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Gold consolidates as dollar and commodities fall

Gold is consolidating in a narrow range between $1300 and $1350/ounce. Penetration of the descending trendline indicates that a bottom is forming. Reversal below $1300 would suggest another test of primary support at $1200, but breakout above $1350 is as likely and would target $1400.

Spot Gold

A rally to $1400 would test the long-term descending trendline as shown on the monthly chart.

Spot Gold

Spot silver has made a weaker rally over the last month and breakout below the rising flag would warn of another decline, with a target of $16.50*. Declining silver would be a bearish sign for gold.

Spot Gold

* Target calculation: 19.5 – ( 21.5 – 18.5 ) = 16.5

Dollar Index

The Dollar Index found short-term support at 81.50. Penetration would indicate a test of primary support at 80.50. Recovery above 82.50 is unlikely, but would suggest the correction is over. Another 13-week Twiggs Momentum trough above zero would indicate the primary up-trend is intact. Breakout above 84.50 is some way off, but would signal an advance to the 2009/2010 highs around 90.00.
Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89

Crude Oil

Nymex WTI light crude is retracing after a sharp rally and is likely to find support between $98 and $100/barrel. Expect the spread with Brent crude to narrow as the US recovery outstrips Europe.

Brent Crude and Nymex Crude

* Target calculation: 98 + ( 98 – 86 ) = 110

Commodities

Copper is testing long-term support at $6800/ton. Follow-through below $6700 would confirm another primary decline.
Dow Jones UBS Commodities Index
Commodity prices are primarily driven by Chinese demand. With the Shanghai Composite Index testing its 2012 low (1950), breakout would signal a decline to its 2008 low (1660) and drag commodity prices lower. Dow Jones-UBS Commodity Index breach of long-term support at 125/126 would confirm, targeting its 2009 low at 100*. Not good news for Australian resources stocks, even if the impact is cushioned by a falling Aussie Dollar.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

Gold and commodities fall as the dollar rises

Gold is falling fast, but should find short/medium-term support at $1200/ounce*. Breach of that level would offer a target of $1000.

Spot Gold

* Target calculations: 1350 – ( 1500 – 1350 ) = 1200; 1500 – ( 1800 – 1500 ) = 1200

Silver similarly offers a target of $16/ounce*.
Spot Silver

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

Dollar Index

The Dollar Index respected its primary trendline at 80.50 and is headed for another test of 84. The 13-week Twiggs Momentum trough above zero suggests a strengthening up-trend. Target for a breakout would be the 2010 high at 89*.

Dollar Index

* Target calculation: 84 + ( 84 – 79 ) = 89

Crude Oil

Crude is range-bound, with Nymex WTI retreating after a false break above resistance at $98/barrel and Brent testing support at $100. The spread has narrowed to $6 and is likely to close further as the US economy recovers faster than Europe. Brent is in a down-trend, while Nymex continues to threaten a primary up-trend, reflecting the stronger US economy.

Brent Crude and Nymex Crude

Commodities

The Dow Jones/UBS Commodity Index is falling hard, more in sympathy with gold than with crude, as the dollar strengthens. A rapidly weakening Chinese economy is likely to drag commodity prices even lower. Breakout below long-term support at 125/126 would offer a target of the 2009 low at 100*.

Dow Jones UBS Commodities Index

* Target calculation: 125 – ( 150 – 125 ) = 100

Gold falls while Treasury yields rise

Gold is testing primary support at $1340/ounce. Breach of support would signal another primary decline, while follow-through below $1320 would confirm.

Spot Gold
Declining 13-week Twiggs Momentum below zero indicates a healthy primary down-trend. Breach of primary support would offer a target of $1100*.

* Target calculation: 1300 – ( 1500 – 1300 ) = 1100

Silver displays a similar down-trend on the monthly chart, offering a target of $16/ounce*.
Spot Silver

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

Dollar Index

The Dollar Index respected its primary trendline at 80.50 on the weekly chart. Recovery above 81.50 would indicate another test of 84. Declining peaks on 13-week Twiggs Momentum, however, suggest a weak up-trend. Failure of support at 80.50 would warn of another test of primary support at 79.

Dollar Index

Treasuries

Treasuries fell, with yields rising sharply after today’s FOMC announcement. Target for the advance of 10-year Treasury Yields is 2.60%*.

10-Year Treasury Yields

* Target calculation: 2.10 + ( 2.10 – 1.60 ) = 2.60

Crude Oil

Crude is rising despite the stronger dollar, with Nymex WTI breaking resistance at $98/barrel and Brent testing resistance at $106. The spread between the two has narrowed to around $8 and is likely to close further as the US economy recovers faster than Europe. Follow-through of Nymex crude above $100/barrel would confirm a primary up-trend, reflecting a stronger US economy — if the dollar is strengthening.

Brent Crude and Nymex Crude

Commodities

The Dow Jones/UBS Commodity Index, assisted by crude oil, found support at 130 on the weekly chart. Expect a test of the declining trendline at 134, but the primary trend is down and, with China weakening, a test of primary support at 125/126 remains likely.

