Category: Gold & Precious Metals

Gold and Precious Metals

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S&P 500 follows through

The S&P 500 followed through above resistance at 1700, indicating an advance to 1800*. Bearish divergence on 21-day Twiggs Money Flow  suggests selling pressure, but this is not as pronounced on the weekly chart and a peak above the May high would negate this. Reversal below support at 1675 remains unlikely, but would warn of another test of primary support at 1560.

S&P 500 Index

* Target calculation: 1680 + ( 1680 – 1560 ) = 1800

The Dollar Index is testing resistance at 82.50. Breakout would indicate the correction is over, suggesting an advance to 84.50. A 63-day Twiggs Momentum trough above zero would strengthen the signal.

Dollar Index

We received some bad data for gold from our Forex & Precious metals data supplier. Here is the corrected chart and our revised comments:

Spot Gold

* Target calculation: 1200 – ( 1350 – 1200 ) = 1050

Gold continues to test support at $1300/ounce. Breach would suggest another test of primary support at $1200, while failure of primary support would offer a target of $1050*. Dollar Index breakout above 82.50 would strengthen the bear signal. Recovery above 1350 is less likely, but would indicate continuation of the rally to $1400/ounce.

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Gold consolidates as dollar and commodities fall

Gold is consolidating in a narrow range between $1300 and $1350/ounce. Penetration of the descending trendline indicates that a bottom is forming. Reversal below $1300 would suggest another test of primary support at $1200, but breakout above $1350 is as likely and would target $1400.

Spot Gold

A rally to $1400 would test the long-term descending trendline as shown on the monthly chart.

Spot Gold

Spot silver has made a weaker rally over the last month and breakout below the rising flag would warn of another decline, with a target of $16.50*. Declining silver would be a bearish sign for gold.

Spot Gold

* Target calculation: 19.5 – ( 21.5 – 18.5 ) = 16.5

Dollar Index

The Dollar Index found short-term support at 81.50. Penetration would indicate a test of primary support at 80.50. Recovery above 82.50 is unlikely, but would suggest the correction is over. Another 13-week Twiggs Momentum trough above zero would indicate the primary up-trend is intact. Breakout above 84.50 is some way off, but would signal an advance to the 2009/2010 highs around 90.00.
Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89

Crude Oil

Nymex WTI light crude is retracing after a sharp rally and is likely to find support between $98 and $100/barrel. Expect the spread with Brent crude to narrow as the US recovery outstrips Europe.

Brent Crude and Nymex Crude

* Target calculation: 98 + ( 98 – 86 ) = 110

Commodities

Copper is testing long-term support at $6800/ton. Follow-through below $6700 would confirm another primary decline.
Dow Jones UBS Commodities Index
Commodity prices are primarily driven by Chinese demand. With the Shanghai Composite Index testing its 2012 low (1950), breakout would signal a decline to its 2008 low (1660) and drag commodity prices lower. Dow Jones-UBS Commodity Index breach of long-term support at 125/126 would confirm, targeting its 2009 low at 100*. Not good news for Australian resources stocks, even if the impact is cushioned by a falling Aussie Dollar.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Gold rises as the dollar falls

Gold broke resistance at $1300/ounce, penetration of the descending trendline indicating that a bottom is forming. Reversal below $1300 would suggest another test of primary support at $1200. Respect of support at $1300 and breakout above $1350 is unlikely, but would target $1400.

Spot Gold

Dollar Index

The Dollar Index is headed for a test of the rising trendline after a false break above 84.00. Respect of the trendline would indicate the primary up-trend is intact, while reversal below 80.50 would warn of a primary down-trend. Bearish divergence on 13-week Twiggs Momentum indicates trend weakness. Recovery above 84.50, however, would signal an advance to 90.00*.
Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89

Crude Oil

Nymex WTI light crude is in a primary up-trend, with the current retracement likely to find support around $100/barrel. Rising Nymex crude prices reflect a stronger US economy. Expect the spread with Brent crude to narrow. Target for the current Nymex advance is the 2012 high of $110/barrel*

Brent Crude and Nymex Crude

* Target calculation: 98 + ( 98 – 86 ) = 110

Commodities

The Shanghai Composite Index continues to consolidate above its 2012 low (of 1950). Failure would signal a decline to its 2008 low (at 1660). China is the primary driver of commodity prices and decline of the Shanghai Index would drag prices lower. Dow Jones-UBS Commodity Index reversal below long-term support at 126 would confirm, targeting the 2009 low at 100*. Not good news for Australian resources stocks, even if the impact is cushioned by a falling Aussie Dollar.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Crude rallies while gold and commodities stall

Gold is consolidating in a narrow range below resistance at $1300 — a bullish sign. Upward breakout would penetrate the descending trendline, suggesting a bottom is forming.  Reversal below $1270, however, would indicate another test of $1200. Failure of support at $1200 would offer a medium-term target of $1100*.

