Tag: gold price

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Gold, Silver and the Dollar

The Dollar Index met strong resistance at 80.00 and is likely to re-test support at 78.00. Upward breakout would signal continuation of the primary up-trend, while failure of support would warn of reversal to a down-trend. In the longer term, breakout above 82.00 would offer a target of 86.00*. Respect of the zero line by 63-day Twiggs Momentum would reinforce the primary up-trend, while breach would indicate a primary down-trend.

US Dollar Index

* Target calculation: 82 + ( 82 – 78 ) = 86

Gold continues to test the long-term trendline at $1600/ounce. 63-Day Twiggs Momentum oscillating around the zero line highlights uncertainty. Failure of support at $1600 would warn that the decade-long up-trend is weakening, while breach of primary support at $1500 would confirm. Recovery above $1700, however, would indicate another test of $1800, suggesting the start of a new up-trend. Breakout above $1800 would confirm, offering a target of $2000/ounce*.

Spot Gold

* Target calculation: 1800 + ( 1800 – 1600 ) = 2000; 1500 – (1800 – 1500 ) = 1200

The Gold Bugs Index, representing un-hedged gold stocks, is already in a primary down-trend, suggesting that spot prices are likely to follow. Peaks below zero on 63-day Twiggs Momentum also indicate a strong down-trend.

Gold Bugs Index

Spot silver is also in a primary down-trend, having encountered strong resistance at $36/ounce. A medium-term descending triangle warns of further weakness. Failure of primary support at $26 would indicate a decline to $20*.

Silver

* Target calculation: 27.50 – (35 – 27.50 ) = 20

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Gold falls as the dollar rallies

The Dollar Index rallied to test resistance at 80.00. Breakout would indicate respect of the rising trendline and another primary advance. Recovery above 82 would confirm the target of 86*. Respect of the zero line by 63-day Twiggs Momentum would also strengthen the signal.

US Dollar Index

* Target calculation: 82 + ( 82 – 78 ) = 86

Spot gold responded by testing support at $1600/ounce. Breach of the rising trendline would indicate that the long-term up-trend is weakening. Reversal of 63-day Twiggs Momentum below zero already warns of a primary down-trend. Recovery above $1700 is unlikely but would indicate respect of the rising trendline and continuation of the long-term up-trend.

Spot Gold

* Target calculation: 1550 – ( 1800 – 1550 ) = 1300

The Gold Bugs Index, representing un-hedged gold stocks, is in a clear primary down-trend since breaking support at 500. Peaks below zero on 63-day Twiggs Momentum also signal a strong down-trend. Spot gold is likely to follow unless the Fed changes course and announces further quantitative easing.

Gold Bugs Index

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Gold Bugs warn of a primary down-trend

Amex Gold Bugs Index, representing un-hedged gold stocks, followed through below 480, after breaking primary support at 500, confirming a primary down-trend. Peaks below the zero line on 63-day Twiggs Momentum also signal a primary down-trend. The Gold Bugs index often acts as a leading indicator of trend changes in spot gold prices. Expect further weakness in the yellow metal; breach of support at $1500/ounce would confirm a primary down-trend.

Amex Gold Bugs Index

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Gold rallies as dollar weakens

Spot gold is headed for a test of resistance at $1800 after breaching the descending trendline on the weekly chart, indicating that a bottom is forming. Breakout above $1800 would complete a double bottom reversal, with a target of $2100*. Respect of $1800 remains as likely, however, and would indicate another test of primary support at $1500.

Index

* Target calculation: 1800 + ( 1800 – 1500 ) = 2100

The Dollar Index is weakening in anticipation of QE3 ahead of the November 2012 elections. The primary trend remains upward, though breach of the rising trendline, and/or reversal of 63-day Twiggs Momentum below zero, would warn that a top is forming.

Index

* Target calculation: 80 + ( 80 – 75 ) = 85

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Spot gold finds support

Spot gold found support at $1500/ounce. Failure of this level would confirm a primary down-trend. Breach of the descending trendline would indicate that a base is forming, while recovery above $1800 would indicate a fresh primary advance to $2300*. We are unlikely to witness another bull-trend, however, unless the Fed introduces QE3.

Spot Gold

* Target calculation: 1900 + ( 1900 – 1500 ) = 2300

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Dollar breakout causes gold tremors

The Dollar Index broke through resistance at 80.00, signaling a primary advance to 85.00. Rising 63-day Twiggs Momentum indicates a strong up-trend.

