed to pare most of its
losses before close of the day. Gold outlook remains bullish as new stimulus is going to weigh dollar further down. Although amount of $75Billion per month is less than analysts expectation who were expecting $100 Billion bond purchase per month which could lead to a near term bounce back in greenback but gold remains supported from various fundamental and technical factors and a short-term rebound in dollar index is not likely to change gold's bullish stance. Now that Cat is out of the hat, market has turned its focus to Friday’s Non-Farm payroll report to get further clues on job’s market and positive numbers could trigger further correction in gold prices.
Gold price started its first session on a quiet note ahead of a data packed day and traded in a narrow range. Gold price was boosted as markets in Europe started their trading day and peaked to its intraday high of $1364.5 an ounce by mid European session. Gold however met with some profit taking which turned into broad sell off as better than expected economic data from U.S started filtering in. Gold remained volatile in early hours of U.S session and fell deep into red soon after FED’s announcement. Bullion managed to pare most of its intraday losses as bargain hunters benefited from dip in prices and finished its day 0.5% lower at $1348.3 an ounce.
Coming Up Today: Bank of England Interest Rate Decision (UK)
European Central Bank Interest Rate Decision (EU)
Weekly Jobless Claims (USA)
Other Metals:
Silver futures for December delivery closed down 40.0 cent to $24.44 an ounce on Wednesday.
Platinum futures for January delivery fell $22.10 to $1,697.00 an ounce on NYMEX.
Palladium futures for December delivery fell $2.75 to $642.70 an ounce.
December N.Y. Copper closed down 5 cent $3.79 a pound on Wednesday.
Gold (News and Views):
December Comex gold closed down $19.30 at $1,337.60 an ounce on Wednesday. The London P.M. gold fixing was $1,345.50 on Wednesday compared to its previous P.M fixing $1,351.00. The world’s largest gold exchange-traded fund, New York’s SPDR Gold Trust, said its holdings fell to 1292.189 tons on November 02 down from 1293.101. The dollar index, which measures the U.S. currency against a basket of six major currencies, fell 0.38 to 76.31 on Wednesday. Crude Oil for October delivery rose by $0.79 to settle at $84.69 on Wednesday 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. A report at a Shanghai conference, saying that China’s gold market could double in the next decade on retail investment and jewelry demand, has profound implications for the metal, says Mark O’Byrne, director of GoldCore. Chinese consumption may rise 800 to 900 metric tons in the 10 years, a World Gold Council official told the conference. Says O’Byrne of Dublin-based GoldCore: “That has huge implications for the gold market. Supply remains constrained.” Not only does mining output remain limited, but central banks collectively have been net buyers rather than sellers lately, erasing that source of supply, he says. Supply has come from the International Monetary Fund in recent months as it sells some of its gold to fund programs for poor nations. “But obviously that supply is going to run out in the coming months as well,” O’Byrne says. Thus, the projection for Chinese demand to double suggests that the fundamental picture for the gold market remains favorable, he concludes.
Factors Affecting Gold Price Yesterday:
Then bargain hunting emerged in precious metals right after the Fed statement, allowing the gold to quickly bounce, said George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures. However, Gero and others said, profit-taking quickly followed.
“It’s been extremely volatile,” said Frank Lesh, broker and futures analyst with FuturePath Trading. “We shot up to $1,349, dropped down to a new low on the day at $1,325.50 and now here we are at $1,341 (as of when he spoke). There were bargain hunters coming in and probably some short covering.”
However, he commented, the market did not fall enough to force long-term players to exit long positions. The December gold futures remain above support at last week’s low at $1,318.60, he said.
"We had a lot of nervous liquidation in the markets today," observed Bill O'Neill, a principal with Logic Advisors. "This is just noise, all the factors driving gold higher are still intact."
Gold has come off because a lot of expectations were already built in. The market was so overbought that it had become a momentum play, it really needs a good dip to give a good buying opportunity," Ashok Shah, chief investment officer at London and Capital Fund.
