Spot gold continues to test support at $1300/ounce. Failure of support would visit the primary level at $1200/ounce, while respect would test $1440. Breach of the downward trend channel indicates the primary trend is slowing, but recovery above $1440, and a primary up-trend, seem some way off — as does recovery of 13-week Twiggs Momentum above zero.
The two-hourly chart shows breakout above resistance at $1330. Retracement that respects the new support level would signal a rally to test $1375, improving the chances of a bottom.
Dollar Index
The Dollar Index broke primary support at 80.50, warning of a primary down-trend. Follow-through below 80 would confirm. A 13-week Twiggs Momentum peak at zero also suggests a down-trend. A falling dollar would boost gold prices. Recovery above 81 is unlikely, but would warn of a bear trap.
The yield on ten-year Treasury Notes broke support at 2.70 percent, warning of another test of 2.40 percent. Penetration of the rising trendline would strengthen the signal. Falling treasury yields are also likely to lift precious metal prices (because of the lower opportunity cost).
Crude Oil
Nymex light crude broke support at $103/barrel and its rising trendline, warning that the up-trend is slowing. A test of medium-term support at $98/barrel is now likely. The wider spread with Brent Crude is an indication of tensions over Syria which threaten supply.
Commodities
Commodity prices continue to fall, with the Dow Jones-UBS Commodity Index headed for another test of 124 despite a resilient Shanghai Composite Index. Recovery above 130 is unlikely, but would confirm the earlier double-bottom reversal and a primary up-trend.
* Target calculation: 130 + ( 130 – 125 ) = 135
There are compelling arguments and evidence pointing to high level manipulation of metals, energy, bonds and currencies. Graphing this activity is at best entertaining and at worst self deluding. Don’t mean to beat the conspiracy drum, but boy the evidence is stacking up.
Just curious why you don’t think the commods index will continue above 130. The chart looks like reversal like you said with a nice retracement of the downward trendline. And with the dollar potentially falling and more demand from europe and china, wouldn’t that put upward pressure on commods?
You are correct. Let me rephrase that: “Recovery above 130 is unlikely in the next few weeks, but breach of the descending trendline warns of reversal to an up-trend in the medium-term.”
Jeremy Grantham pointed out some time ago that the biggest driver of commodity prices is the price of crude oil.
I would say that if there is an increase in oil price then that would indicate an increased demand for fuel which would indicate greater economic activity which would be a driver for higher commodity prices.
I was at a talk some time ago being given by a well known Australian share trader and he pulled up a chart of Qantas and the oil price to show that higher oil prices didn’t negatively impact on Qantas’ bottom line as much as what was made out in the media. They used to charge a fuel levy anyway.
One thing that struck me when I saw the chart was when the oil price went higher the Qantas share price also went higher and the two charts seemed to have a strong correlation. What I saw was as the driver of both charts was economic activity. Much like the Fed-Ex chart Colin occasionally puts up.
Unfortunately rising demand is only half of the picture. Oil prices can also rise because of supply restrictions, as with problems in Libya, Syria, Nigeria, etc.