Category: Gold & Precious Metals

Gold and Precious Metals

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Gold weakens on Dollar strength

  • Treasury yields find support
  • Euro signals a primary down-trend
  • Dollar continues to strengthen
  • Gold weakens

Interest Rates and the Dollar

The yield on ten-year Treasury Notes recovered above 2.50 percent, suggesting that a bottom is forming. Follow-through above 2.65 would strengthen the signal. Reversal below 2.40, however, would confirm a decline to 2.0 percent*.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The Euro broke primary support at $1.35, signaling a primary decline with a target of $1.30*. Reversal of 13-week Twiggs Momentum below zero confirms the down-trend. Recovery above $1.35 is unlikely, but would warn of a bear trap.

EURUSD

* Target calculation: 1.35 – ( 1.40 – 1.35 ) = 1.30

The Dollar Index rallied on strong GDP figures, testing resistance at 81.50. Breakout is likely and would signal a primary advance with a target of 84*. Recovery of 13-week Twiggs Momentum above zero indicates a primary up-trend. Reversal below 80.50 is unlikely, but would warn of another test of primary support at 79.00.

Dollar Index

* Target calculation: 81.50 – ( 81.50 – 79.00 ) = 84.00

Gold

Gold is testing support at $1295/$1300. Failure of support would warn of a primary down-trend. Breach of $1240/$1250 would confirm. Recovery above $1350 is unlikely at present, but would indicate another test of $1400/$1420. Reversal of 13-week Twiggs Momentum below zero would strengthen the bear signal, but oscillation close to the zero line presently signals hesitancy.

Spot Gold

* Target calculation: 1200 – ( 1400 – 1200 ) = 1000

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Gold retreats as Dollar strengthens

  • Treasury yields weaken further
  • The Dollar continues to strengthen
  • Inflation target remains at 2% p.a.
  • Gold retreats

Interest Rates and the Dollar

The yield on ten-year Treasury Notes broke support at 2.50 percent, indicating a test of 2.00 percent*. 13-Week Twiggs Momentum below zero warns of a primary down-trend. Follow-through below 2.40 would confirm. Recovery above 2.65 is unlikely, but would indicate the correction is over, with a medium-term target of 2.80 and long-term of 3.00 percent.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The Dollar Index followed-through above 80.50 and is headed for another test of 81.00. Recovery of 13-week Twiggs Momentum above zero suggests a primary up-trend. Breakout above 81.00 would strengthen the signal; and 81.50 would confirm. Breach of 80.00 is unlikely at present, but would warn of another test of primary support at 79.00.

Dollar Index

Low interest rates and a stronger dollar suggest inflation expectations are falling, but this is not yet evident on the TIPS spread. The 5-year Breakeven rate (5-Year Treasury Yield minus 5-Year Inflation-Indexed Yield) remains at 2.0 percent.

5-Year Treasury Yield minus 5-Year Inflation Indexed (TIPS) Yield

Gold

Gold is nonetheless falling, in line with weaker inflation expectations. Breach of short-term support at $1295/$1300 would test $1240/$1250. And breach of $1240 would signal another primary decline, with an intermediate target of $1100*. Oscillation of 13-week Twiggs Momentum around zero, however, suggests hesitancy, with no strong trend. Recovery above $1350 is unlikely at present, but would indicate another test of $1400/$1420.

Spot Gold

* Target calculation: 1250 – ( 1400 – 1250 ) = 1100

When we compare long-term crude prices (Brent Crude) to gold, it is evident that crude prices tend to lead and gold to follow. The main reason is the impact that higher crude prices have on inflation, increasing demand for gold as an inflation hedge. Crude prices currently remain high, but it remains to be seen whether gold will follow as usual.

Gold and Crude

Gold prices adjusted for inflation suggest the opposite. There are two enormous spikes on the chart, both flagging times of great financial uncertainty. The first is spiraling inflation of the early 1980s and the second is the all-in balance sheet expansion (also known as quantitative easing) by central banks after the global financial crisis. Gold prices remain elevated and are likely to fall further as central banks curtail expansion.

