Gold and Precious Metals
The Dollar Index has been falling since the start of the year. Respect of support at 100, however, would signal a primary up-trend.
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.
Gold retreated below resistance at $1200/ounce, suggesting another decline. Follow-through below $1130 would offer a target of the December 2015 low at $1050*. Rising interest rates, a stronger Dollar and steps by the Chinese government to restrict private gold purchases — in an attempt to support the Yuan — all impact on demand.
* Target short-term: 1130 – ( 1200 – 1130 ) = 1060
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.
The Dollar Index respected its new support level at 100, signaling an advance to 107*.
* 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.
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.
The Dollar Index successfully tested its new support level at 100. Target for the advance is 107*.
* 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.
The Dollar Index paused in its advance and is likely to retrace to test the new support level at 100. Target for the advance is 107*.
* Target medium-term: 100 + ( 100 – 93 ) = 107
Gold paused in its primary decline, in response. The target is unchanged at the December 2015 low of $1050/ounce. Retracement that respects the resistance level at $1200 would strengthen the bear signal.
Interest rates are surging as the market anticipates rising inflation under a Trump presidency. 10-Year Treasury yields are testing resistance at 2.50. Breakout is likely and would signal a test of resistance at 3.0 percent. Penetration of 3.0 percent would warn that the 30-year secular down-trend in Treasury and bond yields is coming to an end.
The Dollar strengthened in response to rising interest rates, with the Dollar Index breaking resistance at 100 to signal a primary advance with a target of 107*.
* Target medium-term: 100 + ( 100 – 93 ) = 107
Gold breached primary support at $1200 in response, signaling a primary decline with a target of the December 2015 low of $1050/ounce.
In the long-term, higher inflation and a weakening Yuan could both fuel demand for gold as a store of value. But the medium-term outlook is bearish.
Gold breached support at $1200/ounce, confirming the primary down-trend. Target for the decline is the December 2015 low at $1050/ounce.
Recovery above $1200 is unlikely at present, but would warn of a bear trap.
Interest rates are climbing steeply as the market anticipates more inflationary policies under a Trump presidency. 10-Year Treasury yields broke through 2.0 percent and are testing resistance at 2.50. Penetration of the descending trendline would warn that the long-term primary down-trend is weakening, signaling a test of 3.0 percent. Breakout above 3.0 is still some way off but would signal the end of the almost 30-year secular down-trend in Treasury and bond yields.
The Chinese Yuan has fallen sharply in response to rising interest rates, with the Dollar headed for a test of resistance at 7.0 Yuan (USDCNY).
Gold responded to rising interest rate expectations with a test of primary support at $1200. Narrow consolidation is a bearish sign, as is reversal of 13-week Momentum below zero. Breach of primary support would signal a primary down-trend with an immediate target of $1050/ounce.
In the long-term, higher inflation and a weakening Yuan could both fuel demand for gold as a store of value. But the medium-term outlook is bearish.
Last week I said that the Trump rally in gold was unlikely to last. That proved correct, but not for the reasons I envisaged.
Donald Trump surprised pollsters and the establishment, including many conservatives who were doubtful of his ability to hold office, with his ability to channel the anger of average Americans towards the entrenched establishment. And towards Hillary Clinton who represented the status quo.
Trump’s statesman-like, conciliatory acceptance speech also surprised many and has restored confidence in financial markets.
Gold retreated from resistance at $1300/ounce and is headed for a test of primary support at $1200. Breach of primary support would signal a primary down-trend with an immediate target of $1050/ounce. But expect volatility to remain high until Trump has announced his appointees and has set a clear direction for his presidency. There may still be further surprises in store.
Gold reacted with urgency to the news that Donald Trump was closing on Hillary Clinton in the polls. After a lackluster start the rally gained new energy in the last week, with the yellow metal climbing to test resistance at $1300/ounce.
Experienced pollsters seem to think that Trump’s gains are too little and too late. According to GOP pollster Whit Ayres, in this PBS Newshour interview, Trump has about the same chance of winning as drawing an inside straight in poker. “He has spent his entire campaign preaching to the converted rather than reaching out to undecided voters….”
Unless there is an upset in next week’s election, I expect gold to respect resistance at $1300/ounce, followed by a test of primary support at $1200.