Spot Gold

* Target calculation: 1200 – ( 1300 – 1200 ) = 1100

The monthly chart shows a primary trendline some way above current price action. Even a rally to $1400 would not disrupt the primary down-trend.
Spot Gold

Dollar Index

The Dollar Index retreated after a false break above 84.00. Respect of the rising trendline would indicate the primary up-trend is intact, while reversal below 79.00 would signal a primary down-trend. Recovery above 84.50 would signal an advance to 89.00.
Dollar Index

Crude Oil

Nymex WTI light crude is in a clear primary up-trend, with Brent crude lifting in sympathy. Rising Nymex crude prices reflect a stronger US economy. Target for the Nymex advance is the 2012 high of $110/barrel*. Expect the spread with Brent crude to narrow.

Brent Crude and Nymex Crude

* Target calculation: 98 + ( 98 – 86 ) = 110

Commodities

The Shanghai Composite Index rebounded weakly above long-term support at 1950, but is likely to re-test in the next few weeks. Failure would indicate a decline to test the 2008 low at 1400. China is the primary driver of commodity prices and another decline on the Shanghai Index would drag prices even lower. Dow Jones-UBS Commodity Index reversal below long-term support at 125 would confirm, targeting the 2009 low at 100*. Not good news for Australian resources stocks, even if the impact is cushioned by a falling Aussie Dollar.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Gold lifts on Dollar’s sharp fall

Gold broke medium-term resistance at $1260 as the Dollar Index fell sharply. Expect strong resistance between $1300 and 1340, however, and respect of the descending trendline would indicate another test of $1200. Continuation of the down-trend is likely, and failure of support at $1200 would offer a medium-term target of $1100*.

Spot Gold

* Target calculation: 1200 – ( 1300 – 1200 ) = 1100

Dollar Index

The dollar fell sharply on Wednesday as investors , hoping for greater clarity, received mixed (if not confusing) signals. Nicole Hong at WSJ writes:

Fed Chairman Ben Bernanke said at a conference that the central bank’s highly monetary policy [QE] is needed for the foreseeable future. He added that it is likely the Fed won’t raise interest rates “for some time,” even after the unemployment rate reaches 6.5%.

His remarks came after the release of minutes from the Fed’s June meeting earlier Wednesday. The minutes showed Fed officials divided about the timing of a reduction in bond buying, with half of Fed officials believing the central bank should end the stimulus program by the end of this year. Other Fed officials said the labor market hasn’t improved enough to begin tapering so soon.

The Dollar Index fell sharply, signaling another test of primary support at 80.50. Breach of support — or reversal of Twiggs Momentum (63-day or 13-week) below zero — would warn of a primary down-trend.  While that is unlikely, failure to break resistance at 84.50 suggests a weak up-trend.
Dollar Index

Crude Oil

Nymex WTI light crude followed through above $100/barrel, signaling a primary up-trend, while Brent crude recovered above $106/barrel. The spread has narrowed to less than $2/barrel. Rising Nymex crude prices reflect a stronger US economy. Target for the advance is the 2012 high of $110/barrel*.

Brent Crude and Nymex Crude

* Target calculation: 98 + ( 98 – 86 ) = 110

Commodities

Commodity prices are largely driven by China. Narrow consolidation of the Shanghai Composite index above long-term support at 1950 suggests a decline to test the 2008 low at 1700. That would drag commodities even lower. Dow Jones-UBS Commodity Index similarly recovered above long-term support at 125 and is likely to test 130, but  reversal below support would target the 2009 low at 100*. Not good news for Australian resources stocks, even if the impact is cushioned by a falling Aussie Dollar.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Gold and commodities bear rally likely to fail

Gold found support at $1200/ounce, but the rally was short-lived, encountering resistance at $1260. Breakout would test resistance at $1300/1320, while reversal below $1230 would again test $1200. Continuation of the down-trend is likely, and failure of support at $1200 would offer a medium-term target of $1100*.

Spot Gold

* Target calculation: 1200 – ( 1300 – 1200 ) = 1100

The Gold Bugs index (representing un-hedged gold stocks) diverged from the spot price in 2012 and retreated, relatively, a lot further since 2011. Does that mean the spot price will follow — or that gold stocks are oversold? I have no idea how far gold will eventually fall, but I do take this as a bearish sign for the metal.
Spot Silver

Crude Oil

Nymex WTI light crude broke resistance at $98/barrel and follow-through above $100 would confirm a primary up-trend. Brent continues to range between $100 and $106, with the spread narrowing to less than $4/barrel. Rising Nymex crude prices reflect a stronger US economy, and should ensure the spread closes completely in the months ahead.

Brent Crude and Nymex Crude

Commodities

Commodity prices are largely driven by Chinese demand, as reflected by the correlation between Dow Jones/UBS Commodity Index and the Shanghai Composite. The Shanghai is in a strong primary down-trend and likely to drag commodities even lower. Breakout below support at 125/126 would offer a long-term target of the 2009 low at 100*. Not good news for Australian resources stocks, even though the impact is cushioned by a falling Aussie Dollar.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Gold rallies

Gold rallied off support at $1200/ounce and is headed for a test of the declining trendline. Expect resistance between $1300 and the former primary support level of $1340. The primary trend is down and resistance is likely to hold. Respect of resistance would indicate another test of $1200 — and offer a target of $1100 if support fails.

