Treasury yields remain weak, with the 10-year yield continuing to test support at 2.0 percent. Declining interest rates improve demand for gold but the weak inflation outlook has the opposite effect.
The Dollar Index is ranging between 93 and 98. Flight to safety could drive the Dollar up (and yields downward) but a Chinese sell-off of foreign reserves — to support the Yuan and/or stimulate their economy — would drive the Dollar down (and yields up).
Spot gold is testing resistance at $1150 per ounce. Breakout would indicate a bear rally to $1200. Reversal of the primary down-trend is unlikely, however, and breach of $1100 would offer a target of $1000/ounce*. Declining 13-week Twiggs Momentum, with peaks below zero, continues to signal a strong down-trend.
* Target calculation: 1200 – ( 1400 – 1200 ) = 1000