Category: Gold & Commodities

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Gold correction slows

Spot gold recovered above support at $1700 per ounce. Frequent penetrations of the declining trendline indicate the correction is slowing. Note how the metal tends to move in increments of $25. Breakout above $1725 would indicate an advance to $1900*. Breach of resistance at $1800 would confirm. A 63-day Twiggs Momentum trough above zero is likely — and would signal a primary up-trend, while reversal below zero is unlikely and would warn of a down-trend.

Spot Gold

* Target calculation: 1800 + ( 1800 – 1700 ) = 1900

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Gold and dollar test support

The Dollar Index (daily chart) broke medium-term resistance at 80 before retracing to test the new support level. Penetration of the descending trendline indicates the correction has ended. A long tail on Wednesday indicates (short-term) buying pressure; respect of support would signal an advance to 81. But the primary trend is downward — reflected 63-day Twiggs Momentum oscillating below zero — and breach of support at 79 would signal a decline to 75*.

US Dollar Index

* Target calculation: 78 – ( 81 – 78 ) = 75

Still on the daily chart, spot gold found short-term support at 1700, penetrating the descending trendline. A stronger dollar would suggest further gold weakness but the $DXY primary trend remains down. Expect another test of $1700 but respect would signal a rally to $1800 per ounce*. A 63-day Twiggs Momentum trough above zero would signal a primary up-trend, while breakout above $1800 would confirm.

Spot Gold

* Target calculation: 1650 + ( 1650 – 1500 ) = 1800

The DJ-UBS Commodity Index (weekly chart) reflects an easing inflation outlook, breach of medium-term support at 145 signaling a correction. A 63-day Twiggs Momentum trough above zero would suggest a primary up-trend, while a fall below zero would mean further weakness.

DJ-UBS Commodity Index

Brent Crude (weekly chart) is testing support at $108 per barrel. Breakout would indicate a decline to $100. Reversal of 63-day Twiggs Momentum below zero would strengthen the bear signal.

ICE Brent Crude Afternoon Markers

* Target calculation: 108 – ( 117 – 108 ) = 99

Nymex WTI Light Crude is falling faster, headed for a test of primary support at $76/$78 per barrel. A 63-day Twiggs Momentum peak below zero warns of a primary down-trend.

Nymex WTI Light Crude

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Gold and commodities fall

The Dollar Index is consolidating between 79 and 80. Upward breakout would test resistance at 81.00/81.50 — penetration of the descending trendline indicating the correction has ended — but the primary trend is downward and breach of support at 79 would signal another decline. A 63-day Twiggs Momentum peak below zero would strengthen the bear signal.

US Dollar Index

* Target calculation: 79 – ( 81 – 79 ) = 77

Inflation expectations are easing, with spot gold undergoing a correction since breaking support at 1750. Expect short-term support at 1700 and penetration of the descending trendline would indicate another test of $1800 per ounce*. A 63-day Twiggs Momentum trough above zero is likely — and would signal a primary up-trend, while breakout above $1800 would confirm.

Spot Gold

* Target calculation: 1650 + ( 1650 – 1500 ) = 1800

The DJ-UBS Commodity Index also reflects an easing inflation outlook, breaking medium-term support at 145 to signal a correction. 63-Day Twiggs Momentum is unlikely to remain above zero but a shallow trough would be a bullish sign.

DJ-UBS Commodity Index

Brent Crude is also falling, having broken support at $108 per barrel. Expect a test of $100. Reversal of 63-day Twiggs Momentum below zero would strengthen the bear signal.

ICE Brent Crude Afternoon Markers

* Target calculation: 108 – ( 117 – 108 ) = 99

Nymex WTI Light Crude is similarly headed for a test of primary support at $76/$78 per barrel. The 63-day Twiggs Momentum peak below zero warns of a primary down-trend.

Nymex WTI Light Crude

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China iron-ore spot prices surge 30% in just weeks – MarketWatch

By MarketWatch

BEIJING–Iron ore spot prices for China delivery have surged nearly 30% since early September with mills replenishing stocks amid a tentative rebound in the steel sector, suggesting that a recent price decline may have bottomed out.

