Rising crude bullish for Gold

Rising Crude prices continue to weaken the Dollar.

Dollar Index

The Dollar Index is consolidating between 89 and 91. Bullish divergence on the Trend Index suggests solid support but continued rise in crude prices or threat of a trade war could undermine this.

Dollar Index

Gold has been testing resistance at $1350/$1360 per ounce over the last 3 months, catching bulls several times with a false break followed by a hasty retreat. But follow-through above $1360 would indicate commitment from buyers. And retracement that respects a new support level at $1350 would confirm the breakout, signaling another primary advance. A weaker Dollar would fuel demand for Gold.

Spot Gold

There are two wild cards that could cause an upward spike in gold: a trade war with China and rising geo-political tensions. The former would weaken the Dollar if Chinese purchases of foreign reserves are scaled back, while the latter would directly increase safe-haven demand for gold.

Gold, Crude, the Dollar and Donald Trump

Since the 1970s, gold and crude oil have tended to rise and fall together as illustrated by the chart below, with gold and crude prices adjusted for inflation.

Spot Gold and WTI Light Crude

The reason is not hard to find. When crude prices rise the Dollar weakens. The chart below compares crude, adjusted for inflation, against an inverted Dollar Index. Major rises in crude are normally accompanied by a similar rise in the inverted Dollar index (signaling Dollar weakness).

WTI Light Crude and inverted Dollar Index

However, the converse is not always true. The 1986 Plaza Accord — where Japan and Germany agreed to scale back Dollar purchases — caused a sharp fall in the Dollar without a corresponding rise in crude.

If Donald Trump successfully negotiates a new trade deal with China, cessation of Chinese purchases could spark a similar decline of the Dollar.

Dollar Index

The Dollar Index is currently consolidating between 88.50 and 91. I suggested last week that it may be forming a base. But rising Crude prices add downward pressure on the Dollar.

Dollar Index

And Gold is the likely beneficiary.

Spot Gold

Breakout above $1375/ounce would signal a strong advance.

We can’t blame Donald Trump for the rise in geo-political tensions around the world. Those are more a legacy of the previous administration’s failure to enforce red lines. But Trump’s communication style does tend to inflame issues and rising geo-political tensions in Syria, North Korea, South China Sea, Ukraine, the Balkans and Baltic states — to name but a few — are also likely to fuel demand for gold as a safe haven.

Gold and the trade war

The Dollar Index continues to consolidate between 88.50 and 91. Despite talk of a trade war with China, a rising Trend Index warns of growing support. Breakout above 91 would indicate that the primary down-trend is weakening. Breach of support at 88.50 is less likely but would signal another decline.

Dollar Index

A rising Dollar would weaken demand for Gold. Breach of support at $1300/ounce would warn of another test of primary support at $1250. But breakout above $1350 remains as likely and would signal another primary advance.

Spot Gold

A lot will depend on performance of the Dollar as the threat of trade tariffs escalates.

Gold stirs as Dollar falls

The Dollar Index is retreating from resistance despite another rate hike from the Fed. Follow-through below 89.50 would signal another test of primary support at 88.50. Respect of resistance suggests another decline; confirmed if primary support is broken.

Dollar Index

Gold is stirring as the Dollar weakens. Penetration of the descending trendline suggests that the correction is over. Follow-through above $1340 per ounce would test resistance at $1360.

Spot Gold

Breach of primary support by the Dollar would most likely fuel another primary advance for gold.

Gold & Dollar: The big picture

Continuing with long-term, monthly charts, the Dollar Index is in a primary down-trend. The latest rally is likely to respect resistance at 92. Breach of support at 88 would signal another decline.

Dollar Index

* Target calculation: 91 – (95 – 91) =87

Gold has formed a broad base over the last 4 years. Breakout above resistance at $1350 per ounce is likely in the long run, aided by a weaker Dollar, and would signal a primary advance.

Spot Gold

The All Ordinaries Gold Index is in a primary up-trend. The large ascending triangle is testing resistance at 5000/5100. Breakout would signal a primary advance with a long-term target of 6000*. But the declining Trend Index warns of medium-term selling pressure and penetration of the rising trendline would warn that momentum is slowing.

All Ords Gold Index

* Target calculation: 5000 + (5000 – 4000) = 6000

Gold waits on the Dollar

The Dollar Index continues to consolidate below resistance at 90.50. Downward breakout is likely and would offer a target of 87*.

Dollar Index

* Target calculation: 91 – (95 – 91) =87

Gold is ranging between $1300 and $1350 per ounce. A declining Dollar is bullish for gold. Breakout above $1375 would offer a target of $1450*.

Spot Gold

* Target calculation: 1350 + (1350 – 1250) = 1450

The All Ordinaries Gold Index is testing resistance at 5100. Upward breakout would signal a primary advance with a long-term target of 6000*.

All Ords Gold Index

* Target calculation: 5000 + (5000 – 4000) = 6000

Gold rallies as Dollar meets resistance

The Dollar rally ended, with the Dollar Index encountering stubborn resistance at 90.50. Expect a test of primary support at 88.50. Breach of support would signal a primary decline.

