- Treasury yields are falling
- The Dollar is weakening
- Inflation expectations are falling
- Gold and silver are testing support
Interest Rates and the Dollar
The yield on ten-year Treasury Notes closed below support at 2.60 percent, warning of another decline. Follow-through below 2.50 percent would signal a primary down-trend, with an immediate target of 2.00 percent*. Reversal of 13-week Twiggs Momentum below zero also suggests weakness. Recovery above 2.80 is unlikely at present, but would indicate another advance.
* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00
The Dollar Index is heading for a test of primary support at 79.00. Peaks below the zero line on 13-week Twiggs Momentum signal a primary down-trend. Breach of primary support at 79.00 would confirm, offering a target of 76.50*. Recovery above 80.50 is unlikely, but would signal that the index has bottomed.
* Target calculation: 79.0 – ( 81.5 – 79.0 ) = 76.5
Gold and Silver
Gold faces conflicting forces: low inflation reduces demand for precious metals, but low interest rates and a weaker Dollar increase demand.
Spot gold continues to test support at $1300/$1280 per ounce. Failure of support would indicate a test of primary support at $1200, but long tails and 13-week Twiggs Momentum recovery above zero indicate that another test of $1400 remains as likely.
Silver is more bearish and failure of primary support at $19/ounce would offer a target of $16*. Respect of the zero line (from below) by 13-week Twiggs Momentum suggests continuation of the primary down-trend. A down-swing on silver would be likely to be followed by gold. Recovery above $22/ounce is less likely, but would signal a primary up-trend.
* Target calculation: 19 – ( 22 – 19 ) = 16
On silver we have a bullish divergence on the momentum indicator and a triple bottom. My money is that it will go up, not down.
I’m still on the fence on this one. Descending neckline makes triple bottom unreliable and, after initial surge, momentum failed to cross above zero and is moving sideways.