Dow Jones UBS Commodities Index

February 27, 2013

Gold retreats

Spot gold is consolidating after retreating below $1600/ounce on the hourly chart. Breach of short-term support at $1590 would warn of a down-swing to test medium-term support at $1550 — and primary support at $1500.

Spot Gold On the monthly chart we can see that breach of $1500 would signal a primary down-trend. A 63-day Twiggs Momentum fall below -10% would also suggest a primary down-trend, while reversal above zero would suggest further ranging between $1500 and $1800.

Silver is also headed for a test of primary support — at $26/ounce — but 63-day Twiggs Momentum respect of -10% would continue the long-term bullish divergence, suggesting a new up-trend.
Spot Gold

I am not yet convinced that gold is headed for a primary down-trend. We may be in a low-inflation/deflationary environment right now but how long will it take for central bank expansionary policies to overcome this? Watch out for bear traps. Respect of primary support around $1500 could present a buying opportunity.

Crude Oil

Jeremy Grantham (GMO) reminds us, in a recent BBC interview, not to underestimate the importance of crude oil. Crude represents roughly half of the cost (extraction, shipping, etc.) of other major commodities traded, but crude oil itself also represents half of the value of all commodities traded. When crude prices rise they do serious harm to the global economy.

Brent Crude retreated below support at $117/barrel, on concerns over the global economy. Expect medium-term support at $90/barrel for Nymex and $112/barrel for Brent crude (the green line) but only failure of primary support at $84 and $106 would signal a primary down-trend. Falling crude would be a bearish sign for gold: demand for gold increases when crude rises.

US Dollar Index

February 7, 2013

Gold and commodities rising

Gold is forming a base between $1650 and $1700/ounce on the daily chart. Upward breakout would offer an initial target of $1750/ounce. Oscillation of 63-day Twiggs Momentum close to the zero line indicates consolidation but beware of a peak below zero — or reversal below $1650 on the spot chart — which would warn of another down-swing.

Spot Gold

* Target calculation: 1700 + ( 1700 – 1650 ) = 1750

Silver displays a similar long-term pattern to gold, albeit with a sharper spike in 2011. Bullish divergence on 63-day Twiggs Momentum suggests an up-trend. Breakout above $35/ounce ($1800 in the case of gold) would signal a long-term advance.

Silver

Brent and Nymex crude both threaten an upward breakout from their recent consolidation — which would signal a primary advance to their 2012 highs.

Crude Oil

Commodity prices are also improving, with Dow Jones-UBS Commodity index displaying a bullish divergence on 63-day Twiggs Momentum. Breakout above 150 would complete an inverted head and shoulders reversal with a target of 175. Rising commodities — other than gold and oil where other factors need to be considered — would suggest a recovering global economy and further gains for stocks in the year ahead.

US Dollar Index

* Target calculation: 150 + ( 150 – 125 ) = 175

August 14, 2012

Dollar up-trend continues, gold finds support, commodities range widely

The US Dollar Index is testing support at 81.50/82.00. Respect of support and the rising trendline would confirm the primary up-trend is intact, offering a target of 86.00*. Breakout above 83.50/84.00 would confirm the advance. In the longer term, expect a test of the 2010 high at 88.50. Oscillation of 63-day Twiggs Momentum above zero indicates a healthy up-trend. Failure of support at 81.50 is unlikely, but would warn of a trend reversal.

US Dollar Index

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

With the Dollar Index in a primary up-trend, Spot Gold would be expected to commence a primary down-trend. Declining 63-day Twiggs Momentum (below zero) indicates a primary down-trend but strong buying support at $1530/ounce has kept consolidation (on the weekly chart) between $1530 and $1650 per ounce. Breakout below primary support at $1530 would offer a target of $1300*. Recovery above $1650 is unlikely but would indicate an advance to $1800.

Spot Gold

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

Spot silver shows similar consolidation to gold, between $26 and $30 per ounce. Breakout will indicate future direction.

Spot Silver

CRB Commodities Index is testing its descending trendline; follow-through above $305 would warn that a bottom is forming — and test 325. Recovery of 63-Day Twiggs Momentum above zero would also suggest a trend change. However, reversal below 295 — and respect of zero by TMO — would indicate another test of 265.

CRB Commodities Index

Brent Crude is testing resistance at $115, having penetrated its descending trendline to suggest that a bottom is forming. Reversal below $108 would signal another test of support at $90/$100. 63-Day Twiggs Momentum below zero continues to indicate a primary down-trend; a peak below zero would strengthen the signal.

ICE Brent Crude Afternoon Markers

Nymex WTI Light Sweet Crude diverged from Brent Crude but is similarly testing resistance, at $93/barrel. Long-term oscillation of 63-day Twiggs Momentum around the zero line suggests a ranging market — between $75 and $110 — but a peak below zero would change that.

Nymex WTI Light Sweet Crude

Dollar and gold strengthen

The US Dollar Index broke resistance at 83.50, signaling continuation of the primary advance to the 2010 high at 88.50, with an interim target of 86.00*. 63-Day Twiggs Momentum oscillating above zero reinforces the up-trend.

