Category: Gold & Precious Metals

Gold and Precious Metals

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Gold and silver fall

Gold respected the new resistance level at $1240 after a brief retracement, confirming a primary down-trend. Declining 13-week Twiggs Momentum below zero strengthens the bear signal. Expect further support at $1200/ounce, breach would add further confirmation.

Spot Gold

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

Silver is testing primary support at $18.50 per ounce. Breach of support would signal a down-trend and strengthen the bear signal for gold. Respect is unlikely, but would suggest further consolidation.

Spot Silver

Interest Rates and the Dollar

A rising Dollar and rising Treasury yields both put downward pressure on gold.

The Dollar Index is testing resistance at the 2013 high of 84.50. Rising 13-week Twiggs Momentum above zero signals a primary up-trend. Reversal below 81.50 is most unlikely. Upward breakout would offer a long-term target of 89*.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89.00

The yield on ten-year Treasury Notes broke resistance at 2.50 percent and is now consolidating at 2.60. Follow-through above 2.65 would signal an advance to 3.00. Respect would signal a decline to 2.00 percent*. 13-Week Twiggs Momentum recovery above zero would suggest a primary up-trend.

10-Year Treasury Yields

* Target calculation: 2.65 + ( 2.65 – 2.30 ) = 3.00

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Gold & crude fall

Gold broke support at $1240/ounce to signal a primary down-trend. Declining 13-week Twiggs Momentum, below zero, strengthens the signal. Follow-through below $1200 would confirm. The sell-off is being driven by a rising Dollar.

Spot Gold

Crude oil is also falling, with Brent Crude testing its 18-month low. Nymex breach of $92/barrel would also signal a primary down-trend.

Nymex and Brent Crude

From Nick Cunningham at Oilprice.com:

The glut of supplies and weak demand is causing problems for OPEC, according to the cartel’s monthly report. OPEC lowered its demand projection for 2015 by 200,000 and in August, Saudi Arabia cut production by 400,000 bpd in an effort to stem oversupply.

It is probably no coincidence, but lower oil prices will hurt the Russian economy. As Nick points out:

Russia needs between $110 and $117 per barrel to finance its spending, which means the Kremlin can’t be happy as it watches Brent prices continue to drop. Combined with an already weak economy, Russia could see its $19 billion surplus become a deficit by the end of the year.

Falling oil prices will benefit the global economy in the medium-term. Subduing Russia’s territorial ambitions will be an added bonus.

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Gold threatens down-trend

Gold continues its decline since breaking medium-term support at $1280. Declining 13-week Twiggs Momentum below zero suggests a primary down-trend. Breach of primary support at $1240/ounce would confirm. Follow-through below $1180/$1200 would strengthen the bear signal. Respect of support at $1240 is unlikely, but recovery above $1280 would suggest that another bottom is forming.

Spot Gold

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

Gold Bugs Index, representing un-hedged gold stocks, breach of support at 235 strengthens the bear signal for gold. Reversal of 13-week Twiggs Momentum below zero is also bearish.

Gold Bugs Index

The Dollar Index is testing resistance at 84.50/84.80. Recovery of 13-week Twiggs Momentum above zero reflects a primary up-trend. Expect retracement or consolidation at the resistance level, but breakout would signal another primary advance. Reversal below 81.50 remains unlikely. A rising dollar is likely to weaken demand for gold.

Dollar Index

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

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Gold Declines as the Dollar rises

A rising dollar, falling crude prices and low inflation all favor a down-trend for gold, while falling long-term interest rates are the only alleviating factor at present.

Gold broke support at $1280, indicating another test of primary support at $1200/ounce. Declining 13-week Twiggs Momentum below zero suggests a primary down-trend. Failure of medium-term support at $1240 would strengthen the bear signal. Breach of primary support would confirm.

Spot Gold

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

Gold Bugs Index, representing un-hedged gold stocks, has not yet followed. Breach of support at 235 would confirm another test of primary support at 205. Reversal of 13-week Twiggs Momentum below zero would strengthen the signal.

Gold Bugs Index

Silver, on the other hand is already testing primary support at $18.50/$19.00 per ounce. Breach of support would strengthen the bear signal for gold, while respect would suggest further consolidation.

Spot Silver

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Dollar surges, yields fall but gold hesitant

The Dollar Index continues its impressive advance. Expect resistance at the 2013 highs at 84.50. Reversal below 81.50 is most unlikely.

Dollar Index

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

The yield on ten-year Treasury Notes is retracing to test its new resistance level at 2.40/2.50 percent. The primary trend is down, with 13-week Twiggs Momentum holding below zero. Respect of resistance is highly likely and would confirm a decline to 2.00 percent*.

