The Dollar Index is testing primary support between 92 and 93. Breach of support would offer a long-term target between 83 and 84* — a bullish sign for gold.
*Target: 93 – ( 103 – 93 ) = 83
Crude continues to test resistance at $50/barrel. Respect would indicate another test of the lower trend channel, around $40/barrel, continuing the primary down-trend. Follow-through above $50 would suggest that a bottom has formed and the next correction is likely to be higher than the last low at $42.
Gold retraced to test support at $1250/ounce — in line with crude strength and Dollar support. Respect of support is more likely and would indicate another test of $1300. Reversal below $1250 is unlikely but would warn of another test of primary support at $1200.
Silver also retraced and is likely to test primary support at $15.50. Rising Twiggs Trend Index suggests that another test of resistance at $17 remains likely. Breakout above $17 would be bullish for gold.
The Dollar Index is testing primary support between 92 and 93; bullish for gold. Breach of support would offer a long-term target between 83 and 84*.
*Target: 93 – ( 103 – 93 ) = 83
Crude rallied strongly this week, with Nymex light crude testing its upper trend channel at $50/barrel. Respect would indicate another test of the lower trend channel, around $40/barrel, continuing the primary down-trend. Follow-through above $50 would suggest that a bottom has formed and the next correction is unlikely to reach the last low of $42.
Gold followed through above $1260 after a brief retracement, indicating another test of $1300. Reversal below $1250 is unlikely but would be a bearish sign, warning of another test of primary support.
The accompanying rally in Silver is testing the descending trendline at $17/ounce. Penetration would suggest that a bottom is forming and the primary down-trend is near an end; a bullish sign for gold.
Jens Meyer at the AFR says that a stronger Dollar and low inflation are likely to prevent the RBA from raising interest rates for some time:
Inflation is expected to remain below the Reserve Bank’s comfort zone when second-quarter CPI data is unveiled on Wednesday. Despite a jump in vegetable prices due to damage caused by Cyclone Debbie, economists predict consumer prices rose just 0.4 per cent over the second quarter and 2.2 per cent over the year.
More importantly for the central bank, ongoing softness in wages growth is tipped to have kept a cap on the less volatile core inflation, coming in at 0.5 per cent over the quarter and 1.8 per cent over the year, below the Reserve Bank’s target band of 2 to 3 per cent.
Rising iron ore prices helped the Aussie Dollar break long-term resistance at 78 cents, testing 80 against the greenback. This goes against the wishes of the RBA who need a weaker Dollar to assist exports and boost import substitution.
But the RBA is in a cleft stick. It cannot lower rates in order to weaken the Dollar as this would encourage speculative borrowing and aggravate the property bubble. It also can’t raise rates when inflation is low, the Aussie Dollar is strong and the economy is weak. Like Mister Micawber in Charles Dickens’ David Copperfield, the RBA has to sit and wait in the hope that something turns up.
Source: Stronger dollar, weaker inflation could check rate hawks
The Dollar Index is in a primary down-trend. Its decline accelerated in the last week, headed for the next level of primary support between 92 and 93, which is bullish for gold.
Falling crude prices, however, have a bearish influence on gold. Nymex light crude recently staged a rally but ran into resistance at $47.50/barrel. Expect another decline to test the lower trend channel at $42, continuing the primary down-trend.
Gold broke resistance at $1250/ounce. Follow-through above $1260 would signal another test of resistance at $1300. Reversal below $1250, on the other hand, would be a bearish sign.
Silver rallied off primary support at $15.50/ounce but only a break above the descending trendline (at $17/ounce) would flag a reversal in the primary down-trend.
The Dollar Index is in a primary down-trend. Breach of support at 95.50 signals another decline. The long-term target is the 2016 low between 92 and 93.
A weakening Dollar and geo-political uncertainty should fuel demand for gold, but gold and silver have both been testing support in recent weeks rather than advancing strongly as expected.
The best explanation I have for this is falling crude oil prices. The long-term chart below shows gold and crude oil prices adjusted for inflation (CPI). Whenever there is a strong surge in crude oil prices, gold tends to follow. Rising crude prices and higher consequent inflation reduce confidence in the Dollar and major oil producers tend to buy more gold with their newfound surplus, as a store of value.
The opposite occurs if oil prices fall and those same oil producers are forced to sell gold reserves in order to fund an unexpected deficit.
At present crude prices are undergoing a bear market rally, having recovered above resistance at $45/barrel, but the primary trend is down. Gold has followed suit, recovering above support at $1215/ounce. Penetration of the declining trendline suggests a test of resistance at $1250.
But crude prices remain weak and (gold) respect of $1250 would indicate another test of primary support at $1200.
Sterling continues to test primary support at 1.13 against the Euro. Twiggs Trend Index peaking below zero warns of selling pressure. Breach of support is likely and would signal a test of the 2016 low at €1.10.
The FTSE 100 breached medium-term support at 7400 and the long-term rising trendline, warning that momentum is slowing. Bearish divergence on Twiggs Trend Index warns of rising selling pressure. Test of primary support at 7100 is likely.
* Target: 7400 + ( 7400 – 7100 ) = 7700
The Dollar Index is in a primary down-trend. Short-term support is unlikely to hold. The long-term target is the 2016 low between 92 and 93.
Silver often acts as a lead indicator gold. Testing primary support at $15.50/15.60 per ounce, breach would warn of a primary down-trend.
I have been bullish on gold since the election of Donald Trump as president. My comment last week was:
“Let me put it this way: recovery of gold above $1250 would not be a surprise. And would test resistance at $1300….”
Gold is trending lower, breach of $1215 warning of a test of primary support at $1200.
From a fundamental viewpoint, I can find no strong argument to support a lower gold price:
So I remain bullish on the long-term outlook for gold. But a peak below zero on Twiggs Trend Index warns of weakness. Breach of primary support at $1200 would mean that all bets are off.
Spot Gold broke support at $1250. Follow-through below $1240 would signal another test of primary support at $1200.
But the Dollar Index is also falling. Breach of 96.50 warns of a decline to the 2016 low at 92/93.
Dollar weakness is even reflected by a test of long-term support at 6.80 against the Yuan. Breach of the rising trendline on the monthly chart would warn of a primary down-trend.
Let me put it this way: recovery of gold above $1250 would not be a surprise. And would test resistance at $1300.
Brexit uncertainty is likely to continue for an extended period, with Sterling testing primary support at 1.13 against the Euro. Breach would signal a test of the 2016 low at 1.10.
The FTSE 100 retraced to test support at 7400, with bearish divergence on Twiggs Money Flow indicating medium-term selling pressure. Respect would confirm the target of 7700*. But breach of the rising trendline is as likely, and would warn of a test of primary support at 7100.
* Target: 7400 + ( 7400 – 7100 ) = 7700
The Dollar Index continues to test support at 96.50. The primary trend is down and breach of support is likely, signaling a decline to test the 2016 low at 92/93.
Spot Gold found support at $1250. A weaker Dollar and rising political uncertainty both favor an up-trend but rising interest rates are expected to weaken demand. Respect of support at $1250 would confirm the up-trend, while breach of $1200 would warn of another decline.