US Dollar Index

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

Spot Gold shows strong support at $1530 per ounce and penetration of the descending trendline now suggests that a bottom is forming — possibly in anticipation of further QE by the Fed. 63-Day Twiggs Momentum below zero continues to warn of a primary down-trend, while recovery above zero would confirm that a bottom is forming. Breakout below primary support at $1530 would offer a target of $1300*; recovery above $1640 would indicate a new up-trend.

Spot Gold

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

Spot Silver is weaker and continues to test primary support at $26 per ounce. Failure would offer a target of $16*.

Spot Silver

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

The CRB Commodities Index is testing its descending trendline. Breakout would warn that the down-trend is ending, but reversal below 295 would suggest another test of 265. The S&P 500 is likely to follow commodities lower.

CRB Commodities Index

* Target calculation: 265 – ( 305 – 265 ) = 225

Brent Crude has already penetrated its descending trendline, suggesting that a bottom is forming, but 63-day Twiggs Momentum continues to indicate a primary down-trend. A peak below zero would signal a primary decline to $75 per barrel*.

Brent Crude and Nymex WTI Light Crude

* Target calculation: 100 – ( 125 – 100 ) = 75

Rising dollar but commodities strengthen

The rising dollar suggests weaker gold and commodity prices. The US Dollar Index continues to test resistance at 83.50. Breakout would target the 2010 high at 88.50, with an interim target of 86*, while respect would test support at 81.50. 63-Day Twiggs Momentum oscillating above zero indicates a strong up-trend.

US Dollar Index

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

Spot Gold continues to test primary support at $1530 per ounce, while 63-day Twiggs Momentum below zero warns of a primary down-trend. Breakout would offer a target of $1300*. QE3, however, would start a new up-trend.

Spot Gold

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

Spot Silver is similarly testing primary support at $26 per ounce. Failure would offer a target of $16*.

Spot Silver

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

Commodities, and not just crude oil, however, have rallied strongly. 63-Day Twiggs Momentum oscillating below zero indicates a strong down-trend and CRB Commodities Index respect of its descending trendline would warn of a decline to 240*. Penetration above the trendline is unlikely, but would suggest that a bottom is forming.

CRB Commodities Index

* Target calculation: 270 – ( 300 – 270 ) = 240

Brent Crude has already penetrated its descending trendline, suggesting that a bottom is forming, but 63-day Twiggs Momentum continues to indicate a primary down-trend. Recovery of the indicator above zero would strengthen the bull signal, while a peak below zero would signal a primary decline to $75 per barrel*.

Brent Crude and Nymex WTI Light Crude

* Target calculation: 100 – ( 125 – 100 ) = 75

Dollar rises, gold and silver threaten support

The US Dollar Index rallied to test resistance at 83.50. Breakout would target the 2010 high of 88.00. 63-Day Twiggs Momentum oscillating above the zero line indicates a strong up-trend.

US Dollar Index

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

Spot Gold is consolidating above primary support at $1530 per ounce. 63-Day Twiggs Momentum below zero signals a primary down-trend. Downward breakout would offer a target of $1300*……. unless the Fed introduces QE3.

Spot Gold

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

Spot Silver is similarly testing primary support at $26 per ounce. Breakout would offer a target of $16*….. again with the QE3 caveat.

Spot Silver

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

Commodities continue in a primary down-trend, warning of a global economic down-turn. Respect of resistance at 295 by the CRB Commodities Index would warn of another primary decline, with a target of 235*. 63-Day Twiggs Momentum oscillating below zero indicates a strong down-trend. Penetration of the descending trendline is unlikely, but would suggest that a bottom is forming.

CRB Commodities Index

* Target calculation: 265 – ( 295 – 265 ) = 235

Brent Crude is also testing resistance — and the descending trendline — at $100 per barrel. Respect would indicate another decline, with a target of $75 per barrel*. There are two wild cards that could impact on price: tensions with Iran and QE3.

Brent Crude and Nymex WTI Light Crude

* Target calculation: 100 – ( 125 – 100 ) = 75

The gold-oil ratio (measured against Brent crude) is close to its mid-point of 15.0, offering little in the way of overbought/oversold readings for gold over the last few years (after a false overbought reading — above 20 — in 2009).

Gold/Brent Crude Ratio

Dollar rallies while Gold & Silver fall

The Dollar Index is testing primary resistance at 81.50 on the weekly chart. Respect of zero by the latest 63-day Twiggs Momentum trough suggests continuation of the primary up-trend. Follow-through above 82 would signal an advance to 86*.

US Dollar Index

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

Spot Gold broke support at $1550/ounce on the daily chart. Expect retracement to test the new resistance level at $1600 but a sharp fall below zero by 63-day Twiggs Momentum warns of a primary down-trend. Breach of support at $1500 would confirm, offering a long-term target of $1200*.

Spot Gold

* Target calculation: 1500 – ( 1800 – 1500 ) = 1200

Spot Silver is testing primary support at $26/ounce. 63-Day Twiggs Momentum oscillating below zero already indicates a primary down-trend. Breach of support would offer a target of $16/ounce*.

Spot Silver

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