Gold Future Outlook:
Mike Daly, gold and silver specialist with PFGBest, described the market as volatile as traders tried to decipher just what the Fed statement means for gold’s future prospects. It ultimately should be supportive, he said.
“I think the bottom line is the amount the Fed is going to issue -- $600 billion – no matter how you look at it, that’s printing an awful lot of money between now and the end of the second quarter of 2011,” Daly said. “Any time you print that kind of money…it has to be seen as a little bit inflationary…People are remembering the old rule, when you print more, the dollar is worth less.”
As a result, investors are looking at gold as the “currency of choice,” Daly continued. “Overall, it’s very dollar bearish and gold friendly.”
Commenting on future prospects for gold prices, Frank Lesh added, “It is extra stimulus, a little bit more than expected” Lesh said. “They also left open that they can do more, if necessary. All of this really doesn’t say much for the dollar going forward.
“It looks like currency volatility is expected to continue. Fiscal irresponsibility on the part of most Western nations is still out there. All of the factors driving gold are still there. I still expect higher prices.”
Tom Pawlicki, analyst with MF Global, commented that the quantitative easing itself could be bullish since it shows the Fed is still pumping money into the economy, as well as saying it is still reviewing plans and could adjust the amount of quantitative easing as necessary. However, he cautioned, this could be more than offset by potential for a new Congress to be more austere than the old after Republicans captured the House of Representatives, which could end up being a bearish factor.
"Short term we have a sell-off. After the sell-off you have to move back into gold and precious metals and buy back those precious metals and commodities you may have sold going into this meeting," said Michael Pento, senior economist with Euro Pacific Capital in New York.
He added: "This is going to lead us to the very high likelihood of an inflationary death spiral."
Gold trading may be muted ahead of the outcome of the FOMC meeting Wednesday, say analysts with Standard Bank. The market consensus seems to be the Fed will announce quantitative easing of some $500 billion, which is consistent with a gold price around $1,350 an ounce, Standard says. The bank sees a risk in which the Fed disappoints markets by announcing a “staggered approach,” with smaller amounts of asset purchases on a monthly basis; this could mean a pullback in gold prices. “Nevertheless, any additional liquidity (no matter in what manner it is delivered) should be bullish for precious metals, especially for gold,” Standard says in its daily research note. “Therefore, we would buy on dips. In addition, seasonal jewelry demand for gold (ahead of Diwali and the Indian wedding season) remains strong, even at current prices, adding weight to our bullish stance over the medium term.”
Technical Analysis (by Jim Wyckoff):
Technically, December Comex gold futures closed nearer the session low Wednesday and scored a bearish "outside day" down on the daily bar chart--whereby the daily high was higher and daily low was lower than the previous day's trading range.
Bulls still have the overall near-term and longer-term technical advantage, but did fade Wednesday and need to show some fresh power soon.
Bulls' next near-term upside technical objective is to produce a close above solid technical resistance at this week's high of $1,366.40 in December futures.
Bears' next near-term downside price objective is closing prices below solid technical support at $1,315.60. First resistance is seen at $1,350.00 and then at last week's high of $1,359.80.
Support is seen at Wednesday's low of $1,327.10 and then at $1,320.00.
Wyckoff's Market Rating: 6.5.
Daily Gold and Silver Expected Range:
Gold: US$1338- $1370
Silver: US$24.20 - $25.30
Forex News : ADP Employment Shows 43,000 Jobs Were Added, While Attention Now Turns to ISM, and FOMC
Forex News : ADP Employment Shows 43,000 Jobs Were Added, While Attention Now Turns to ISM, and FOMC
U.S. markets are ahead of a very important day, where important fundamentals are scheduled to be released in addition to the highly anticipated FOMC rate decision, which will determine whether the Fed will undertake QE2, not to forget the victory of the Republican party over Democrats in taking the majority in the House of Representatives.
