The Yuan found short-term support at 0.1395/0.1400 against the US Dollar. Expect a rally over the next month, with “talks about talks” between US and Chinese trade representatives.
The Yuan is in a long-term down-trend against the Dollar that shows no signs of easing. Our view is that resolution of trade tensions is unlikely. Trade is merely the tip of the iceberg in a far wider clash between two global powers with conflicting ideologies, likely to continue for decades, if not longer.
The Yuan rally has softened demand for Gold and breach of support at $1500, or penetration of the rising trendline, would warn of a correction. A correction may present a good entry point in an expected long-term up-trend. Our target is the 2012 high at $1800/ounce.
Last week’s gravestone candlestick on Silver also warns of a correction. Gold and Silver tend to move in tandem.
The All Ordinaries Gold Index is testing support at 7500. Breach would warn of another decline, with a target of 6000/6500. The primary trend is expected to remain upward, so again, this may present a good entry point.
A long-term chart of the Australian Dollar against the greenback illustrates our long-term target of 60 cents (subtract 10 cents (80-70) from 70 cents). A weaker Aussie Dollar would support stronger prices for local gold miners.