Category: Gold & Precious Metals

Gold and Precious Metals

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Gold shudders on strong jobs numbers

Long-term interest rates surged on strong jobs numbers, well above the estimate of 180,000. From the WSJ:

Nonfarm payrolls rose by a seasonally adjusted 255,000 last month, the Labor Department said Friday. Revisions showed U.S. employers added 18,000 more jobs in May and June than previously estimated.

10-Year Treasury yields strengthened to 1.58 percent in response, from a record low of 1.33 percent four weeks ago. Expect a test of the descending trendline at 1.66 percent.

10-Year Treasury Yields

Gold fell to $1335/ounce on expectations of higher interest rates. Penetration of the rising trendline would suggest a correction to test primary support at $1200/ounce. Follow-through below $1300 would confirm.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1050 ) = 1550

At present I don’t see much threat to support between $1300 and $1310. Especially with safe-haven demand for gold enhanced by European uncertainty over Brexit, the dilemma of US November elections (a choice between two equally undesirable alternatives), and a declining Yuan encouraging capital flight from China.

USDCNY

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Gold & support at $1300

The daily chart of Gold shows consolidation forming between $1310 and $1335 per ounce. Respect of the $1300 support level would signal a healthy up-trend. Reversal without touching the support level would reveal buyers’ eagerness.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1050 ) = 1550

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Gold, the Yuan & Donald Trump

China’s Yuan continues its slide against the Dollar, with USDCNY testing resistance at 6.70. The current retracement is likely to respect support at 6.60, offering a target of 6.80*.

USDCNY

* Target calculation: 6.70 + ( 6.70 – 6.60 ) = 6.80

A depreciating Yuan is likely to drive demand for gold as well as hard currencies. Rising political uncertainty — in Europe, the Middle East and the US — is expected to add fuel to the fire. Strong polling by Donald Trump alone could drive gold to its long-term target of $1550/ounce*. Expect retracement to test the new support level at $1300/ounce. Respect is likely and would signal an advance to $1400/ounce.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1050 ) = 1550

Disclosure: Our managed portfolios are heavily overweight gold stocks.

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Gold surges as the Pound and Yuan fall

The Yuan is sliding against the Dollar, with USDCNY breaking through resistance at 6.60. Expect further capital flight, both from residents and offshore investors. Borrowers will also seek to repay Dollar-denominated loans and replace them with facilities in the local currency, adding further pressure on the Yuan.

USDCNY

The PBOC has been encouraged by fading prospects of further rate rises from the Fed, with 10-year Treasury Yields falling to a new all-time low of 1.37 percent, compared to 1.40 percent in 2012.

10-Year Treasury Yields

….And the Pound falling to a 30-year low.

GBPUSD

Falling currencies and lower long-term interest rates are both good news for gold bugs, with spot gold surging to $1370/ounce. Expect retracement to test the new support level at $1300/ounce. Respect of the band of support at $1280/$1300 is likely and would signal another advance, with a target of $1400/ounce*.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1200 ) = 1400

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Gold rises as the Yuan and interest rates fall

China seems to have given up on its policy of supporting the Yuan against the Dollar, with USDCNY breaking through resistance at 6.60. Depleting foreign reserves to support the Dollar-peg was always going to be a tough call for the PBOC. But the alternative of increased capital flight and rising counter-measures from trading partners may exact an even higher price.

USDCNY

Perhaps the PBOC was encouraged by fading prospects of further rate rises from the Fed this year, after BREXIT. 10-Year Treasury Yields are headed for a test of support at the all-time low of 1.40 percent in 2012.

10-Year Treasury Yields

Gold broke resistance at $1300/ounce and is now retracing to test the new support level. BREXIT, a weakening Yuan, and lower interest rates are all likely to fuel demand for gold. Respect of the band of support at $1280/$1300 is likely and would signal another advance, with a target of $1400/ounce*.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1200 ) = 1400

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Gold surges as BREXIT looms

It looks like the LEAVE vote has it, with a lead of more than 900,000 so far.

BREXIT

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*.

Gold

* Target calculation: 1300 + ( 1300 – 1050 ) = 1550

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Gold: Should I BREXIT?

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.

Gold

* 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.

USDCNY

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.

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Gold surges on BREXIT fears

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.

10-year Treasury yields

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*.

Gold

* 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.

USDCNY

Disclosure: Our Australian managed portfolios are invested in gold stocks.

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Why BREXIT matters

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:

  • A sell-off of UK equities. GDP is expected to contract between 1% and 2%. A Footsie breach of support at 6000 would signal a test of 5500, while breach of 5500 would offer a target of 5000 (5500 – [ 6000 – 5500 ]).

FTSE 100

  • UK housing prices fall.
  • A sharp sell-off in UK banks in response to falling GDP, equities and housing — threatening contagion in financial markets.
  • BOE rate cuts to support the UK economy.
  • A sharp fall in the Pound due to uncertainty, lower interest rates and lower capital inflows.

GBPUSD

  • The Euro falls in sympathy, as confidence in the EU dwindles.
  • The US Dollar strengthens, causing the Fed to back off on further interest rate rises.
  • Volatility surges across all markets.
  • Gold spikes upward.

Hat tip to The Coppo Report

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Gold tanked? Not yet!

Gold broke below its recent flag formation, warning of a test of support at $1200/ounce.

Gold

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.

USDCNY

…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.

Dollar Index

…and Gold higher. I remain bullish as long as support at $1200/ounce holds.

Disclosure: Our Australian managed portfolios are invested in gold stocks.

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