The start today was with the labor market, where the ADP employment report was released for the month of October, as the ADP employment report showed that U.S. private employers added 43,000 jobs, compared with the prior revised drop of 2,000 jobs back in September, and better than markets estimates of 20,000 added jobs.
The importance of the ADP employment report comes from the fact that it is released two days ahead of the infamous jobs report, and investors will be scrutinizing the report in order to find any clues that will help them anticipate Friday’s non-farm payrolls, which is expected to rise by 60,000 jobs.
The labor market is showing slight signs of improvement; nevertheless, conditions in the labor market remain weak, since employers are still reluctant to add new workers amid the weak overall economic conditions, noting that unemployment continues to hover near its highest levels in more than 25 years standing at 9.6%.
The labor market has been the major obstacle standing in the way of economic recovery, where unemployment hammered income growth, and accordingly, consumer spending which is considered the cornerstone for economic growth in the United States since it accounts for nearly two thirds of economic activities remained weak, meaning that economic growth remained sluggish.
The U.S. government though tried to provide support for the labor market, nonetheless, that proved to be rather insignificant, as employers were still not hiring new workers over a strong pace, where employers still believe that the outlook of the economy is rather fragile, while demand levels remain at depressed levels.
The economy though is showing some encouraging signs recently that conditions will improve over a noticeable pace during next year, which will probably mark the real recovery for the U.S. economy, although we still expect the economy to underperform its long term growth potentials at least during the first half of 2011, however, the second half of 2011 should mark a real and aggressive improvement.
Markets will now turn their attention on the ISM services index which will be released later today, and is expected to show that activity in the services sector continued to improve, however, markets will be more focused on the FOMC rate decision, where investors are almost certain that the Fed will undertake a second round of Quantitative Easing (QE2), as the Fed is expected to conduct purchases of Treasury securities of $500 billion, which will be conducted on monthly basis with a total amount of $100 billion a month
U.S. markets are ahead of a very important day, where important fundamentals are scheduled to be released in addition to the highly anticipated FOMC rate decision, which will determine whether the Fed will undertake QE2, not to forget the victory of the Republican party over Democrats in taking the majority in the House of Representatives.
The start today was with the labor market, where the ADP employment report was released for the month of October, as the ADP employment report showed that U.S. private employers added 43,000 jobs, compared with the prior revised drop of 2,000 jobs back in September, and better than markets estimates of 20,000 added jobs.
The importance of the ADP employment report comes from the fact that it is released two days ahead of the infamous jobs report, and investors will be scrutinizing the report in order to find any clues that will help them anticipate Friday’s non-farm payrolls, which is expected to rise by 60,000 jobs.
The labor market is showing slight signs of improvement; nevertheless, conditions in the labor market remain weak, since employers are still reluctant to add new workers amid the weak overall economic conditions, noting that unemployment continues to hover near its highest levels in more than 25 years standing at 9.6%.
The labor market has been the major obstacle standing in the way of economic recovery, where unemployment hammered income growth, and accordingly, consumer spending which is considered the cornerstone for economic growth in the United States since it accounts for nearly two thirds of economic activities remained weak, meaning that economic growth remained sluggish.
The U.S. government though tried to provide support for the labor market, nonetheless, that proved to be rather insignificant, as employers were still not hiring new workers over a strong pace, where employers still believe that the outlook of the economy is rather fragile, while demand levels remain at depressed levels.
The economy though is showing some encouraging signs recently that conditions will improve over a noticeable pace during next year, which will probably mark the real recovery for the U.S. economy, although we still expect the economy to underperform its long term growth potentials at least during the first half of 2011, however, the second half of 2011 should mark a real and aggressive improvement.
Markets will now turn their attention on the ISM services index which will be released later today, and is expected to show that activity in the services sector continued to improve, however, markets will be more focused on the FOMC rate decision, where investors are almost certain that the Fed will undertake a second round of Quantitative Easing (QE2), as the Fed is expected to conduct purchases of Treasury securities of $500 billion, which will be conducted on monthly basis with a total amount of $100 billion a month
The market is calm ahead of the announcement of the Fed meeting result where investors
Market steadies before FOMC meeting
The market is calm ahead of the announcement of the Fed meeting result where investors are on hold till knowing the Fed's monetary action.
