Gold, inflation and the Dollar

The (5-year) inflation breakeven (Treasury yield – TIPS) recovered from the oil price fall to post 1.66% on May 8.

5-Year Inflation Breakeven

Growth in average hourly earnings (manufacturing – production and non-supervisory employees) also recovered to 1.49% at the end of April.

Average Hourly Earnings

The stronger inflation outlook lifted the yield on 10-year Treasury notes above resistance at 2.25%. Recovery of 13-week Twiggs Momentum above zero also signals an up-trend. Target for the breakout is 2.65%*. This is a bearish sign for bonds, but only breakout above long-term resistance at 3.00% would signal that the secular bull market is over.

10-Year Treasury Yields

* Target calculation: 2.25 + ( 2.25 – 1.85 ) = 2.65

The Dollar Index found support at 94 in response to rising yields. 13-Week Twiggs Momentum is declining, but recovery above 96 would suggest that the correction is over and another test of 100 likely. Otherwise, expect strong support at the primary trendline around 92.

Dollar Index

Gold

Gold is testing medium-term support at $1180/ounce. Breach would test the primary level at $1140. 13-Week Twiggs Momentum holding below zero suggests continuation of the primary down-trend. Failure of $1140 would test the long-term target of $1000*.

Spot Gold

* Target calculation: 1200 – ( 1400 – 1200 ) = 1000

One thought on “Gold, inflation and the Dollar

  1. starmoon says:

    after nfp gold move..
    i hope gold always strong… 😀

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s