Interest rates retreated this week, with 10-year Treasury yields falling below support at 1.60 percent.
Falling interest rates reduce downward pressure on gold. Spot Gold steadied above support at $1300/ounce. Momentum above zero continues to indicate a primary up-trend. Respect of support at $1300 would confirm. Breach of support is unlikely but would signal trend weakness and a test of primary support at $1200/ounce.
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
Interest rates are rising. Upward breakout from an ascending triangle formation on 10-year Treasury yields indicates an up-trend.
A rate hike from the Fed would increase pressure on the Chinese Yuan, leaving the PBOC with a dilemma. Either allow the Yuan to slide, which could panic investors and borrowers into a rout, or sell off more of its $3.2 trillion foreign exchange reserves to slow Dollar appreciation against the Yuan.
Long tails on USDCNY indicate buying at the 6.60 support level. Breakout above 6.70 would warn of another advance (decline for the Yuan).
Rising interest rates increase downward pressure on gold but a falling Yuan would boost demand as a store of value. Spot Gold is above the rising trendline on a weekly chart but expect a test of support at $1300/ounce. Momentum holding above zero continues to indicate a healthy primary up-trend. Respect of support at $1300 would confirm. Breach of support remains unlikely but would signal trend weakness and a test of primary support at $1200.
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
Interest rates have stabilised with an ascending triangle formation on 10-year Treasury yields suggesting reversal to an up-trend. Recovery above 1.60% would confirm.
Rising interest rates increase downward pressure on gold. Tall shadows for the last three weeks indicate selling pressure and a test of support at $1300 is likely. But the metal remains well above the rising trendline on a weekly chart and Momentum holding above zero indicates a healthy primary up-trend. Respect of support at $1300 would confirm. Breach of support is unlikely but would signal weakness.
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
Tall shadows for the last three days on the spot gold chart suggest selling pressure. Penetration of the rising trendline indicates that the up-trend is slowing. Breach of short-term support at $1330/ounce would signal a test of medium-term support at $1300. Respect of support would confirm a healthy primary up-trend, while breach would indicate weakness.
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
At present I don’t see much threat to support between $1300 and $1310. Safe-haven demand for gold is boosted by uncertainty in Europe, the US election dilemma (a choice between two equally undesirable alternatives), and the declining Yuan.
USDCNY retraced to test support at 6.60. Sell-off of USD currency reserves by the PBOC — to support the Yuan or at least slow its decline — helps to suppress US Dollar appreciation. This is a win-win for gold bulls. A weak dollar enhances the price of gold while a falling Yuan encourages capital flight and — you guessed it — demand for gold.
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.
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.
* 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.
Light Crude (September contract) is testing medium-term support at $40/barrel. Breach of support would signal a test of primary support at $33 to $34. Respect of support, on the other hand, would indicate another test of resistance at $50. And breakout above $50 would signal a primary up-trend.
The long tail and strong volume at $40 suggest that support may hold. But I wouldn’t bet the house on it. Especially when gasoline inventories have surged, the US rig count is rising …..and demand is set to fall.
More from Tyler Durden:
As the chart below shows, gasoline stocks rose 0.5 million bbls last week to 241Mm bbl and is now 11.8% higher than last year.
Source: Oil Crashes To $41 Handle After Surprise Inventory Build, Production Rise | Zero Hedge
Tyler Durden suggests that crude oil prices will fall in the second half of 2016:
Tracking last year’s pump-and-dump of hope perfectly.
As demand is set to tumble…
Source: Oil Crashes To $41 Handle After Surprise Inventory Build, Production Rise | Zero Hedge
The recent peak in crude prices coincides with the bottom for the US oil rig count (discussed Monday).
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.
* Target calculation: 1300 + ( 1300 – 1050 ) = 1550
