Crude reversal undermines Gold rally

Nymex crude broke support at $65, warning of a primary down-trend with a medium-term target of $56/barrel.

Nymex WTI Light Crude

Crude and gold tend to rise and fall together, over the long-term, and falling crude prices warn of gold weakness.

The bear rally in Gold is likely to meet stubborn resistance at $1250. Reversal below support at $1180 would offer a long-term target of the 2015 low at $1050/ounce.

Spot Gold in USD

Another major influence on Gold prices is Dollar strength. A strong Dollar is synonymous with lower gold prices. The Dollar Index is trending upwards but ran into resistance at 96.50/97.00.

Dollar Index

The reason is not hard to find as China’s central bank (PBOC) stepped in to support the Yuan at 14.5 US cents (6.9 to $1), selling Dollar reserves.

Chinese Yuan

The Aussie Dollar also strengthened as a result.

Australian Dollar

Australian Gold stocks continue to find support because of the weak currency (AUD) but a declining Trend Index warns of long-term weakness. Breach of support at 4500 would signal a primary down-trend.

All Ords Gold Index

Aussie gold stocks rally

Gold continues to find resistance at $1210/ounce. Trend Index peaks below zero warn of selling pressure. Respect of resistance would indicate another decline and a long-term target of the 2015 low at $1050/ounce.

Spot Gold in USD

Currencies

The PBOC is supporting the Yuan at 14.5 US cents.

CNY/USD

Support for the Yuan is driving down the Dollar. Dollar Index breach of support at 95 warns of a correction to test 91. Bearish divergence on the Trend Index warns of selling pressure. A falling Dollar is likely to boost demand for gold.

Dollar Index

The Australian Dollar benefited from the weaker greenback, rallying to test resistance at 73/73.5 US cents. Trend Index peaks below zero continue to warn of long-term selling pressure. Respect of resistance is likely and would signal a test of the 2015/2016 low at 70 US cents.

Australian Dollar/USD

Gold Stocks

Australian gold stocks rallied despite the strengthening Aussie Dollar. The All Ordinaries Gold Index (XGD) is likely to encounter stiff resistance between 4900 and 5100.  A Trend Index peak below zero would warn of further selling pressure and continuation of the down-trend.

All Ordinaries Gold Index

Gold reacts to Dollar weakness

The Yuan continues to find support at 14.5 US cents.

CNY/USD

The Dollar Index is testing support at 95. Respect of support would confirm another advance, with a long-term target of 103, but declining Trend index peaks warn of selling pressure.

Dollar Index

Gold rallied to $1200/ounce but failed to make further progress. Respect of the descending trendline would warn of another decline with a long-term target of the 2015 low at $1050/ounce.

Spot Gold in USD

The Australian Dollar respected resistance at 73.50 US cents, warning of another decline. Trend Index peaks below zero reflect selling pressure.

Australian Dollar/USD

The All Ordinaries Gold Index (XGD) continues its downward path, tall shadows on the last two candles reflecting selling pressure. Breach of short-term support at 4550 is likely and would offer a long-term target of 4000/4100.

All Ordinaries Gold Index

China threatened by loss of US trade

The threat of a US-China trade war has rattled investors, with the Shanghai Composite Index breaking primary support at 2700 to signal another decline. Trend Index peaks below zero warn of strong selling pressure. Long-term target is the 2012 to 2014 lows at 2000.

Shanghai Composite Index

Hong Kong’s Hang Seng Index is also under the pump, breaking support at 28,000 to warn of another decline.

Hang Seng Index

Copper prices, a good barometer of the Chinese economy, are also falling. Breach of $6,000 offers a target of $5,500/tonne.

Copper S1

The Yuan has fallen almost 10 percent, testing support at 14.5 US cents. Failure of the PBOC to support the Yuan (by selling some of their $3 trillion of foreign reserves) may cushion the economic impact in the short-term but only invites further escalation from the Trump administration.

Chinese Yuan/USD

There is no easy way out. Trump clearly has the upper hand in trade negotiations.

Dollar strength hurts Aussie gold stocks

China’s Yuan continues its steep descent against the US Dollar.

CNY/USD

The weakening Yuan strengthened demand for Dollars, with the Dollar Index breaking through strong resistance at 95. Expect retracement to test the new support level. Respect would confirm the long-term target at the 2016/2017 highs of 103.

