Gold and Precious Metals
It looks like the LEAVE vote has it, with a lead of more than 900,000 so far.
Gold bugs seem to think so, with the spot price blasting through resistance at $1300/ounce. Retracement that respects the new support level would confirm a target of $1550*.
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
Odds of a BREXIT are drifting at the bookmakers, with REMAIN a firm 1 to 4 favorite. Fears of a BREXIT have been driving demand for gold and a REMAIN vote is likely to spur a sell-off.
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
Breakout above resistance at $1300/ounce turned into a bull trap with a sharp retreat to support at $1250/$1260. A REMAIN vote on June 23rd would test support at $1250 and possibly $1200. But the up-trend remains intact if support at $1200 holds.
Political uncertainty is unlikely to fade before the November US election. And economic uncertainty, fueled by Chinese instability, is likely to last a lot longer.
Capital outflows from China continue, with USDCNY running into resistance at 6.60. This is a sign that PBOC sale of foreign reserves has resumed, weakening the Dollar and boosting demand for Gold.
Gold’s up-trend is likely to continue. And breakout above $1300 would offer a long-term target of $1550/ounce*.
Disclosure: Our Australian managed portfolios are invested in gold stocks.
Long-term interest rates continue their decline, with 10-year Treasury yields breaking support at 1.65 percent. Breach signals a test of the all-time (July 2012) low of 1.40 percent.
Gold broke resistance at $1300/ounce on fears of a BREXIT vote on June 23rd and expectations that the Fed will need to soft-pedal on interest rates. Breakout offers a long-term target of $1550*.
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
Chinese buying of gold has been relegated to secondary status, at least for the next week. Sale of foreign reserves appear to have resumed, with the USDCNY running into resistance at 6.60. PBOC sale of foreign reserves weakens the Dollar, boosting demand for Gold.
Disclosure: Our Australian managed portfolios are invested in gold stocks.
From The Guardian, June 14th:
Support for leaving the EU is strengthening, with phone and online surveys reporting a six-point lead, according to a pair of Guardian/ICM polls.
Leave now enjoys a 53%-47% advantage once “don’t knows” are excluded, according to research conducted over the weekend, compared with a 52%-48% split reported by ICM a fortnight ago.
….Prof John Curtice of Strathclyde University, who analyses available referendum polling data on his website whatukthinks.org, noted that after the ICM data, the running average “poll of polls” would stand at 52% for leave and 48% for remain, the first time leave has been in such a strong position.
If the UK votes to LEAVE, we can expect:
Hat tip to The Coppo Report
Gold broke below its recent flag formation, warning of a test of support at $1200/ounce.
Selling is driven by expectations of a Fed interest rate hike in June …..and recent Chinese stimulus which postponed Yuan devaluation against the Dollar. But expectations of a rate hike are causing a sell-off of the Chinese Yuan, with the USDCNY strengthening over the last few weeks.
…Which in turn will cause the Chinese to sell foreign reserves to support the Dollar peg (…..else devalue which would panic investors and cause a downward spiral). Sale of Dollar reserves by China would drive the Dollar lower.
…and Gold higher. I remain bullish as long as support at $1200/ounce holds.
Disclosure: Our Australian managed portfolios are invested in gold stocks.
Gold is now in the fourth week of a flag formation and is testing support at $1250/ounce. The best flag signals are in weeks 3 or 4. With no immediate prospect of a breakout, this raises the question: is gold losing momentum?
Increased likelihood of a Fed interest rate hike has certainly taken some wind from the sails …..as has recent Chinese stimulus which at least postponed (but not averted) Yuan devaluation against the Dollar. While this affected short to medium-term prospects, factors driving long-term demand for gold are unaltered. From a technical view, narrow candle ranges over the last 4 days suggest increased buying at the $1250 support level. And breakout above the flag remains a buy signal ……at least into the fifth week.
Silver experienced a much sharper sell-off, but on the weekly chart still looks likely to respect support at $16.00/ounce. Respect would suggest another test of resistance at $18.00 to $18.50.
