Gold and Precious Metals
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.
US Treasury yields are rising, with the 10-year yield breaking through 1.80 percent to signal a test of 2.0 percent. Further rises are likely on the back of stronger GDP figures for the last quarter.
The Chinese Yuan continues to depreciate against the Dollar in anticipation of another rate rise from the Fed.
Spot gold displays a weak retracement off support at $1250/ounce, with short candles indicating a lack of conviction. Another primary decline is likely and would test primary support at $1200.
The ASX All Ordinaries Gold Index respected the descending trendline, suggesting another decline. Reversal below 4300 would confirm, offering a target of 4000.
Selling pressure on gold continues, with the SPDR Gold [GLD] ETF consolidating in a bearish narrow band above support at 119. Twiggs Money Flow below zero warns of long-term selling pressure. Continuation of the down-trend is likely and breach of 119 would signal another decline.
Spot gold displays a similar narrow consolidation at $1250/ounce. Continuation is likely and would test primary support at $1200.
The ASX All Ordinaries Gold Index recovered above resistance at 4500 but has so far respected the descending trendline. Respect is likely and reversal below 4300 would signal a decline to 4000.
Interest rates are rising, driving gold lower. Long-term Treasury yields are heading for a test of resistance at 2.0 percent but a lot depends on continued stability in financial markets.
The Chinese Yuan continues its devaluation against the Dollar. Any sharp movements would spur global instability and increase demand for gold. But at present Dollar appreciation proceeds at a measured pace.
Selling pressure on gold has increased, reflected by the steep fall of Twiggs Money Flow on the SPDR Gold [GLD] ETF. A larger (TMF) peak near zero would warn of a long-term sell-off.
Spot gold has paused in its descent, with a short candle on the weekly chart reflecting short-term support at $1250/ounce, but expect a test of primary support at $1200.
A long-term monthly chart of gold reflects the importance of support at $1200. The high of 2009, the lows of 2013, and the recent lows in April and June, all reinforce strength at $1200. Breach of this level would signal a long-term down-trend.
The ASX All Ordinaries Gold Index retraced to test resistance at 4500 after the recent breakout. Respect is likely and would signal decline to 4000.
At present, interest rates are driving gold. How long this will continue is hard to say. It depends on what shocks lie in store for the global financial system. Two pending rolls of the dice are the November 8 elections and negotiations over Britain’s exit from the EU.
Long-term Treasury yields are rising while gold is falling. Expectations of a rate rise after the November election are growing and a test of resistance at 2.0 percent is likely. But a lot depends on continued stability of financial markets.
Spot gold reacted to rising interest rates by breaking support at $1300/ounce, warning of a test of primary support at $1200. A brief pause at medium-term support at $1250 is indicated by a spinning top candlestick, signaling indecision. Support at $1250 is unlikely to hold but the primary up-trend is intact unless support at $1200 is broken.
The ASX All Ordinaries Gold Index broke support at 4500, warning of a primary down-trend. The immediate target is 4000.
