Gold & Commodities Archives - Page 40 of 76

August 6, 2015

Gold-Oil ratio warns of further selling

The Gold-Oil ratio, comparing the price of bullion ($/ounce) to Brent crude ($/barrel), has long been used as an indication of whether gold is in a bull or bear market. When the oil price is high, demand for gold, anticipating rising inflation, is normally strong. The current plunge in oil prices indicates the opposite: weak inflation and low demand for gold. Bullion prices are falling but not fast enough to keep pace with crude, driving the Gold-Oil ratio to an overbought position above 20. Expect a long-term bear market for gold.

Gold-Oil ratio

Spot Gold is consolidating in a narrow rectangle below $1100/ounce. This is a bearish sign, with buyers unable to break the first level of resistance. Breach of support at $1080 is likely and would signal a decline to $1000/ounce*. Declining 13-week Twiggs Momentum below zero confirms a strong primary down-trend.

Spot Gold

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

The Gold Bugs Index, representing un-hedged gold stocks, has fallen close to 30 percent since breaking support five weeks ago.

Gold Bugs Index

Barrick Gold, one of the largest global gold producers, is falling even faster.

Barrick Gold

If long-term crude prices continue to fall, like the June 2017 (CLM2017) futures depicted below, gold is likely to follow and support at $1000/ounce will not hold.

WTI Light Crude June 2017 Futures

August 2, 2015

Crude downward slide continues

Long-term June 2017 Nymex Light Crude futures (CLM2017) is approaching its medium-term target of $54/barrel*, maintaining a premium of about $10/barrel over current delivery. Expect support at $54, but the long-term target could be as low as $36**.

Nymex WTI Light Crude June 2017 Futures

* Target calculation: 60 – ( 66 – 60 ) = 54

** Target calculation: 66 – ( 90 – 60 ) = 36

July 22, 2015

Cold wind blows for crude oil producers

Long-term June 2017 Nymex Light Crude futures (CLM2017) broke support at $60/barrel, offering a target of $54/barrel*.

Nymex WTI Light Crude June 2017 Futures

* Target calculation: 60 – ( 66 – 60 ) = 54

In the short-term, September 2015 futures (CLU15) are testing support at their March low of $50/barrel. Breach is likely, given the long-term down-trend, and would offer a target of $40/barrel*.

Nymex Light Crude September 2015 Futures CLU15

* Target calculation: 50 – ( 60 – 50 ) = 40

Declining prices will hurt the Energy sector in the short/medium-term, but the benefit to the broader economy will outweigh this in the longer term. Lower fuel prices will especially benefit the Transport sector. Highly industrialized exporters like Germany, Japan, China and the broader EU, will also benefit. While oil exporters like Russia, Iran, the Middle East, Nigeria, Angola, Venezuela, and to a lesser extent Norway, face hard times ahead.

July 21, 2015

Gold headed for $600 or $700?

Gold broke long-term support at $1140/ounce, offering a medium-term target of $1000*. Peaks at zero on 13-week Twiggs Momentum indicate a strong primary down-trend.

Spot Gold

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

What is the long-term target?

Gold fell from a long-term high around $1800 before encountering strong support at $1200. Breakout below this lengthy, mid-point consolidation suggests that the precious metal is likely to experience another decline of similar magnitude to the first. These patterns are normally symmetrical, which would present an end target of $600 per ounce. That is $1200 – ($1800 – $1200) = $600.

$600 may seem outlandish, given the strength of recent support, but not when one adjusts the gold price by the consumer price index (CPI). Then it appears that yellow metal still has some way to fall.

Gold over CPI

Nothing is certain in this world (except death and taxes) and there are many fundamentals (like central banks) that may intervene. Also, there is a strong support level at the 2008 low of $700 per ounce.

Spot Gold

I would attach a 50% probability to gold reaching $700 in the next few years and a bit less, say 30%, to gold reaching $600.

July 17, 2015

Gold crashes through primary support

Gold broke primary support at $1140/ounce, signaling a decline to the target of $1000*. 13-Week Twiggs Momentum peaks below zero have been warning of this for some time.

Spot Gold

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

Major producer Barrick Gold also broke primary support, at $10, strengthening the bear signal for gold. Similar peaks below zero on 13-week Twiggs Momentum warn of a primary down-trend. Breach of support offers a target of $6.50*.

Barrick Gold

* Target calculation: 10 – ( 13.50 – 10.00 ) = 6.50

July 15, 2015

Will Iran deal nuke crude?

The nuclear deal with Iran is likely to increase supply of crude oil, especially in European markets, driving down prices.

Brent Crude August 2015 Futures

Brent crude August 2015 contract (CBQ15 above) is testing support at $56 per barrel. Narrow consolidation suggests continuation of the down-trend. Breach of $56 would signal a test of primary support at $53.

Nymex WTI Light Crude August 2015 Futures

Nymex (WTI) Light Crude August 2015 contract (CLQ15) is in a similar pattern, with medium-term support at $51 and primary support at $49 per barrel.

July 13, 2015

Gold: Is Barrick next?

The Gold Bugs Index — representing un-hedged gold stocks — broke primary support at 150, warning of a bear market for gold.

Gold Bugs Index

Major producer Barrick Gold is testing primary support at $10. Peaks below zero on 13-week Twiggs Momentum already indicate a primary down-trend. Breach of support would confirm, offering a target of $6.50*. More importantly, it would strengthen the bear signal for gold.

Barrick Gold

* Target calculation: 10 – ( 13.50 – 10.00 ) = 6.50

Gold is headed for another test of primary support at $1140/ounce, while 13-week Twiggs Momentum peaks below zero suggest continuation of the down-trend. Breach of primary support would offer a target of $1000*.

Spot Gold

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

July 9, 2015

Gold Bugs warn of a bear market

Silver is testing long-term support at $15/ounce. Breach is likely, with 13-week Twiggs Momentum peaking below zero, indicating continuation of the down-trend.

Silver

Gold is similarly testing primary support at $1140/ounce. 13-Week Twiggs Momentum also peaked below zero, suggesting continuation of the down-trend. Breach of support would offer a target of $1000*.

Spot Gold

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

Stocks of major producers like Barrick Gold are also testing primary support. 13-week Twiggs Money Flow below zero indicates a primary down-trend.

Barrick Gold

The Gold Bugs Index, representing un-hedged gold stocks, has already departed. Breach of the band of primary support between 150 and 155 warns of a bear market for gold.

Gold Bugs Index