China’s Yuan fell sharply over the last 3 weeks, with the threat of US trade tariffs.
Risk of capital flight will force the PBOC to sell foreign reserves to support the Yuan. It took $1 trillion to stem the last fall, so expect a sizable sell-off in Chinese holdings of US Dollar assets, mainly Treasuries and mortgage-backed securities. The outflow is likely to weaken the Dollar, which is likely to strengthen Gold.
The Dollar Index encountered stubborn resistance at 95. Respect would warn of another correction.
Gold found support at $1250/ounce. Respect of the primary support level would suggest another rally.
The Aussie Dollar is likely to strengthen if the US Dollar falls.
A stronger US Dollar is expected to be mildly bullish for Australian gold stocks, with a stronger Aussie Dollar offsetting some of the gains.
The All Ordinaries Gold Index broke through resistance at 5250, signaling a primary advance with a target of 6000. Follow-through above 5300, after the recent retracement, would strengthen the signal.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.