Gold and CPI

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Gold retreats as Dollar strengthens

  • Treasury yields remain weak
  • The Dollar strengthens
  • Inflation looks weak despite rising TIPS spread
  • Gold retreats

Interest Rates and the Dollar

The yield on ten-year Treasury Notes continues to test support at 2.50 percent. Failure would indicate a decline to 2.00 percent; follow-through below 2.40 would confirm. 13-Week Twiggs Momentum below zero continues to warn of a primary down-trend. Recovery above 2.65 is less likely, but would suggest the correction is over, with a medium-term target of 2.80 and long-term of 3.00 percent.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The Dollar Index found short-term support at 80.00. Follow-through above 80.50 indicates another test of 81.00. Recovery of 13-week Twiggs Momentum suggests a primary up-trend. Breakout above 81.00 would strengthen the signal; above 81.50 would confirm. Breach of 80.00 is unlikely at present, but would warn of another test of primary support at 79.00.

Dollar Index

Low interest rates and a stronger dollar suggest inflation expectations are falling, but this is not yet evident on the TIPS spread (10-Year Treasury Yields minus 10-Year Inflation-Indexed Yields).

10-Year Treasury Yields minus 10-Year Inflation Indexed (TIPS) Yields

Gold

Gold is nonetheless falling, in line with weaker inflation expectations. Follow-through below $1300 would test support at $1240. And breach of $1240 would threaten another primary decline, with a target of $1000*. Oscillation of 13-week Twiggs Momentum around zero, however, suggests hesitancy, with no strong trend. Recovery above $1350 is unlikely at present, but would indicate another test of $1400/$1420.

Spot Gold

* Target calculation: 1200 – ( 1400 – 1200 ) = 1000

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Gold strengthens on Dollar weakness

  • Treasury yields weaken
  • The Dollar continues to test long-term support
  • Gold is strengthening

Interest Rates and the Dollar

The yield on ten-year Treasury Notes is again testing support at 2.50 percent. Failure would indicate a decline to 2.00 percent. Follow-through below 2.40 would confirm. Market expectations favor low interest rates and 13-Week Twiggs Momentum below zero continues to warn of a primary down-trend. Recovery above 2.65 is less likely, but would suggest the correction is over, offering a medium-term target of 2.80 and long-term of 3.00 percent.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The Dollar Index tests short-term support at 80.00. Respect of zero by 13-week Twiggs Momentum warns of continuation of the primary down-trend. Breach of 80.00 would indicate a test of primary support at 79.00. Recovery above 80.50 is unlikely at present, but would suggest an advance to 81.50.

Dollar Index

Gold

Low interest rates and higher inflation expectations favor a stronger gold price and a weaker Dollar. Gold is consolidating in a narrow band below medium-term resistance at $1325/$1330, suggesting continuation of the rally. Breakout would signal a test of $1400. Recovery of 13-week Twiggs Momentum above zero hints at a primary up-trend; breakout above $1400 would confirm. Retreat below $1300 is unlikely, but would test support at $1240.

Spot Gold

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Gold rallies as inflation expectations rise

Overview:

  • Treasury yields are recovering
  • Inflation expectations rise
  • The Dollar weakens
  • Gold rallies

Interest Rates and the Dollar

The yield on ten-year Treasury Notes found support at 2.50 percent. Recovery above 2.65 would suggest the correction is over, offering a medium-term target of 2.80 and long-term of 3.00 percent. 13-Week Twiggs Momentum below zero continues to indicate weakness. Reversal below 2.40 would signal a decline to 2.00 percent* — confirmed if yield follows through below 2.40 percent.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

Long-term inflation expectations, indicated by 10-Year Treasury Yields minus 10-Year Inflation-Indexed (TIPS) Yields below, turned upward after 12-month CPI jumped to 1.8 percent in May, but are still range-bound between 2.0 and 2.50 percent.