On the weekly chart gold remains on track for a test of $1300/ounce. For as long as support at $1200 holds, we retain our bullish view on gold.
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
With the added incentive of a weakening Aussie Dollar, Australian gold stocks, represented here by the All Ords Gold Index (XGD), remain in a strong primary up-trend. A 13-week Twiggs Money Flow trough above zero and breakout above the recent trend channel are both bullish signs.
Disclosure: Our Australian managed portfolios are invested in gold stocks.
Looking at the monthly chart of gold, we can see a strong rally that stalled at $1300/ounce. Consolidation below $1300 would be a bullish sign, suggesting a long-term advance to $1550*. Breakout above resistance would confirm.
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
But correction to test support at $1200 remains a possibility. Again, recovery above $1300 would confirm another advance.
The weekly chart adds more nuance. We have already seen two successful tests of support at $1200, making a third test less likely. Respect of medium-term support at $1250 would suggest another advance.
The daily chart adds further detail, revealing a broad saucer pattern (similar to a shallow cup and handle) through March-April, indicating strong buyer interest. This was followed by a flag, now in its third week, which suggests continuation of the up-trend. Breakout above the flag (at $1280) would signal another advance. Follow-through above $1300, as mentioned earlier, would confirm the signal.
The question is: If the flag successfully completes, do we take the signal at $1280 or wait for confirmation at $1300? If there is a breakout above $1300, the floor may get pretty crowded, making it difficult to fill your order. If we take the earlier signal, probabilities will be in your favor but there is no guarantee that the breakout (at $1300) will occur. There are no hard rules for this and I prefer a pragmatic approach. If your capital is sufficient, why not take a three-way bet? Fill a third of your position at $1280, a third at $1300, and the other third on retracement that respects the new support level (at $1300).
Disclosure: Our Australian managed portfolios are invested in gold stocks.
Not quite a classic cup and handle pattern, but gold’s 2-week flag after a broad saucer through March-April suggests strong buyer interest. Breakout above $1280 would signal a fresh advance. Follow-through above $1300 would confirm, offering a long-term target of 1550 (the lows of Sep/Dec 2011 and May 2012).
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
Disclosure: Our managed portfolios are invested in Australian gold stocks.
Australian gold stocks have had a good run since the index (XGD) broke resistance at 2800. At some stage there is bound to be a correction but the up-trend now looks pretty robust, rising 13-week Money Flow confirming buying pressure.
Crude finds support at $30/barrel, iron ore rallies, the Dollar strengthens, long-term interest rates fall and all seems right with the world. But is it? Deflationary pressures in Europe are rising. China cut bank reserve requirements to stimulate lending. And long-term interest rates would be rising, not falling, if confidence is restored.
Nymex WTI Light Crude futures (June 2016) found support at $30 per barrel. Expect a test of $40/barrel. But the primary trend is down and respect of the descending trendline is likely, which would warn of another decline.
* Target calculation: 30 – ( 40 – 30 ) = 20
Long-term interest rates remain weak, with 10-year Treasury yields testing primary support at 1.5/1.65 percent. The flight from stocks is driving up Treasuries (and yields lower), overwhelming sales by China (to shore up the Yuan). Declining 13-week Twiggs Momentum warns of further weakness.
The Dollar Index rallied over the past two weeks but further PBOC selling is expected to reinforce resistance at 100. Reversal of 13-week Twiggs Momentum below zero would warn of a primary down-trend.
Gold has benefited from the uncertainty, with consolidation above $1200 suggesting another advance. Breakout above $1250 would offer a target of $1300*.
* Target calculation: 1200 + ( 1200 – 1100 ) = 1300
The monthly chart, however, reflects a more precarious position. Momentum has clearly shifted, with breach of the descending trendline and a sharp rise on the 13-week indicator. But there is no higher trough confirming the trend change. So pick your entry points carefully and maintain tight stops. This could still go either way.
