Category: Gold & Precious Metals

Gold and Precious Metals

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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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Gold losing its luster

Inflation pressures are easing and Elliot Clarke summarizes Westpac’s outlook for US inflation as follows:

This week we decompose the Personal Consumption Expenditure (PCE) deflator to assess what inflation pressures currently exist and how they are likely to develop. The conclusion is that the inflation picture argues for an extended period of extremely accommodative policy settings and it may even serve to delay the timing of the initial interest rate increase well beyond the timeframe currently envisaged by markets.

Soft treasury yields, a weak dollar and weaker gold price tend to support this view.

Interest Rates and the Dollar

The yield on ten-year Treasury Notes is ranging in a narrow band between 2.60 percent and 2.80 percent. Breakout above 2.80 would indicate an advance to 3.50 percent* — confirmed if there is follow-through above 3.00 percent — but declining 13-week Twiggs Momentum continues to warn of weakness. Breach of primary support at 2.50 percent is as likely and would signal a primary down-trend.

10-Year Treasury Yields

* Target calculation: 3.00 + ( 3.00 – 2.50 ) = 3.50

The Dollar Index is testing medium-term resistance at 80.50. Breakout would suggest that a bottom is forming, but only recovery above 81.50 would signal a trend change. 13-Week Twiggs Momentum oscillating below zero, however, is typical of a primary down-trend. Breach of primary support at 79.00 would signal a decline to 76.50*.

Dollar Index

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

Gold and Silver

Silver failed to imitate gold’s performance in the first quarter and is headed for a test of primary support at $19/ounce. 13-Week Twiggs Momentum likewise failed to cross to above zero, suggesting continuation of the primary down-trend. Breach of primary support would offer a target of $16, while respect of support would test resistance at $22/ounce.

Spot Silver

Spot gold is undergoing a strong correction, having breached the rising trendline and support at $1320/ounce. The outlook remains bullish, but breach of primary support by Silver or continued decline of 13-week Twiggs Momentum below zero would negate this. Failure of primary support at $1200 is unlikely, but would offer a target of $1000/ounce*.

Spot Gold

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

Copper

Copper is a commodity rather than a precious metal, but is also used as a store of value. At present, copper is testing long-term support at $6800/tonne. Follow-through below $6600 would signal continuation of the primary down-trend to $6000/tonne*. Recovery above the descending trendline (at $7000) is unlikely, but would suggest that a bottom is forming.

Copper

* Target calculation: 6750 – ( 7500 – 6750 ) = 6000

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Yellen takes the heat out of gold

Janet Yellen held firm on the Fed taper and unsettled markets somewhat with her throwaway “6 months” remark.

The Fed said the change in its rate hike guidance did not mark a shift in its intentions and that it would wait a “considerable time” after shuttering its asset purchase program before pushing borrowing costs higher. Yellen, who had fielded numerous questions without a hitch, hesitated when asked what the Fed meant by “considerable.”

“I — I, you know, this is the kind of term it’s hard to define, but, you know, it probably means something on the order of around six months or that type of thing. But, you know, it depends — what the statement is saying is it depends what conditions are like.” (Reuters)

That is not a firm commitment to raise rates any time soon. More like: “We are keeping our options open”.

The Dollar Index jumped, along with Treasury yields, but only 13-week Twiggs Momentum recovery above zero would indicate a trend change; confirmed if there is a breakout above 81.50.

Dollar Index

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

Spot gold retreated to support at $1320/ounce in response to the stronger Dollar. Breach of the rising trendline would warn of another test of primary support at $1200, while respect would signal another attempt at $1420/$1440.

Spot Gold

* Target calculation: 1400 + ( 1400 – 1200 ) = 1600

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Gold and the Dollar: The Putin factor

Spot gold is normally a reliable indicator of inflation expectations, but rising tensions over Ukraine and Crimea are likely to increase demand for gold as a safe haven. The yellow metal broke through resistance at $1350/ounce but is retracing to test the new support level. Respect of the rising trendline would confirm an advance to $1420. Crossover of 13-week Twiggs Momentum above zero (and earlier bullish divergence) signals a primary up-trend. Breakout above $1420 still appears some way off, but would offer a target of $1600/ounce*.