Dollar Index

The strong Dollar weakened demand for Gold, with the spot price heading for $1200/ounce after breaching short-term support at $1220.

Spot Gold in USD

A long-term gold chart shows likely support levels at $1150 and $1050/ounce.

Spot Gold in USD - Quarterly

The Australian Dollar continues to range between 73.50 and 75.00 US cents, leaving local gold miners exposed to the falling Dollar price.

Australian Dollar/USD

The All Ordinaries Gold Index (XGD) is testing support at 4900. Breach is likely and penetration of the rising trendline warns of a strong decline, with a LT target of 4100.

All Ordinaries Gold Index

A sharp fall in the Aussie Dollar would soften the blow. But hope isn’t a strategy.

Falling Yuan strengthens the Dollar but weakens Gold

China failed to intervene in the past few weeks, allowing the Yuan to fall to offset the impact of tariffs instead of selling foreign reserves to support the currency. Their actions risk further retaliation by the Trump administration and could spark a full-blown trade war.

CNY/USD

A weakening Yuan is likely to increase demand for US Dollars, both as investors in the Middle Kingdom seek to withdraw and as borrowers with USD-denominated loans seek to hedge or repay.

The Dollar Index continues to test strong resistance at 95. Breakout is likely and would offer a target of 2016/2017 highs at 103.

Dollar Index

Spot Gold is in a primary down-trend, consolidating in a narrow band above short-term support at $1220/ounce. Breach of support is likely and would offer a short-term target of $1200.

Spot Gold in USD

The Australian Dollar is also in a primary down-trend, consolidating above 73.50 US cents. So far, the weaker currency has cushioned local gold miners from the impact of falling spot prices.

Australian Dollar/USD

The All Ordinaries Gold Index (XGD) recovered above support at 4950. Follow-through above 5100 would indicate another test of 5400.

All Ordinaries Gold Index

But downside risk to Australian gold stocks is rising as the USD spot price falls. Gold is more volatile than the Aussie Dollar.

Gold breaches primary support

The Dollar price of gold breached support at $1240/ounce, signaling a primary down-trend. A long tail indicates active buyers and we can expect retracement to test the new resistance level at $1250.

Spot Gold in USD

The Dollar Index continues to test strong resistance at 95.

Dollar Index

But Chinese selling to support the Yuan has not materialized in sufficient magnitude to reverse Dollar strength. Dollar Index breakout above 95 is likely to spur selling of gold.

CNY/USD

The Australian Dollar has not weakened sufficiently to protect local gold miners, with the price of Gold in Australian Dollars falling sharply.

Gold Price in AUD

The All Ordinaries Gold Index (XGD) broke support at 4950. Expect a test of 4600.

All Ordinaries Gold Index

Downside risk to Australian gold stocks is rising.

Gold falls despite soft Dollar

Spot Gold broke support at $1250. Follow-through below $1240 would signal another test of primary support at $1200.

Spot Gold

But the Dollar Index is also falling. Breach of 96.50 warns of a decline to the 2016 low at 92/93.

Dollar Index

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.

Dollar Index

Let me put it this way: recovery of gold above $1250 would not be a surprise. And would test resistance at $1300.

Shanghai breaches support

Copper is testing long-term support at 5400, suggesting weak demand from China. Breach would signal a primary down-trend.

Copper A Grade

The Yuan has enjoyed a respite, consolidating in a narrow line for several weeks. But this is likely to prove temporary, with further advances of the Dollar against the Yuan eroding PBOC foreign exchange reserves.

USDCNY

Shanghai’s Composite Index broke support at 3100, signaling a primary down-trend, but the long tail indicates buying support. Recovery above 3100 would suggest a false signal (or government intervention) while respect of resistance would confirm the down-trend.

Shanghai Composite Index

* Target medium-term: May 2016 low of 2800

Yuan Warning

Our forex data feed shows a current USDCNY exchange rate of 7.4775, which matches Barcharts.com and Google Finance, but Bloomberg and NetDania show a far lower rate of 6.8681. We have asked our data suppliers to investigate the disparity. Please do not act on the rates quoted without verifying with your bank/forex dealer.