Spot gold is consolidating between $1570 and $1585/ounce on the 2-hourly chart. Upward breakout would re-test the February 26 high at $1620. Downward breakout would test support at $1550.
This can be seen on the weekly chart, where respect of support at $1550 would test the upper trend channel at $1620. Breakout would indicate that the correction is over. Failure of support would warn that the long-term up-trend is over and follow-through below $1500 would confirm a primary down-trend.
My conclusion is the same as last week:
I am not yet convinced that gold is headed for a primary down-trend. We may be in a low-inflation/deflationary environment right now but how long will it take for central bank expansionary policies to overcome this? Watch out for bear traps. Respect of primary support around $1500 could present a buying opportunity.
Crude Oil
Brent Crude and Nymex Crude continue to weaken but, for the moment, remain in a primary up-trend.retreated below support at $117/barrel, on concerns over the global economy. Failure of primary support at $106 and $84/barrel, respectively, would signal a primary down-trend. Falling crude would be a bearish sign for gold: demand for gold increases when crude rises.
Hi Colin,
Very interesting world right now. How is the coppock indicator seeing the present circumstances? I dont understand how our flat economy is experiencing a bull market -there is no foundation to this? Gold will be the decider if we are doomed or escalating to recovery???
Your thoughts much appreciated.
confused Elly
Coppock turned up in July 2012. I see this as a paradigm shift by international investors. The Aussie dollar is no longer perceived as high risk and high-yield large caps are attractive because of low yields elsewhere.
The lobsters are getting into the pot
It will be interesting to see the response of Gold and the other commodities to the ending of QE. Now, the main impact of the actions of the central banks (in producing this low interest rate environment) seems to be a rush into high yield assets. And also the obvious one of pushing up the markets albeit with low trading volumes. In the US, junk bonds are doing well (see HYG), REITS are doing well (see MPW) and income stocks are holding their own volumewise. In this environment (maybe arrested deflation is the correct term), nobody wants to hold gold.
When QE ends and interest rates are restored to traditional levels as they must be eventually, the US will be socked with another roughly $500 billion in interest charges on the current $16 T debt (likely grown to $18-20T). That is 4% of $16T. The US must either raise taxes or find another $500 B of budget cuts to use the money for interest repayment. When they can’t find $85 B in cuts now, it is hard to believe they will find $500 B later.
So either raise taxes or inflate the dollar. Kill the economy with deflation or kill the economy with inflation. This is why, in my opinion, FED is hesitant to end QE in the 4th year of the expansion. Holding gold will either be the investment of the decade or, as it is now, a lousy choice in a low interest environment.
Higher interest rates would increase the opportunity cost of holding gold — provided inflation remains low.
Armstrong’s hypothesis – Dow is flashing bull as capital trickles from the periphery economies (Euro) to the core (US). The ASX is benefiting from part of this capital flow. Dow can expect a major move when Euro government debt defaults as interest rates rise and capital flees in earnest.
Flight to safety normally benefits bonds and gold more than the Dow.