…..Prices for 63.5% iron ore fines delivered to Qingdao rose 29% from a multiyear low Sept. 7 to around $117 a metric ton Monday, data from The Steel Index showed……

via China iron-ore spot prices surge 30% in just weeks – MarketWatch.

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Gold and commodities wait on the dollar

The Dollar Index rally recovered and is headed for a test of resistance at 81.00/81.50. Respect of resistance would confirm the primary down-trend. Reversal of 63-day Twiggs Momentum below zero also signals a primary down-trend; a peak below zero would strengthen the signal.

US Dollar Index

* Target calculation: 81 – ( 84 – 81 ) = 78

Gold and commodities await clear direction from the dollar which, in turn, is dependent on the inflation outlook. Spot Gold encountered strong resistance at $1800 per ounce*. A 63-day Twiggs Momentum trough above zero would signal a primary up-trend, while breakout above $1800 would confirm. Reversal below $1740 is unlikely but would warn of another correction.

Spot Gold

* Target calculation: 1650 + ( 1650 – 1500 ) = 1800

The RJ-CRB Commodities Index has been de-listed so I am now using the DJ-UBS Commodity Index, which retraced to test support at 145/146. Respect would indicate another test of resistance at 150/152 — as suggested by recovery of 63-day Twiggs Momentum above zero — while failure would warn of another test of primary support at 125.

DJ-UBS Commodity Index

Brent Crude rallied off support at $108 per barrel and is headed for another test of $117. Breakout would advance to the 2012 high of $125/$126. The small 63-day Twiggs Momentum trough above zero suggests a primary up-trend.

ICE Brent Crude Afternoon Markers

* Target calculation: 117 + ( 117 – 108 ) = 126

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Gold, TIPS and inflation

The Dollar Index rally to test resistance at 81.00/81.50 appears to be faltering. Respect of resistance would confirm the primary down-trend. Reversal of 63-day Twiggs Momentum below zero earlier indicated a trend change; a peak below zero would strengthen the signal.

US Dollar Index

* Target calculation: 81 – ( 84 – 81 ) = 78

Spot Gold continues to test resistance at $1800 per ounce*. A 63-day Twiggs Momentum trough above zero would signal a primary up-trend, while breakout above $1800 would confirm.

Spot Gold

* Target calculation: 1650 + ( 1650 – 1500 ) = 1800

Rising gold prices indicate increased inflation expectations. The spread between 10-year Treasury yields and the equivalent TIPS (Treasury Inflation Protected Securities) yield also spiked up after the latest QE announcement but then retreated. The inflation effect of quantitative easing by the Fed is likely to be muted by deflationary pressures from private debt contraction — and a slow-down in government debt expansion after November (no matter who wins the election) — working in the opposite direction. I believe the Fed goal is to manufacture a soft landing rather than to generate inflation, which would go against their mandate.

10-Year Treasury Yield v. 10-Year TIPS Yield

Commodities: The RJ/CRB Commodities index has been delisted by ICE Futures US (formerly NYBOT). For details click here.

The equivalent DJ-UBS Commodity Index is testing resistance at 150/155. Respect would warn of another test of primary support at 125, but also that inflation expectations remain muted.

DJ-UBS Commodity Index

Brent Crude is correcting despite the rise in inflation expectations, reflecting slowing economic activity rather than improved security. Follow-through below $108 per barrel would indicate a correction to $100, while reversal of 63-day Twiggs Momentum below zero would suggest a primary down-trend.

ICE Brent Crude Afternoon Markers

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RJ-CRB Commodities Index delisted

Intercontinental Exchange announced that ICE Futures US (formerly NYBOT) will cease listing any new expiration months in the RJ-CRB Index and Continuous Commodity Index (“CCI”) Futures Contracts, and is delisting all expiration months in RJ-CRB Index Futures Contracts as of the open of business on September 26, 2012.

Reasons given in their submission to the Commodity Futures Trading Commission were “…..the low volume transacted year to date, as well as historically, which evinced a lack of trader interest in the products.”