10-Year Treasury Yields

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

Gold

Gold continues in a narrow range, between $1280 and $1320/ounce, in the apex of the triangle. Both this and oscillation of 13-week Twiggs Momentum close to zero signal uncertainty. Expect further consolidation between $1250 and $1350 in the medium-term. Breakout from that band is likely to indicate future direction. Falling crude prices and low inflation favor a down-trend.

Spot Gold

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

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Dollar surges as crude falls

  • Dollar surges
  • Treasury yields rally, but the trend is down
  • Crude oil prices fall
  • Gold uncertainty continues

Interest Rates and the Dollar

The Dollar Index followed through above resistance at 81.50, signaling a long-term advance to test the 2013 highs at 84.50. Recovery of 13-week Twiggs Momentum above zero strengthens the signal. Reversal below 81.50 is most unlikely, but would warn of another test of support at 80.00.

Dollar Index

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

The yield on ten-year Treasury Notes recovered above support at 2.40 percent, but the primary trend is downward. Respect of the descending trendline is likely and reversal below 2.40 would confirm a decline to 2.00 percent*. 13-Week Twiggs Momentum holding below zero strengthens the bear signal. Recovery above the descending trendline is unlikely, but would suggest a rally to 2.65/2.70 percent.

10-Year Treasury Yields

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

There are two factors driving the fall in long-term interest rates. The first is aggressive purchases of US treasuries by China in order to maintain a weak yuan. The second is the abysmal state of the employment market when we look past the official unemployment figures. Employment levels for males in the 25 to 54 age group remain roughly 6% — and females 5% — below their previous high.

Employment levels

Gold

Gold is consolidating in a triangle pattern, between $1200 and $1400/ounce. Price action is now too close to the apex (“>”) of the triangle for breakouts to be reliable, but breach of support at $1280 would test $1240, while breakout above $1320 would test $1350. Oscillation of 13-week Twiggs Momentum close to zero continues to signal hesitancy. In the longer term, recovery above $1350 would indicate a primary up-trend, while breach of support at $1240/$1250 would signal a down-trend.

Spot Gold

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

Declining crude prices may be contributing to lower inflation expectations and weaker gold demand (as an inflation hedge). Brent Crude breach of $99/barrel would confirm a primary down-trend as would Nymex WTI crude below $92/barrel.

Gold and Crude

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Strong Dollar weakens gold

  • Treasury yields decline
  • Dollar strengthens
  • Crude oil weakens
  • Gold hesitates

Interest Rates and the Dollar

The yield on ten-year Treasury Notes is testing support at 2.40 percent. Breach would confirm a primary decline with a target of 2.00 percent*. 13-Week Twiggs Momentum holding below zero strengthens the bear signal. Recovery above 2.50 is unlikely, but would suggest a rally to 2.65/2.70 percent.

10-Year Treasury Yields

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

The Dollar Index broke resistance at 81.50, signaling a long-term advance to 84*. Expect retracement to test the new support level. Recovery of 13-week Twiggs Momentum above zero also suggests a primary up-trend. Reversal below 81.00 is unlikely, but would warn of another test of support at 80.00.

Dollar Index

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

A rising dollar and falling treasury yields both suggest that inflation expectations are falling.

Gold

Gold found medium-term support at $1280/$1300, but oscillation of 13-week Twiggs Momentum around zero indicates hesitancy. Recovery above $1350 would indicate a primary up-trend, while breach of support at $1240/$1250 would signal a down-trend.

Spot Gold

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

Declining crude prices may also be contributing to lower inflation expectations and weaker gold demand as an inflation hedge. Brent Crude breach of $104/barrel would signal a primary down-trend, reducing the possibility of a sustained rise in the gold price.

Gold and Crude

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Gold finds support as Euro falls

  • Treasury yields warn of a decline
  • Euro trending lower
  • Dollar halts at resistance
  • Gold finds short-term support

Interest Rates and the Dollar

The yield on ten-year Treasury Notes retreated below 2.50 percent, warning of a decline to 2.00 percent*. Follow-through below 2.40 would confirm. 13-Week Twiggs Momentum below zero strengthens the signal. Reversal above 2.65 is unlikely, but indicate an advance to 3.00 percent.

10-Year Treasury Yields

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

The euro is in a primary down-trend, having broken primary support at $1.35. Target for the initial decline is $1.30*. Declining 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 has run into resistance at 81.50, evidenced by tall wicks (“shadows”) on the last two weekly candles. Weakness in Europe is likely to drive the Dollar higher, while lower treasury yields would retard the advance. Recovery of 13-week Twiggs Momentum above zero suggests a primary up-trend. Breakout above 81.50 would signal a primary advance to 84*. Reversal below 81.00 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 found short-term support at $1280/$1300. Oscillation of 13-week Twiggs Momentum around zero continues to indicate hesitancy. Breach of support at $1240/$1250 would warn of a primary down-trend. Recovery above $1350 remains unlikely at present, but would indicate another test of $1400/$1420.

Spot Gold

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

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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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