Category: Gold & Commodities

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Gold shudders on strong jobs numbers

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.

10-Year Treasury Yields

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.

Spot Gold

* 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.

USDCNY

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Crude testing $40

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.

WTI Light Crude September Contract

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.

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Gold & support at $1300

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.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1050 ) = 1550

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Gold, the Yuan & Donald Trump

China’s Yuan continues its slide against the Dollar, with USDCNY testing resistance at 6.70. The current retracement is likely to respect support at 6.60, offering a target of 6.80*.

USDCNY

* Target calculation: 6.70 + ( 6.70 – 6.60 ) = 6.80

A depreciating Yuan is likely to drive demand for gold as well as hard currencies. Rising political uncertainty — in Europe, the Middle East and the US — is expected to add fuel to the fire. Strong polling by Donald Trump alone could drive gold to its long-term target of $1550/ounce*. Expect retracement to test the new support level at $1300/ounce. Respect is likely and would signal an advance to $1400/ounce.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1050 ) = 1550

Disclosure: Our managed portfolios are heavily overweight gold stocks.

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Gold surges as the Pound and Yuan fall

The Yuan is sliding against the Dollar, with USDCNY breaking through resistance at 6.60. Expect further capital flight, both from residents and offshore investors. Borrowers will also seek to repay Dollar-denominated loans and replace them with facilities in the local currency, adding further pressure on the Yuan.

USDCNY

The PBOC has been encouraged by fading prospects of further rate rises from the Fed, with 10-year Treasury Yields falling to a new all-time low of 1.37 percent, compared to 1.40 percent in 2012.

10-Year Treasury Yields

….And the Pound falling to a 30-year low.

GBPUSD

Falling currencies and lower long-term interest rates are both good news for gold bugs, with spot gold surging to $1370/ounce. Expect retracement to test the new support level at $1300/ounce. Respect of the band of support at $1280/$1300 is likely and would signal another advance, with a target of $1400/ounce*.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1200 ) = 1400

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Gold rises as the Yuan and interest rates fall

China seems to have given up on its policy of supporting the Yuan against the Dollar, with USDCNY breaking through resistance at 6.60. Depleting foreign reserves to support the Dollar-peg was always going to be a tough call for the PBOC. But the alternative of increased capital flight and rising counter-measures from trading partners may exact an even higher price.

USDCNY

Perhaps the PBOC was encouraged by fading prospects of further rate rises from the Fed this year, after BREXIT. 10-Year Treasury Yields are headed for a test of support at the all-time low of 1.40 percent in 2012.

10-Year Treasury Yields

Gold broke resistance at $1300/ounce and is now retracing to test the new support level. BREXIT, a weakening Yuan, and lower interest rates are all likely to fuel demand for gold. Respect of the band of support at $1280/$1300 is likely and would signal another advance, with a target of $1400/ounce*.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1200 ) = 1400

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Gold surges as BREXIT looms

It looks like the LEAVE vote has it, with a lead of more than 900,000 so far.

BREXIT

Gold bugs seem to think so, with the spot price blasting through resistance at $1300/ounce. Retracement that respects the new support level would confirm a target of $1550*.

Gold

* Target calculation: 1300 + ( 1300 – 1050 ) = 1550

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