Available alternatives are:

  • US Commodity Index Fund which tracks the SummerHaven Dynamic Commodity Index Total Return℠;
  • S&P World Commodity Index ($SWSP); and
  • Dow Jones/UBS (formerly “DJ-AIG”) Commodity Index ($DUBS).

Of the three I prefer $DUBS, though $USCI is also a fairly close match.

Alternatives to CRB Commodities Index

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Dollar bounce, gold and copper retrace

The Dollar Index is retracing to test resistance at 81.00/81.50. Respect would confirm the primary down-trend, as indicated by 63-day Twiggs Momentum below zero.

US Dollar Index

* Target calculation: 81 – ( 84 – 81 ) = 78

Spot Gold is retracing below resistance at $1800 per ounce*. A 63-day Twiggs Momentum trough above zero would signal a primary up-trend. Breakout above $1800 would confirm, indicating rising inflation expectations in response to QE3.

Spot Gold

* Target calculation: 1650 + ( 1650 – 1500 ) = 1800

Copper is also retracing. Respect of 8000 would be a bullish sign. Again, a 63-day Twiggs Momentum trough above zero would indicate a primary up-trend. Breakout above 8600 would confirm, indicating that global economic activity is reviving. Failure of support at 8000 would suggest the opposite.

Copper

Brent Crude is falling after breaking support at $112 per barrel. 63-Day Twiggs Momentum below zero warns of a primary down-trend. The fall, despite increased inflation expectations, reflects slowing economic activity rather than increased security. Syria and Iran remain concerns in the Middle East. Test of support at $100 would warn of another down-turn.

ICE Brent Crude Afternoon Markers

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When Oil Prices Drop in a 'Flash': Is It Real?

By John Kemp

The CFTC is looking into Monday’s oil price drop and is collaborating with Britain’s Financial Services Authority FSA which regulates the London-based Brent market. CME Group, which operates one of the two principal oil markets, has described the drop as a “coordinated selloff” not caused by any technical failures. Intercontinental Exchange ICE, which runs the main Brent contract, has declined to comment on whether it saw any unusually big orders placed during the period. It did, however, say: “Following rumors regarding the Strategic Petroleum Reserve SPR, volume was widely distributed and oil prices declined over a period of time. Circuit breakers were not triggered and markets were orderly.”

via When Oil Prices Drop in a 'Flash': Is It Real?.

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Dollar down, gold up but crude falls

The Dollar Index is in a primary down-trend, as indicated by 63-day Twiggs Momentum below zero. Expect a test of support at 78.00. An ensuing rally that respects resistance at 81.00/81.50 would reinforce the primary down-trend.

US Dollar Index

* Target calculation: 81 – ( 84 – 81 ) = 78

Spot Gold is headed for a test of $1800 per ounce*. Recovery of 63-day Twiggs Momentum above zero indicates a primary up-trend.

Spot Gold

* Target calculation: 1650 + ( 1650 – 1500 ) = 1800

The Gold Bugs Index, representing un-hedged gold stocks, reinforces the primary up-trend in the spot metal, with breakout above the double-bottom signaling an advance to 530*. Again, 63-day Twiggs Momentum above zero strengthens the signal.

Gold Bugs Index

* Target calculation: 460 + ( 460 – 390 ) = 530

The CRB Commodities Index fell sharply on the daily chart after last week’s run-up. Failure of initial support at 305 would indicate that momentum is slowing, but only a fall below 295 would warn of a reversal. A 63-day Twiggs Momentum trough above zero would indicate a primary up-trend.

CRB Non-Energy Commodities Index

Brent Crude fell sharply after breaking support at $112 per barrel. Upward breakout would test $126. 63-Day Twiggs Momentum reversal below zero warns of a primary down-trend. Expect a test of support at $100.

ICE Brent Crude Afternoon Markers

Nymex WTI light crude also broke medium-term support, closing at $92.12 on Wednesday (October delivery). Expect a test of  primary support at $76.00/$78.00.

Nymex WTI Light Crude

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