Gold and Precious Metals
The Dollar Index rally is falling despite rising interest rates. Chinese sell-off of foreign reserves to support the Yuan may be a factor.
Spot Gold rallied off support at $1200/ounce. Recovery above $1250 would confirm an up-trend, with the next target at $1300.
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.
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.
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.
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.
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.
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%.
The Dollar Index rally remains muted since finding support at 100. Rising long-term yields would fuel the advance, with bearish consequences for gold.
China’s Yuan is consolidating. Resistance on USDCNY at 7 Yuan is likely to be tested soon.
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.
Spot Gold broke through resistance at $1250, signaling an advance to $1300.
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%.
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.
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.
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.
The Dollar Index, however, found support at 100. Respect would suggest another advance and a primary up-trend. With bearish consequences for gold.
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.
