Gold weekly update 03-07.04
Gold has been in a consolidation for two weeks - a very tricky one. It could be a double top, triangle, wedge, head and shoulders, every known pattern. Any speculation at the moment is gambling. Next week is a new month and new quarter, which means gold has a lot of room to fall before the rally resumes. The important numbers for the institutions are the annually, quarterly and monthly closes. This quarter and month closed bullish, so we can expect a small decline.
Market sentiment is very bullish and everyone is expecting gold to reach at least 2070, which means for me that banks can sell for a while and clear few stop losses.
Gold is moving in a bullish channel. It has made a new higher high and is consolidating at the top of the channel.
Considering the channel, the timing and the factors we will observe below, I prefer a bearish week, for now. As I said at the moment the direction is not clear, so we have to watch the chart every day.
On Friday gold was set to rise - silver rose sharply, PCE inflation showed lower inflation which should have been bullish for gold, yields collapsed but gold also closed as a bearish day.
I don't like the timing, I don't like the divergences between the assets. XAUUSD also showed weakness these days.
Macroeconomics
Market sentiment is very bullish because:
1) Banks have been buying gold for six months. They were prepared for the banking crisis, so the main direction remains bullish.
2) Russia and China bought record amounts of gold last year and they are still buying.
3) Gold has never been in a downtrend. Last year it fell because of rising interest rates and yields. Investors also recouped losses from the collapsing stock market by selling gold.
- A few days ago the FED announced that they will most likely stop raising interest rates, at least for a while.
- Yields are falling for now.
- Stock market is stable and is going up for now.
So no reason for Gold to collapse.
4) The FED is printing money again, short-term loans to the banks.
There is speculation that this move could cause hyperinflation. For now there is no reason to believe in this speculation, but it could still be a driver for gold to rise.
5) Uncertainty is very high due to speculation, that the Fiat system could collapse. This theory is driven by a possible recession and failing banks.
Top-Down Analysis
Last two weeks are bearish dojis. This does not mean anything yet, but a new HH with two dojis is something we have to consider as a possible reversal.
For now, consolidation is being supported by old manipulation.
Price is moving between these two manipulation areas. It is not clear which one will break.
Swing projection
May be it is a time for new high to be formed.
Benchmark
It seems to me that the indices are preparing for a retracement. XAUUSD is also weaker against other assets.
COT Reports
Professional traders are very bullish on Gold and Silver.
Gold vs Yields
For me, yields have already resumed their downtrend. What worries me is that yields collapsed on Friday, but so did gold.
Gold vs Silver
I do not like the divergence between Gold and Silver. Silver is approaching a reaction area and there is a big change to turn, at least for a while.
XAUUSD vs GDX
I don't like the divergence. Divergence between tops is a proven signal of decline.
Retail Support and Resistance
Support is holding for now, but we will see how long it lasts.
Momentum
Momentum is only showing a pause.
RSI is bullish.
Market sentiment is very bullish and everyone is expecting gold to reach at least 2070, which means for me that banks can sell for a while and clear few stop losses.
Gold is moving in a bullish channel. It has made a new higher high and is consolidating at the top of the channel.
Considering the channel, the timing and the factors we will observe below, I prefer a bearish week, for now. As I said at the moment the direction is not clear, so we have to watch the chart every day.
On Friday gold was set to rise - silver rose sharply, PCE inflation showed lower inflation which should have been bullish for gold, yields collapsed but gold also closed as a bearish day.
I don't like the timing, I don't like the divergences between the assets. XAUUSD also showed weakness these days.
Macroeconomics
Market sentiment is very bullish because:
1) Banks have been buying gold for six months. They were prepared for the banking crisis, so the main direction remains bullish.
2) Russia and China bought record amounts of gold last year and they are still buying.
3) Gold has never been in a downtrend. Last year it fell because of rising interest rates and yields. Investors also recouped losses from the collapsing stock market by selling gold.
- A few days ago the FED announced that they will most likely stop raising interest rates, at least for a while.
- Yields are falling for now.
- Stock market is stable and is going up for now.
So no reason for Gold to collapse.
4) The FED is printing money again, short-term loans to the banks.
There is speculation that this move could cause hyperinflation. For now there is no reason to believe in this speculation, but it could still be a driver for gold to rise.
5) Uncertainty is very high due to speculation, that the Fiat system could collapse. This theory is driven by a possible recession and failing banks.
Top-Down Analysis
Last two weeks are bearish dojis. This does not mean anything yet, but a new HH with two dojis is something we have to consider as a possible reversal.
For now, consolidation is being supported by old manipulation.
Price is moving between these two manipulation areas. It is not clear which one will break.
Swing projection
May be it is a time for new high to be formed.
Benchmark
It seems to me that the indices are preparing for a retracement. XAUUSD is also weaker against other assets.
COT Reports
Professional traders are very bullish on Gold and Silver.
Gold vs Yields
For me, yields have already resumed their downtrend. What worries me is that yields collapsed on Friday, but so did gold.
Gold vs Silver
I do not like the divergence between Gold and Silver. Silver is approaching a reaction area and there is a big change to turn, at least for a while.
XAUUSD vs GDX
I don't like the divergence. Divergence between tops is a proven signal of decline.
Retail Support and Resistance
Support is holding for now, but we will see how long it lasts.
Momentum
Momentum is only showing a pause.
RSI is bullish.
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