10-Year Treasury Yields minus 10-Year Inflation Indexed (TIPS) Yields

The Dollar Index continues to head for primary support at 79.00 after retreating below 80.50. Respect of zero by 13-week Twiggs Momentum warns of continuation of the primary down-trend. Recovery above 80.50 is unlikely at present, but would suggest an advance to 81.50.

Dollar Index

Gold

Gold is testing medium-term resistance at $1325/$1330. Breakout would signal a test of $1400. Recovery of 13-week Twiggs Momentum above zero hints at a primary up-trend; breakout above $1400 would confirm. Retreat below $1280 is unlikely, but would warn of the opposite; confirmed if support at $1240 is breached.

Spot Gold

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Gold rallies as the Dollar weakens

Overview:

  • Treasury yields weaken
  • The Dollar weakens
  • Gold rallies

Interest Rates and the Dollar

The yield on ten-year Treasury Notes is headed for another test of primary support at 2.50 percent. Follow-through below 2.40 would would signal a decline to 2.00 percent*. 13-Week Twiggs Momentum continues below zero, indicating weakness. Recovery above the descending trendline is unlikely at present, but would suggest another attempt at 3.00 percent.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The Dollar Index retreated below resistance after a false break above 80.50. Recovery above 80.50 would suggest an advance to 81.50, but respect of zero by 13-week Twiggs Momentum warns of continuation of the primary down-trend.

Dollar Index

Gold

A weaker Dollar helped gold break its descending trendline, ending the correction. Expect a test of $1400. Whipsawing of 13-week Twiggs Momentum around the zero line, however, indicates indecision and reversal below zero would warn of further weakness. Retreat below $1280 would warn of a test of primary support at $1200.

Spot Gold

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Gold bearish as dollar base strengthens

Overview:

  • Treasury yields recover
  • The Dollar establishes a base
  • Gold bearish

Interest Rates and the Dollar

The yield on ten-year Treasury Notes made a false break through primary support at 2.50 percent, before recovering to 2.60 percent*. 13-Week Twiggs Momentum below zero continues to suggest weakness. Recovery above 2.80 remains unlikely at present, while reversal below 2.50 would signal a decline to 2.00 percent.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The Dollar Index completed a double-bottom reversal, breaking through resistance at 80.50, but last week’s tall shadow (wick) warns of selling pressure. Reversal below 80.00 would indicate a test of primary support at 79.00, but 13-week Twiggs Momentum recovery above zero is bullish and follow-through above 81 would suggest a primary up-trend. Breakout above 81.50 would confirm.

Dollar Index

* Target calculation: 81.5 + ( 81.5 – 79.0 ) = 84.0

Gold

Low inflation and a strengthening Dollar reduce demand for precious metals. Gold found short-term support at $1240, but reversal of 13-week Twiggs Momentum below zero is bearish. Expect a test of primary support at $1200. Recovery above $1300 is unlikely, but would warn of a bear trap and rally to $1400.

Spot Gold

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Gold tumbles as Treasury yields fall

Overview:

  • Treasury yields fall
  • The Dollar strengthens slightly
  • Stocks are rising
  • Gold breaks support

Interest Rates and the Dollar

The yield on ten-year Treasury Notes broke primary support at 2.50 percent, warning of a decline to 2.00 percent*. Reversal of 13-week Twiggs Momentum below zero confirms weakness. Recovery above 2.80 is most unlikely at present, but would indicate another advance.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The Dollar Index is testing resistance at 80.50. Recovery of 13-week Twiggs Momentum above zero would increase the chances of a double-bottom reversal (to a primary up-trend), but respect of resistance remains as likely and would test primary support at 79.00. Another 13-week Twiggs Momentum peak below the zero line would signal continuation of the primary down-trend.

Dollar Index

* Target calculation: 79.0 – ( 81.5 – 79.0 ) = 76.5

Stocks and Housing

Falling long-term interest rates are likely to boost the housing sector and the broader stock market. The Dow Jones Industrial Average is heading for a test of the recent high at 16750. Rising 21-day Twiggs Money Flow signals medium-term buying pressure. Retracement that respects support at 16500 would confirm an advance to 17000*.

