Forex Archives - Page 18 of 59 - the patient investor

March 10, 2017

Gold bears grow as Fed hints at rate hike

The Fed is expected to hike interest rates next week. 10-year Treasury yields broke resistance at 2.5 percent, signaling an advance to the 2013/2014 high of 3.0 percent. Breakout above 3.0 percent is still a way off but would complete a large double bottom signaling the end of the 30-year secular bull market in bonds. Rising interest rates are bearish for gold.

10-year Treasury Yields

The Dollar Index rally continues to meet resistance, with tall shadows on the last four weekly candles signaling selling pressure. Rising interest rates could strengthen the advance, with bearish consequences for gold, but Chinese sell-off of foreign reserves (to support the Yuan) is working against this.

Dollar Index

Spot Gold is testing support at $1200/ounce. Recovery above $1250 would indicate that the recent down-trend has ended. But breach of support is more likely and would warn of another test of long-term support at $1050/ounce.

Spot Gold

March 3, 2017

Gold hesitates as Fed hints at rate hike

From WSJ:

Federal Reserve Chairwoman Janet Yellen signaled the central bank is likely to raise short-term interest rates at its March meeting and suggested more increases are likely this year if the economy performs as expected.

“At our meeting later this month, the [Federal Open Market] Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate,” Ms. Yellen said in remarks prepared for delivery at the Executives’ Club of Chicago.

The Dollar Index rally continues to meet resistance, with tall shadows on the last three weekly candles signaling selling pressure. Rising interest rates would strengthen the advance, with bearish consequences for gold.

Dollar Index

Spot Gold hesitated at $1250/ounce. Rising interest rates also increase the opportunity cost of holding precious metals. Reversal below $1200 would warn of another decline but recovery above $1250 remains more likely and would signal an advance to $1300.

Spot Gold

February 24, 2017

Gold breaks through $1250

10-Year Treasury Yields are testing support at 2.30%. Expect this to hold. Breach of the rising trendline would warn of a correction but this seems unlikely with the Fed intent on normalizing interest rates. Breakout above 2.50% would offer a target of 3.0%.

10-Year Treasury Yields

The Dollar Index rally remains muted since finding support at 100. Rising long-term yields would fuel the advance, with bearish consequences for gold.

Dollar Index

China’s Yuan is consolidating. Resistance on USDCNY at 7 Yuan is likely to be tested soon.

USDCNY

The PBOC has been burning through its foreign reserves to slow the rate of depreciation against the Dollar, to create a soft landing. A sharp fall would destabilize global financial markets and fuel capital flight from China.

China Foreign Reserves

Spot Gold broke through resistance at $1250, signaling an advance to $1300.

Spot Gold

February 17, 2017

Interest rates bearish for gold

10-Year Treasury Yields are consolidating below resistance at 2.50%. Long tails suggest medium-term buying pressure. Breakout is likely and would offer a target of 3.0%.

10-Year Treasury Yields

The Dollar Index rally has so far been muted since finding support at 100. But rising long-term yields are likely to fuel the advance, with bearish consequences for gold.

Dollar Index

Spot Gold is consolidating below $1250/ounce. Reversal below $1200 would warn of another decline. Breach of primary support at $1130 would confirm. Arguments for a further advance appear weak, but breakout above $1250 would signal an advance to $1300.

Spot Gold

February 10, 2017

Gold rallies but Dollar bottoms

Rising uncertainty has fueled an extended Gold rally. Respect of support at $1200/ounce suggests another advance, this time to $1300, but a lot will depend on the Dollar.

Spot Gold

The Dollar Index, however, found support at 100. Respect would suggest another advance and a primary up-trend. With bearish consequences for gold.

Dollar Index

February 3, 2017

Gold rises as Dollar falls

The Dollar Index has been falling since the start of the year. Respect of support at 100, however, would signal a primary up-trend.

Dollar Index

Gold advanced as the Dollar fell. Support at $1200/ounce suggests another advance, this time to $1300, but a lot will depend on the Dollar.

Spot Gold

January 30, 2017

Australia at risk as USD rises

NAB are predicting that the RBA will cut rates twice in 2017.

This ties in with the Credit Suisse view: if Donald Trump succeeds in reducing the US trade deficit, it will cause a USD shortage in international markets. And, in Australia, “a USD shortage tends to exert downward pressure on rates, bond yields, the currency and even house prices.”

Macrobusiness joins the dots for us: “a rising USD this year is very bad for commodity prices and national income while being bearish for interest rates and the AUD.”

Source: CS: Australia at risk as USD rises – MacroBusiness

December 20, 2016

Best time to short commodities since 2012

From Vesna Poljak:

….China’s stimulus is finite and demand for raw materials will collapse without it.

Australian Atul Lele, the Bahamas-based chief investment officer of private wealth manager Deltec, says all monetary and fiscal stimulus has a natural conclusion – “it just ends” – and traditional indicators of commodity prices such as global growth and liquidity conditions have been outrun by prices already.

“Right now, commodity prices are consistent with 8 per cent global industrial production. If we saw that, ex of the financial crisis recovery, it would be the strongest rate of global industrial production growth since 1981, at least. Now I’m bullish global growth and more bullish than most people, but it’s not going to happen and even if it does happen, all you’ve done is justify current commodity prices. So why would you buy a resource stock now?”

China continues to inject stimulus to revive its economy but that is making its financial system increasingly unstable. Credit growth in excess of 30% of annual GDP warns of a banking crisis according to the BIS. And shrinking foreign reserves flag that the currency is under pressure.

China faces the impossible trinity. According to David Llewellyn-Smith at Macrobusiness, a country pegged to the Dollar can only achieve two out of the following three:

a stable exchange rate
independent monetary policy
free and open international capital flows

At present all three are under pressure.

Source: Best time to short commodities since 2012 says Deltec’s Atul Lele

December 14, 2016

Gold falls as the Fed hikes rates

10-Year Treasury yields jumped above resistance at 2.5 percent after the latest Fed rate hike. Penetration of the long-term descending trendline warns that the secular down-trend is ending. Expect a test of the 2013/2014 high at 3.0 percent. Breakout would confirm the long-term down-trend has ended.

10-Year Treasury Yields

The Dollar Index respected its new support level at 100, signaling an advance to 107*.

US Dollar Index

* Target medium-term: 100 + ( 100 – 93 ) = 107

Gold continued its descent in response to rising interest rates and a stronger Dollar. Steps by the Chinese government to limit private gold purchases, in an attempt to support the Yuan, will also impact on demand. Target for the decline is unchanged at the December 2015 low of $1050/ounce. Retracement that respects the resistance level at $1200 would further strengthen the bear signal.

Spot Gold

December 9, 2016

Gold declines as interest rates rise

The Fed is expected to hike interest rates in December. Long-term interest rates are rising in anticipation of further rate hikes in 2017. 10-Year Treasury yields have penetrated their 10-year descending trendline, warning that the secular down-trend is ending. Breakout above 2.50 percent would strengthen the signal, while follow-through above the 2013/2014 high of 3.0 percent would confirm.

10-Year Treasury Yields

The Dollar Index successfully tested its new support level at 100. Target for the advance is 107*.

US Dollar Index

* Target medium-term: 100 + ( 100 – 93 ) = 107

With interest rates rising and the Dollar strengthening, demand for Gold is shrinking. Steps by the Chinese government to limit private gold purchases, part of their program to support the Yuan by slowing capital flight, will also impact on demand. Target for the decline is unchanged at the December 2015 low of $1050/ounce. Retracement that respects the resistance level at $1200 would strengthen the bear signal.

Spot Gold