The Gold Bugs Index, representing un-hedged gold stocks, is often a leading indicator of spot prices. Bullish divergence on 13-week Twiggs Momentum suggests that a bottom is forming and is strengthened by breach of the descending trendline. Only recovery above 280 would signal reversal to a primary up-trend, but retracement that respects support at 190 would be a bullish indication.
Dollar Index
Rising interest rates and a stronger dollar, however, are likely to exert downward pressure on gold.
The yield on ten-year Treasury Notes respected resistance at 3.00 percent. Breach of support at 2.75 and the rising trendline would test primary support at 2.50, but failure of this level is unlikely. Breakout above 3.00 is more likely and would offer a target of 3.50 percent*.
* Target calculation: 3.00 + ( 3.00 – 2.50 ) = 3.50
The Dollar Index is again testing resistance at 81.50 after a bullish higher trough and breach of the descending trendline. Breakout would signal a primary advance to 83.00*, while recovery of 13-week Twiggs Momentum above zero would strengthen the signal. Respect of resistance is less likely, but reversal below 80 would warn of further weakness.
* Target calculation: 81.5 + ( 81.5 – 80 ) = 83
Spot Gold
Spot gold respected long-term support at $1200/ounce and is testing resistance at $1260/ounce as well as the descending trendline. Respect would signal another test of $1200, while breakout above $1260 would suggest that a bottom is forming. Recovery of 13-week Twiggs Momentum above zero would strengthen the signal. Failure of $1200, however, would warn of a decline to 1000*.
* Target calculation: 1200 – ( 1400 – 1200 ) = 1000