Dow Jones Industrial Average

* Target calculation: 16.5 – ( 16.5 – 16 ) = 17

Gold and Silver

Gold faces conflicting forces: low inflation reduces demand for precious metals, but low interest rates and a weaker Dollar increase demand. At present low inflation seems to have the upper hand, driving gold through support at $1300/$1280 per ounce. Expect a test of primary support at $1200. Reversal of 13-week Twiggs Momentum below zero reinforces the bear signal. Recovery above $1300 is most unlikely, but would warn of a bear trap and rally to $1400.

Spot Gold

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Gold faces conflicting forces

  • Treasury yields are falling
  • The Dollar is weakening
  • Inflation expectations are falling
  • Gold and silver are testing support

Interest Rates and the Dollar

The yield on ten-year Treasury Notes closed below support at 2.60 percent, warning of another decline. Follow-through below 2.50 percent would signal a primary down-trend, with an immediate target of 2.00 percent*. Reversal of 13-week Twiggs Momentum below zero also suggests weakness. Recovery above 2.80 is unlikely at present, but would indicate another advance.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The Dollar Index is heading for a test of primary support at 79.00. Peaks below the zero line on 13-week Twiggs Momentum signal a primary down-trend. Breach of primary support at 79.00 would confirm, offering a target of 76.50*. Recovery above 80.50 is unlikely, but would signal that the index has bottomed.

Dollar Index

* Target calculation: 79.0 – ( 81.5 – 79.0 ) = 76.5

Gold and Silver

Gold faces conflicting forces: low inflation reduces demand for precious metals, but low interest rates and a weaker Dollar increase demand.

Spot gold continues to test support at $1300/$1280 per ounce. Failure of support would indicate a test of primary support at $1200, but long tails and 13-week Twiggs Momentum recovery above zero indicate that another test of $1400 remains as likely.

Spot Gold

Silver is more bearish and failure of primary support at $19/ounce would offer a target of $16*. Respect of the zero line (from below) by 13-week Twiggs Momentum suggests continuation of the primary down-trend. A down-swing on silver would be likely to be followed by gold. Recovery above $22/ounce is less likely, but would signal a primary up-trend.

Spot Silver

* Target calculation: 19 – ( 22 – 19 ) = 16

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Gold and inflation

Inflation expectations are falling, as suggested by a weaker gold price and treasury yields. The Dollar, however, is also weakening in response to low interest rates and should provide some support for precious metal prices.

Interest Rates and the Dollar

The yield on ten-year Treasury Notes is falling, reflecting a dovish outlook on inflation, and testing the base of the recent consolidation at 2.60 percent. Breach of primary support at 2.50 percent would signal a primary down-trend, with an immediate target of 2.00 percent*. Reversal of 13-week Twiggs Momentum below zero also warns of weakness. Recovery above 2.80 is less likely, but would suggest another advance.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The Dollar Index is heading for a test of primary support at 79.00. Peaks below the zero line on 13-week Twiggs Momentum suggest a primary down-trend. Breach of primary support at 79.00 would confirm, offering a target of 76.50*.

Dollar Index

* Target calculation: 79.0 – ( 81.5 – 79.0 ) = 76.5

Gold and Silver

Spot gold found support at $1280/ounce, but narrow candles for the last two weeks indicate an absence of buying pressure. Reversal below $1280 would test primary support at $1200. Completion of a 13-week Twiggs Momentum trough above zero would be a bullish sign, although breakout above $1400 remains unlikely.

Spot Gold

Silver is more bearish and failure of primary support at $19/ounce would signal continuation of the primary down-trend, offering a target of $16. Bullish divergence on 13-week Twiggs Momentum, however, points to an up-trend and breakout above $22 would confirm. Behavior of silver is likely to be mimicked by gold (and vice versa). This is a tough one to call and the outcome may well be further consolidation.

Spot Silver

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