Expectations are in favor of adding $500 billion stimulus to boost the economy, thus the size of the QE2 will affect movements in markets as the quantity will reflect the status of the economy.
Meanwhile, refuges are facing downside pressure where the yen and franc and declining against other majors, especially after the upbeat services data released from the Australia, UK and the US which provided hopes global recovery is not weak as expected.
The dollar index, which tracks the dollar performance versus a basket of major currencies, is currently trading at 76.76 after recording a high of 76.86 and a low of 76.56.
US elections did not have much impact on the dollar where the midterm election results showed that Republicans regained the House of Representative while the Democrats maintained the majority of the Senate, which is still a big setback for President Obama.
Concerning the euro-dollar pair, it is trading near the day's opening, above 1.40 key level after recording a high of 1.4059 and a low of 1.3989.
Tomorrow, ECB will announce interest rate for November where it is expected to keep borrowing cost unchanged amid stability in the region.
Meanwhile, the pair is trading at 1.4020, whereas the trading range for today is among the key support at 1.3925 and the key resistance at 1.4250.
Moving to the royal pair, it bounced against majors after the report showing that UK services expanded in October to 53.2 from 52.8 in September, but it then retreated from a high of 1.6155 while it touched a low of 1.6004 earlier today.
The pair is currently trading at 1.6098, while the trading range for today is among the major support at 1.5920 and the major resistance at 1.6200.
With regard to the dollar-yen pair, it rose for the third day in a serious attempt from the dollar to rebound from 15-year low. The pair is currently trading at 81.34 after posting a high of 81.50 and a low of 80.58.
The yen is facing pressure on speculation the Bank of Japan will announce further measures to keep borrowing costs low to prevent recovery from faltering.
The trading range for today is among the key support at 78.55 and the key resistance at 81.15
The market is calm ahead of the announcement of the Fed meeting result where investors are on hold till knowing the Fed's monetary action.
Expectations are in favor of adding $500 billion stimulus to boost the economy, thus the size of the QE2 will affect movements in markets as the quantity will reflect the status of the economy.
Meanwhile, refuges are facing downside pressure where the yen and franc and declining against other majors, especially after the upbeat services data released from the Australia, UK and the US which provided hopes global recovery is not weak as expected.
The dollar index, which tracks the dollar performance versus a basket of major currencies, is currently trading at 76.76 after recording a high of 76.86 and a low of 76.56.
US elections did not have much impact on the dollar where the midterm election results showed that Republicans regained the House of Representative while the Democrats maintained the majority of the Senate, which is still a big setback for President Obama.
Concerning the euro-dollar pair, it is trading near the day's opening, above 1.40 key level after recording a high of 1.4059 and a low of 1.3989.
Tomorrow, ECB will announce interest rate for November where it is expected to keep borrowing cost unchanged amid stability in the region.
Meanwhile, the pair is trading at 1.4020, whereas the trading range for today is among the key support at 1.3925 and the key resistance at 1.4250.
Moving to the royal pair, it bounced against majors after the report showing that UK services expanded in October to 53.2 from 52.8 in September, but it then retreated from a high of 1.6155 while it touched a low of 1.6004 earlier today.
The pair is currently trading at 1.6098, while the trading range for today is among the major support at 1.5920 and the major resistance at 1.6200.
With regard to the dollar-yen pair, it rose for the third day in a serious attempt from the dollar to rebound from 15-year low. The pair is currently trading at 81.34 after posting a high of 81.50 and a low of 80.58.
The yen is facing pressure on speculation the Bank of Japan will announce further measures to keep borrowing costs low to prevent recovery from faltering.
The trading range for today is among the key support at 78.55 and the key resistance at 81.15
Subscribe to:
Posts (Atom)