Dollar Index

* Target calculation: 80 + ( 80 – 75 ) = 85

The stronger dollar caused spot gold to weaken, testing the band of support between $1550 and $1600/ounce.

Spot Gold

Gold is also testing the lower trend channel on the weekly chart. Cross of 63-day Twiggs Momentum below zero warns of a trend reversal. Failure of support at $1550 would confirm a primary down-trend.

Spot Gold Weekly

* Target calculation: 1600 – ( 1800 – 1600 ) = 1400

CRB Commodities Index is similarly testing support at 292. Breakout would offer a target of 265*.

CRB Commodities Index

* Target calculation: 295 – ( 325 – 295 ) = 265

Brent Crude is testing medium-term support at $105/barrel. Failure would indicate a test of the lower trend channel.

ICE Brent Afternoon Markers

Some readers questioned why gold and stocks are falling simultaneously — one normally rises when the other falls. A possible explanation is that expectation of quantitative easing, both from the Fed and ECB, has been supporting both markets. As prospects of QE recede, inflation forecasts will be lowered and demand for inflation-hedge assets (stocks and commodities) will fade. We should see a corresponding rise in bond prices (and falling yields) as a result.

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Safe haven demand for dollar and gold eases

The Dollar Index is testing support at 78.00. Narrow consolidation above the support level indicates weakness. Recovery above 79.00 would relieve this, while failure of support would warn of another test of primary support at 75.00.  Rising 63-day Twiggs Momentum, well above zero, however, suggests continuation of the up-trend.

Dollar Index

* Target calculation: 80 + ( 80 – 75 ) = 85

Spot gold is also weak as safe haven demand for both the yellow metal and the dollar has eased. Reversal below $1670 would signal another test of primary support at $1600. Declining 63-day Twiggs Momentum suggests further weakness but the long-term outlook remains bullish with the indicator comfortably above the zero line.

Spot Gold

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

Increased tensions with Iran are supporting the price of Brent Crude above $105/barrel. Narrow oscillation of 63-day Twiggs Momentum around the zero line indicates uncertainty. Failure of support (and respect of the descending trendline) would indicate another primary decline with a target of $85*. Breach of primary support at $99 would confirm.

ICE Brent Crude Afternoon Markers

* Target calculation: 100 – ( 115 – 100 ) = 85

The CRB Commodities Index respected its descending trendline, suggesting a primary decline to $265*. Follow-through below short-term support at $305 would strengthen the signal, while breach of primary support at $295 would confirm. The Aussie Dollar and Canada’s Loonie both closely follow commodity prices and can be expected to follow the CRB index lower.

CRB Commodities Index

* Target calculation: 295 – ( 325 – 295 ) = 265

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Spot gold

Spot gold rallied off support at $1670 as the dollar weakened. The primary trend remains upward and breakout above $1800 would signal a test of $1900*. Declining 63-day Twiggs Momentum warns that the trend may be weakening, but only a cross below zero would confirm.

Spot Gold

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

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Gold falters as the dollar strengthens

Spot Gold is headed for another test of the lower trend channel on the weekly chart. Failure of support at $1600 would warn of reversal to a primary down-trend; follow-through below the September low at $1550 would confirm. A fall of 63-day Twiggs Momentum below zero would also warn of a reversal.

Spot Gold Weekly Chart

Penetration of medium-term support at $1700 on the daily chart of spot gold is not a strong signal, but follow-through below the recent low would indicate a test of primary support at $1600. Failure would offer a target of $1400*.

Spot Gold Daily Chart

* Target calculation: 1600 – ( 1800 – 1600 ) = 1400

The NYSE Arca Gold Bugs Index has been ranging between 500 and 600 for some time. Decline of 63-day Twiggs Momentum below zero suggests long-term weakness. Reversal below primary support at 500 would signal a primary down-trend — and a negative outlook for gold.

NYSE Arca Gold Bugs Index

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Silver reverts to mean

Spot silver has reverted to its “mean” — the spot gold price plotted against weekly silver. Reaction to the GFC was far more severe than gold in 2008 as industrial demand for silver slowed. Breakout above $20/ounce in 2010, however, ignited a steep ascent to $50. The inevitable blow-off followed and silver has now reverted to its 2007 ratio to the gold price. However, Newton’s Third Law of Motion — for every action, there is an equal and opposite reaction — has an equivalent in financial markets: if price over-shoots in one direction, the reaction/correction is likely to overshoot in the opposite direction. Expect another test of primary support at $26. Failure of that level would offer a target of $16/ounce*.

Spot Silver Compared to Gold

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

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