Donald Trump is talking up the prospects of a trade deal, while China remains non-commital, but experience has taught us to judge the two parties more by their actions than the rhetoric.
The Chinese Yuan is strengthening against the US Dollar, testing resistance at 14.35 US cents. A strengthening Yuan means lower USD reserves, driving US Treasury yields higher.
10-Year Treasury yields are likely to again test 2.0%, weakening demand for Gold (higher yields increase the opportunity cost of holding precious metals).
The one counter to this scenario is if the Fed takes up the slack — left by low PBOC purchases — through its repo activity which is expected to reach $500 billion by the end of the year. The Fed is not buying Treasuries but instead may finance purchases by primary dealers and hedge funds at very low rates.
Gold continues to test support at $1450, while lower Trend Index peaks warn of selling pressure. Breach of support would offer a target of $1350/ounce.
Silver made a false break through support at $16.80/ounce but declining Trend Index peaks similarly warn of continued selling pressure.
Australia
Australia’s All Ordinaries Gold Index broke support at 6500, signaling continuation of the downward trend channel. Declining Trend Index peaks again warn of continued selling pressure
Patience
Gold is in a long-term up-trend and the current correction may offer an attractive entry point. But we first need a breakout from the trend channel to confirm that the up-trend is intact.