Spot Gold

* Target calculations: 1350 – ( 1500 – 1350 ) = 1200;  1200 – ( 1300 – 1200 ) = 1100

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Gold and commodities fall as the dollar rises

Gold is falling fast, but should find short/medium-term support at $1200/ounce*. Breach of that level would offer a target of $1000.

Spot Gold

* Target calculations: 1350 – ( 1500 – 1350 ) = 1200;  1500 – ( 1800 – 1500 ) = 1200

Silver similarly offers a target of $16/ounce*.
Spot Silver

* Target calculation: 26 – ( 36 – 26 ) = 16

Dollar Index

The Dollar Index respected its primary trendline at 80.50 and is headed for another test of 84. The 13-week Twiggs Momentum trough above zero suggests a strengthening up-trend. Target for a breakout would be the 2010 high at 89*.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89

Crude Oil

Crude is range-bound, with Nymex WTI retreating after a false break above resistance at $98/barrel and Brent testing support at $100. The spread has narrowed to $6 and is likely to close further as the US economy recovers faster than Europe. Brent is in a down-trend, while Nymex continues to threaten a primary up-trend, reflecting the stronger US economy.

Brent Crude and Nymex Crude

Commodities

The Dow Jones/UBS Commodity Index is falling hard, more in sympathy with gold than with crude, as the dollar strengthens. A rapidly weakening Chinese economy is likely to drag commodity prices even lower. Breakout below long-term support at 125/126 would offer a target of the 2009 low at 100*.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

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Gold falls while Treasury yields rise

Gold is testing primary support at $1340/ounce. Breach of support would signal another primary decline, while follow-through below $1320 would confirm.

Spot Gold
Declining 13-week Twiggs Momentum below zero indicates a healthy primary down-trend. Breach of primary support would offer a target of $1100*.
Spot Gold

* Target calculation: 1300 – ( 1500 – 1300 ) = 1100

Silver displays a similar down-trend on the monthly chart, offering a target of $16/ounce*.
Spot Silver

* Target calculation: 26 – ( 36 – 26 ) = 16

Dollar Index

The Dollar Index respected its primary trendline at 80.50 on the weekly chart. Recovery above 81.50 would indicate another test of 84. Declining peaks on 13-week Twiggs Momentum, however, suggest a weak up-trend. Failure of support at 80.50 would warn of another test of primary support at 79.

Dollar Index

Treasuries

Treasuries fell, with yields rising sharply after today’s FOMC announcement. Target for the advance of 10-year Treasury Yields is 2.60%*.

10-Year Treasury Yields

* Target calculation: 2.10 + ( 2.10 – 1.60 ) = 2.60

Crude Oil

Crude is rising despite the stronger dollar, with Nymex WTI breaking resistance at $98/barrel and Brent testing resistance at $106. The spread between the two has narrowed to around $8 and is likely to close further as the US economy recovers faster than Europe. Follow-through of Nymex crude above $100/barrel would confirm a primary up-trend, reflecting a stronger US economy — if the dollar is strengthening.

Brent Crude and Nymex Crude

Commodities

The Dow Jones/UBS Commodity Index, assisted by crude oil, found support at 130 on the weekly chart. Expect a test of the declining trendline at 134, but the primary trend is down and, with China weakening, a test of  primary support at 125/126 remains likely.

Dow Jones UBS Commodities Index

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Gold and Dollar fall

Gold retreated below support at $1400, indicating the end of the bear rally. Expect a test of primary support at $1320/$1340. Yesterday’s long tail is evidence of short-term buying pressure, so breach of primary support is not a certainty. Respect would suggest another test of $1400.

Spot Gold

* Target calculation: 1350 – ( 1500 – 1350 ) = 1200

Dollar Index

The Dollar Index is retreating after a false break above 84 on the monthly chart. Breach of support at 79 would complete a double top, signaling reversal to a down-trend. Fall of 13-week Twiggs Momentum below zero would strengthen the bear signal. Respect of the rising trendline remains as likely, however, and would signal a long-term advance to 89/90.

Dollar Index

Crude Oil

Crude is consolidating, with Brent likely to continue the down-trend after breaking support at $100/barrel. Respect of resistance at $106 would strengthen the signal. Nymex WTI, however,  is headed for resistance at $98. Breakout would signal an advance, but reversal below $90 is as likely and would test support at $85/barrel. The spread between the two is likely to narrow as the European economy under-performs the US.

Brent Crude and Nymex Crude

Commodities

A weakening Shanghai Composite Index is being followed lower by the Dow Jones/UBS Commodity Index. Breach of medium-term support at 130 would signal a test of  primary support at 125/126. Commodities remain in a primary down-trend and are likely to stay there unless China resumes major infrastructure investment. Not good news for Australian resources stocks.

Dow Jones UBS Commodities Index

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