Dollar Index

* Target calculation: 91 – (95 – 91) =87

Gold found support at $1310 and is likely to again test resistance at $1360. A declining Dollar would be bullish for gold. Breakout above $1360 would offer a target of $1450*.

Spot Gold

* Target calculation: 1350 + (1350 – 1250) = 1450

The All Ordinaries Gold Index has been undermined by the strong Aussie Dollar but found support at the rising trendline. Expect another test of resistance at 5100. Breakout would signal a primary advance.

All Ords Gold Index

Dollar drives long-term Gold prospects

The Dollar is likely to continue weakening over the next few years according to analysis from a number of major banks. A falling Dollar would be a bull signal for gold investors.

The Dollar Index rallied over the past few days but is likely to encounter stubborn resistance at 90.50. Respect is likely and would signal another test of support at 88.50. Breach of support would warn of another primary decline.

Dollar Index

* Target calculation: 91 – (95 – 91) =87

Gold lacks direction, ranging between 1310 and 1360, but that would change dramatically if the Dollar breaches support at 88.50. Breakout above $1360 would signal another primary advance, with a target of $1450*. Follow-through above $1375 would strengthen the signal.

Spot Gold

* Target calculation: 1350 + (1350 – 1250) = 1450

The All Ordinaries Gold Index has been undermined by the strong Aussie Dollar. Further weakness of the greenback would help support commodity prices and the Aussie. But further gains on XGD remain likely and recovery above 5100 would signal another advance.

All Ords Gold Index

Dollar falls, Gold rises

The Dollar weakened, with the Dollar Index testing support at 88.50. Respect of new resistance at 91 — the last primary support level — confirms the strong down-trend. Completion of another Trend Index peak below zero would further strengthen the signal.

Dollar Index

* Target calculation: 91 – (95 – 91) =87

The extent of the Dollar’s fall is best illustrated against major trading partner China’s Yuan: a 9.5% fall in just over two years. And that is despite rising US interest rates and a $120 billion increase in China’s foreign reserves over the last year.

USDCNY

Gold is again testing resistance at $1350. Breakout would signal another primary advance, with a target of $1450*. Follow-through above $1375 would confirm.

Spot Gold

* Target calculation: 1350 + (1350 – 1250) = 1450

The All Ordinaries Gold Index has been undermined by the strong Aussie Dollar. But recovery above 5000 would signal another advance.

All Ords Gold Index

Dollar rallies, Gold retreats

On Friday President Donald Trump signed a $400 billion budget deal that sharply boosts spending and swells the federal deficit, ending a brief federal government shutdown. [CBS News]

The Dollar Index rallied as stock market volatility increased around the globe. Another test of resistance at 91 is likely. Respect would signal a decline to 87*.

Dollar Index

* Target calculation: 91 – (95 – 91) =87

Gold retreated as the Dollar rallied, confirming an earlier divergence on the Trend Index. Breach of primary support at $1250 remains unlikely.

Spot Gold

* Target calculation: 1350 + (1350 – 1250) = 1450

Long tails on the All Ordinaries Gold Index indicate buying support, fueled by a weakening Aussie Dollar. Recovery above 5000 would signal another advance.

All Ords Gold Index

Further (USD) Dollar weakness is likely to boost gold prices.

Gold and Dollar hesitate

The Dollar Index found short-term support at 89, having respected new resistance at 91. Trend Index peaks below zero warn of strong selling pressure. Expect a further decline to 87*.

Dollar Index

* Target calculation: 91 – (95 – 91) =87

Gold respected resistance at $1350 as the Dollar found short-term support. Bearish divergence on the Trend Index warns of secondary selling pressure, warning of a correction.

Spot Gold

* Target calculation: 1350 + (1350 – 1250) = 1450

A strong Aussie Dollar is holding back the All Ordinaries Gold Index. Respect of the rising trendline would signal another advance.

All Ords Gold Index

Further (USD) Dollar weakness is likely to boost gold prices.

Gold hesitates as Dollar retraces

The Dollar is retracing to test resistance. Dollar Index respect of the former primary support level at 91 would confirm a primary decline with a target of 87*. Trend Index peaks below zero warn of strong selling pressure.

Dollar Index

* Target calculation: 91 – (95 – 91) =87

Gold hesitated below resistance at $1350 as the Dollar retraced. Trend Index above zero indicates an up-trend. Breakout above $1350 is likely and would signal an advance with a target of $1450*.

Spot Gold

* Target calculation: 1350 + (1350 – 1250) = 1450

A strong Aussie Dollar is holding back the All Ordinaries Gold Index. Respect of the rising trendline is likely and recovery above 5000 would signal another advance.

All Ords Gold Index

Cessation of Chinese purchases of US Treasuries may not be permanent but will fuel Dollar weakness, improve the competitiveness of US exports in international markets, and boost dollar-denominated gold prices.

Gold strengthens as the Dollar falls

Gold rallied strongly on the back of a weak Dollar. A rising Trend Index indicates buying pressure. Breakout above $1350 is likely and would signal a fresh advance.