Spot Gold

* Target calculation: 1400 + ( 1400 – 1200 ) = 1600

Treasury yields are easing, with the yield on ten-year Treasury Notes again testing support at 2.60 percent. Consolidation between 2.60 and 2.80 percent would be a bearish formation. Breakout above 2.80 would indicate an advance to 3.50 percent*; confirmed if there is follow-through above 3.00 percent. But bearish divergence on 13-week Twiggs Momentum continues to warn of weakness and breach of primary support at 2.50 percent would signal a primary down-trend.

10-Year Treasury Yields

* Target calculation: 3.00 + ( 3.00 – 2.50 ) = 3.50

The Dollar Index is falling, in line with softer Treasury yields. Breach of support at 79.00 would confirm a primary down-trend. A 13-week Twiggs Momentum peak below zero also suggests weakness.

Dollar Index

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

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Dollar falls: Outflow to safe haven?

Rising gold prices would normally signal increased inflation expectations and higher Treasury yields, but the present situation is distorted by tensions in Ukraine and increased demand for gold as a safe haven. The yield on ten-year Treasury Notes found support at 2.60 percent and is now testing medium-term resistance at 2.80 percent. Breakout would indicate an advance to 3.50 percent*; confirmed if there is follow-through above 3.00 percent. Bearish divergence on 13-week Twiggs Momentum continues to warn of weakness and reversal below 2.60 remains as likely, testing primary support at 2.50 percent.

10-Year Treasury Yields

* Target calculation: 3.00 + ( 3.00 – 2.50 ) = 3.50

Rising Treasury yields and a weakening dollar may reflect international outflows from the Dollar in search of a safe haven. The Dollar Index is testing primary support at 79.50/79.60. Breach would signal a primary down-trend; confirmed if support at 79.00 is broken. The 13-week Twiggs Momentum peak below zero suggests further weakness.

Dollar Index

* Target calculation: 79.5 – ( 81.5 – 79.5 ) = 77.5

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Gold signals up-trend

Spot gold encountered resistance at $1350/ounce. Retracement that respects $1300 and the rising trendline would suggest an advance to $1400. Crossover of 13-week Twiggs Momentum above zero indicates a primary up-trend, especially following a bullish divergence on the weekly chart. Breakout above $1400 would confirm the signal, but still seems a long way off.

Spot Gold

The Gold Bugs Index is similarly testing resistance at 250. Breakout would signal an advance to 280. Again, bullish divergence on 13-week Twiggs Momentum and crossover above zero indicate a primary up-trend. Reversal below 210 is unlikely, but would warn of continuation of the down-trend.

Gold Bugs Index

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Gold rallies as stocks hesitate

Spot gold continued its rally, as stocks hesitate, and is likely to reach $1400/ounce before encountering strong resistance. Bullish divergence on 13-week Twiggs Momentum strengthens the signal and recovery above zero would indicate a primary up-trend. Breakout above $1400 would confirm the signal, but seems a long way off.

Spot Gold

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Gold rally

Spot gold is likely to rally to $1400/ounce before encountering strong resistance, from patient sellers. Bullish divergence on 13-week Twiggs Momentum strengthens the signal. Momentum breakout above zero would suggest a primary up-trend, but breach of $1400 seems a long way off. Retracement that respects new support at $1250 would strengthen the rally.

Spot Gold

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Gold follows through

The Gold Bugs Index followed through above 225 after breaking its descending trendline, suggesting that a bottom is forming. Bullish divergence on 13-week Twiggs Momentum strengthens the signal. Reversal below 210 is unlikely, but would re-test primary support at 190.

Gold Bugs Index

Spot gold similarly followed-through above 1280, suggesting a bottom. Again, bullish divergence on 13-week Twiggs Momentum strengthens the signal. Another retracement to find support is likely before there is a serious attempt at the September 2013 high of 1430, which would complete a large double bottom. Reversal below 1240 is unlikely, but would warn of another test of primary support at 1180.

Spot Gold

Silver is likely to follow gold. Breakout above $20.50 would suggest another test of $25.00/ounce.

Spot Silver

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