Spot Gold

The Dollar is weakening which is bullish for gold. Follow-through of the Dollar Index below 91 would signal a primary decline with a target of 87*. Trend Index peaks below zero warn of strong selling pressure.

Dollar Index

* Target calculation: 91 – (95 – 91) =87

Gold Bounces

Gold bounced off support at $1240/ounce, ending the week with a strong rally. Penetration of the descending trendline would indicate the down-trend has weakened, while breakout above $1300 would suggest another advance. Twiggs Trend Index close to zero still indicates hesitancy.

Spot Gold

The greenback is weakening which is bullish for gold. Dollar Index reversal below 93 (and the rising trendline) would indicate another test of primary support at 91. A major Trend Index peak below zero would warn of another primary decline with a target of 87*.

Dollar Index

* Target calculation: 91 – (95 – 91) =87

Australia’s All Ords Gold Index is headed for another test of long-term resistance at 5000. Breakout would signal a primary advance.

All Ordinaries Gold Index

A weakening Aussie Dollar would strengthen demand for gold stocks. Respect of resistance at 77.5 US cents by the current bear rally would warn of a decline to test primary support at 73.5.

Australian Dollar AUDUSD

Gold finds short-term support

The greenback continues its bear market rally, assisted by the new tax bill and the December Fed rate hike. Breakout above resistance at 95 would signal a primary up-trend, a strong bear signal for gold, but the Dollar still has to overcome concerns over North Korea.

Dollar Index

Gold found short-term support at $1240/ounce and recovery above the descending trendline would indicate that the down-trend is weakening. Breach of primary support at $1200 is unlikely but would be a strong bear signal, warn of a primary down-trend.

Spot Gold

The All Ords Gold Index is also correcting. Breach of primary support at 4300 would warn of a primary down-trend.

All Ordinaries Gold Index

But I expect this to be cushioned by further weakness on the Aussie Dollar.

Australian Dollar/USD

Helped in part by a declining yield differential between Australian and US government bonds.

Differential between Australian and US 10-year Government Bonds

Gold falls

Gold broke support at $1250/ounce, warning of a test of primary support at $1200. Breach of primary support at $1260 remains unlikely but would warn of long-term down-trend.

Spot Gold

The greenback rallied on passing of the new tax bill. A test of resistance at 95 is now likely. Breakout above 95 would signal a primary up-trend, bearish for gold.

Dollar Index

Long-term Treasury yields are gradually strengthening, with the 10-year expected to test resistance at 2.50%. Breakout above 2.5/2.6 would signal a primary up-trend which again would be bearish for gold.

10-Year Treasury Yield

A long-term chart of gold shows the precious metal retains its bullish bias. There is strong resistance at $1350 opposed by a broad band of support between $1050 and $1200. Respect of $1200 would signal another test of resistance, while breach of $1150 would warn of a primary down-trend.

Spot Gold

The All Ords Gold Index is also correcting but is somewhat cushioned by the falling Australian Dollar, now at 75 US cents. Respect of the rising trendline would be bullish, while breach of primary support at 4300 would warn of a down-trend.

All Ordinaries Gold Index

Gold as a safe haven

The performance of gold can be volatile but at times it acts as a safe haven when geo-political tensions are high and confidence in fiat currencies is low.

Chris Puplava highlighted the recent strong correlation between gold and the Japanese Yen. That is no surprise as the Japanese yen also acts as a safe haven in times of political turmoil. Breakout above 114 to the yen (below 0.00875 on the chart below) would warn of a stronger Dollar and weaker gold prices. Breach of support at 108 (above 0.0092 on the chart below), on the other hand, would be bearish for the Dollar and bullish for gold.

Japanese Yen and Gold

The greenback continues its primary down-trend. Expect another test of primary support at the September low of 91. Breach is not yet likely but would be a strong bull signal for gold.

Dollar Index

Gold continues its test of medium-term resistance at $1300/ounce. Upward breakout is more likely (Twiggs Trend Index holding above zero indicates buying pressure) and would target the September high of $1350. Breach of primary support at $1260 is less likely but would warn of a test of primary support at $1200.

Spot Gold

Gold rallies as Dollar falls

The greenback is weakening. The Dollar Index retracement respected resistance at 94, confirming a decline to test primary support at the September low of 91. Follow-through below secondary support at 93 would strengthen the signal.

Dollar Index

The falling Dollar strengthened demand for gold which is testing the band of resistance around $1300/ounce. Upward breakout is likely (Twiggs Trend Index holding above zero indicates buying pressure) and would target the September high of $1350. Breach of primary support at $1260 is most unlikely but would be a strong bear signal for gold.

Spot Gold

The All Ordinaries Gold Index is headed for a test of long-term resistance at 5000 in response to the falling Aussie Dollar and rising gold prices in USD.

All Ordinaries Gold Index

Gold and crude oil tend to rise and fall in unison over the long-term. The primary up-trend in crude prices improves the long-term outlook for gold.

Nymex Light Crude